2013 (7) TMI 1167 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of penalty u/s 271(1)(c) of the Act for assessment years 1991-92, 1992-93, and 1993-94.

Summary:

Issue 1: Deletion of Penalty u/s 271(1)(c)

The sole issue in these appeals is whether the ld. CIT(A) erred in deleting the penalties of Rs. 8,25,32,755/-, Rs. 1,40,55,563/-, and Rs. 17,68,928/- for assessment years 1991-92, 1992-93, and 1993-94, respectively, levied u/s 271(1)(c) of the Act. The penalties were initially levied by the Assessing Officer (AO) due to disallowances of payments to Public Sector Undertakings (PSUs) which were added to the assessee's income during scrutiny assessments.

The assessee, a Proprietor of M/s Chandrakala & Co., had filed returns admitting incomes which were significantly increased by the AO due to these disallowances. The ld. CIT(A) initially allowed the disallowances, but the Tribunal later confirmed the AO's additions. Consequently, the AO issued notices and levied penalties for furnishing inaccurate particulars of income.

The assessee appealed against the penalties, arguing that the amounts were not includible in their income due to diversion by overriding title, as they were obligated to pass these amounts to PSUs as per Indian Bank's instructions. The ld. CIT(A) deleted the penalties, citing the Hon'ble Madras High Court's decision which had deleted the additions made by the AO, thus nullifying the basis for the penalties.

The Revenue argued that the penalties should remain as they had filed an SLP against the High Court's decision. However, no material was presented to show that the SLP was accepted or that the High Court's order was stayed by the Supreme Court.

The Tribunal, referencing the Hon'ble P&H High Court's decision in CIT vs Prakash Industries Ltd., upheld the ld. CIT(A)'s order, stating that without any contrary evidence or stay on the High Court's order, the penalties could not be sustained. Thus, the appeals of the Revenue were dismissed.

Order pronounced in the open court at the time of hearing on Monday, the 01st of July, 2013, at Chennai.