2015 (1) TMI 107 - HC - Income Tax

Validity of cancellation of penalty u/s 271(1)(c) - fact of suppression of material facts or not Application of Explanation to Section 271(1)(C) - Held that - The Tribunal was rightly of the view that the AY involved in 1979-80 and the levy of penalty is to be governed by the provisions of Explanation to Section 271(1) (C), which was applicable from 1.4.1978 and not with reference to Explanation which was in subsection for the periods from 1.4.1964 to 31.3.1976 - in respect of the various disallowances and additions made by the AO which were challenged in the appeal before the CIT(A) and then before the Tribunal the assessee has given explanations, some of which were adopted by the CIT(A)/Tribunal and some of which were rejected - even in respect of those claims which were rejected by the Tribunal - reference applications were filed by the assessee and were allowed to the Tribunal and they are pending for adjudication before the Hon ble High Court - the view taken by the Tribunal is just and proper - The Tribunal as well as the CIT(A) have taken care the factual aspects of the matter - the paper book shows that there was in fact reply filed and the AO had ample occasion to look at the explanation and the respondent-assessee did not fail to substantiate the claim and the explanation was considered to be bona fide and germane to the facts of the case - therefore, the cancellation of penalty was just and proper the order of the Tribunal is upheld Decided against revenue.

Summary

Issues:
Challenge to order by Income Tax Appellate Tribunal regarding penalty cancellation under Section 271(1)(c) of the Income Tax Act.

Analysis:
1. The appellant revenue challenged the Tribunal's order dated 22.03.2000, which dismissed the appeal against the cancellation of penalty. The case involved the assessment year 1979-80 where the Assessing Officer proposed additions to the income of the assessee. The CIT(A) allowed the appeal of the assessee, leading to the revenue's appeal before the Tribunal.

2. The substantial questions of law formulated by the Court focused on the justification of the ITAT in confirming the CIT(A)'s cancellation of the penalty under Section 271(1)(c) of the Act. The appellant's counsel argued that the reasons given by the Assessing Officer were pertinent, and both the CIT(A) and the Tribunal erred in their decisions.

3. The respondent heavily relied on previous decisions before the Tribunal and emphasized that the assessee neither concealed income nor furnished inaccurate particulars. The Tribunal, in its order, discussed the factual scenario of the case, highlighting the explanations provided by the assessee for various disallowances and additions made by the Assessing Officer.

4. The Tribunal and the CIT(A) considered the factual aspects of the matter and concluded that the penalty cancellation was justified. The Court found the view taken by the Tribunal appropriate and answered the substantial questions of law in favor of the assessee. The Assessing Officer's failure to consider the explanation and the subsequent correction by the CIT(A) and Tribunal led to the cancellation of the penalty.

5. Ultimately, the Court agreed with the Tribunal's decision, dismissed the appeal, and answered the questions posed in favor of the assessee and against the revenue. The judgment upheld the cancellation of the penalty under Section 271(1)(c) of the Income Tax Act, based on the facts and explanations provided by the assessee during the proceedings.