1997 (4) TMI 100 - AT - Income Tax

Summary

Issues:
1. Penalty under section 271(1)(c) of the IT Act - Deletion of penalty by CIT(A).
2. Penalty under section 273(2)(a) of the IT Act - Deletion of penalty by CIT(A).

Analysis:

Issue 1: Penalty under section 271(1)(c) of the IT Act - Deletion of penalty by CIT(A)

The case involved the deletion of a penalty under section 271(1)(c) of the IT Act by the CIT(A). The assessee-HUF, engaged in manufacturing watches and clocks, had failed to include goods worth Rs. 2,11,430 in the closing stock for the assessment year. The penalty was initiated by the AO, but the CIT(A) deleted it. The CIT(A) held that the present Karta was not aware of the omission as the goods were kept in the cupboard of the deceased Karta. The explanation provided by the present Karta was considered valid, citing a judgment of the Madras High Court in a similar case. The AO contended that the penalty was justified, but the counsel for the assessee argued that the disclosure was voluntary and made under specific assurances. The Tribunal noted that penalty proceedings are penal in nature and require conscious concealment, which was lacking in this case. The circumstances, including the serious illness of the deceased Karta, supported the contention that the omission was unintentional. The Tribunal agreed with the assessee's argument and upheld the CIT(A)'s decision to delete the penalty.

Issue 2: Penalty under section 273(2)(a) of the IT Act - Deletion of penalty by CIT(A)

In the second issue, the penalty under section 273(2)(a) of the IT Act was deleted by the CIT(A) for the assessment year 1983-84. The assessment was reopened under section 147, and the Revenue challenged the deletion of the penalty. However, the Tribunal referred to a Supreme Court judgment stating that prior to the introduction of Explanation 2 to section 139(8), reassessment was not considered a regular assessment, and no interest or penalty for advance tax or late filing should be levied. Therefore, the Tribunal declined to interfere with the CIT(A)'s decision and dismissed the appeal.

In conclusion, both appeals were dismissed, upholding the decisions of the CIT(A) in deleting the penalties under sections 271(1)(c) and 273(2)(a) of the IT Act.