2006 (8) TMI 104 - HC - Income Tax

Penalty Penalty imposed by the department on non payment of duty and processing charge not disclose in the books of account Tribunal partially upheld the penalty HC held that not tribunal could not be lenient in favour of the assessee and levying the minimum penalty

Summary

Issues:
- Upholding of penalty order under section 271(1)(c) of the Income-tax Act, 1961.

Analysis:
The case involved a reference made by the Income Tax Appellate Tribunal, Ahmedabad Bench "C" to the High Court regarding the upholding of a penalty order under section 271(1)(c) of the Income-tax Act, 1961. The main question before the court was whether the Tribunal was correct in partially upholding the penalty order. The assessee's counsel argued that no penalty should be levied as the return was voluntarily filed and revised after the penalty was imposed. On the other hand, the Revenue's counsel contended that the assessee had received man-made fabric, processed it, allowed its exit without paying excise, and revised the return only after a raid was conducted and penalty imposed. The Tribunal found discrepancies in the assessee's conduct, such as not mentioning the excise raid in the original return and filing the revised return much later.

The Tribunal's findings revealed that the Central Excise Department conducted a raid where it was discovered that the assessee allowed man-made fabric to exit the premises without proper documentation of processing charges. The original return was filed two years after the raid, and the revised return was submitted two years later. Considering the discrepancies in the assessee's conduct and the delayed filing of the revised return after the raid, the Tribunal deemed the assessee's behavior as unfair. The Tribunal, despite being lenient, observed that a minimum penalty should be imposed given the circumstances.

In its judgment, the High Court concluded that based on the facts and circumstances of the case, it was not a scenario where no penalty should have been charged. The court sided with the Revenue, stating that the Tribunal had been extra-lenient towards the assessee. Therefore, the court upheld the penalty order and disposed of the reference in favor of the Revenue, without any costs being awarded.