1995 (3) TMI 122 - AT - Income Tax

Summary

Issues Involved:
1. Penalty under Section 271(1)(c) for concealment of income and furnishing inaccurate particulars.
2. Penalty under Section 271(1)(a) for late filing of return.
3. Penalty under Section 273(1)(b) for failure to file an estimate of advance tax.

Detailed Analysis:

Issue 1: Penalty under Section 271(1)(c) for Concealment of Income and Furnishing Inaccurate Particulars
The assessee filed a return declaring a loss of Rs. 3,20,770 for the assessment year 1987-88. The assessee firm, engaged in dyeing and printing of grey cloth, had received job charges of Rs. 2,10,86,830. However, it gave a rate difference of Rs. 24,90,941 to three sister concerns, which was not recorded in the recipients' books. The AO disallowed the claim, holding it as non-genuine, and initiated penalty proceedings under Section 271(1)(c) for concealing income and furnishing inaccurate particulars.

On appeal, the first appellate authority confirmed the AO's action. The Tribunal, in its order dated 2nd July 1992, upheld the disallowance for the assessment year 1987-88, stating that the liability for the rate difference did not arise during that year but in the subsequent year. The Tribunal directed that if any part of the rate difference was deductible, it should be allowed in the assessment year 1988-89. The AO, following the Tribunal's order, allowed the amount of Rs. 24,90,941 in the assessment year 1988-89.

The assessee argued that the rate difference was a business consideration and was disclosed in the sister concerns' accounts in the subsequent year. The Tribunal found that the Revenue had not shown that the net rate charged from sister concerns was lower than from other parties. The AO, on re-examination, allowed the claim in the subsequent year, treating it as genuine. Thus, the Tribunal concluded that there was no concealment or furnishing of inaccurate particulars, and the penalty under Section 271(1)(c) was unjustified and directed its cancellation.

Issue 2: Penalty under Section 271(1)(a) for Late Filing of Return
The assessee filed the return on 31st July 1987, a month late from the due date of 30th June 1987. The AO levied a penalty for one complete month of default. The first appellate authority confirmed this penalty.

The assessee contended that the default was less than a complete month, citing decisions from the Karnataka and Rajasthan High Courts, which reckoned a month according to the British Calendar. The Tribunal, agreeing with this view, held that the default was not for a complete month and directed the cancellation of the penalty.

Issue 3: Penalty under Section 273(1)(b) for Failure to File an Estimate of Advance Tax
The assessee, declaring a loss of Rs. 3,20,770, was assessed at a total income of Rs. 13,87,271, with tax payable of Rs. 3,18,945. The AO levied a penalty for not filing an estimate of advance tax. The first appellate authority confirmed this penalty.

The assessee argued that it was not previously assessed to tax and thus not obliged to file an estimate under Section 209A(1)(a). The Tribunal found that the assessee was not under an obligation to file the statement of advance tax and directed the cancellation of the penalty under Section 273(1)(b).

Conclusion:
All the appeals of the assessee were allowed, resulting in the cancellation of penalties under Sections 271(1)(c), 271(1)(a), and 273(1)(b).