1992 (7) TMI 102 - AT - Income Tax

Summary

Issues:
Penalty under section 271(1)(a) of the IT Act, 1961 for assessment years 1983-84 and 1984-85.

Detailed Analysis:

1. Background and Facts:
The appeals consolidated by the Revenue relate to the same assessee for the assessment years 1983-84 and 1984-85. The CIT(A) had cancelled the penalties levied by the ITO under section 271(1)(a) of the IT Act, 1961. The Revenue contended that the CIT(A) erred in law and on facts by deleting the penalties based on the exemption under sections 10(22) and 11 of the IT Act, 1961.

2. Assessment for 1983-84 and 1984-85:
For the assessment year 1983-84, the assessee filed a return showing a deficit. The ITO allowed accumulation within the limit of gross income under section 11(1), resulting in a net deficit. Similarly, for 1984-85, the return showed a deficit after setting off capital expenditure. The total income was determined as nil for both years.

3. Penalty Imposition and Defence:
The ITO imposed penalties for late filing under section 271(1)(a) for both years. The assessee's defence was based on seeking extensions of time, with the belief that the extensions were granted. The ITO imposed penalties without considering the provisions of sections 11 and 12.

4. CIT(A) Decision and Grounds for Cancellation:
The CIT(A) cancelled the penalties citing that the assessee's income was exempt under section 10(22) and the delay in filing was not contumacious. The CIT(A) relied on a judgment regarding the obligation of the ITO to intimate extension decisions to the assessee.

5. Arguments and Considerations:
The Revenue argued against the cancellation of penalties, emphasizing the exemption under section 11 and the limited extensions sought by the assessee. The assessee justified the CIT(A)'s decision based on the educational institution status and previous judgments.

6. Tribunal's Decision:
The Tribunal rejected the contention that the income was exempt under section 10(22), as the assessment was based on exemption under section 11. It upheld the cancellation of penalties, considering the multiple extension requests made by the assessee and the audit-related delays in filing returns.

7. Legal Analysis of Penal Provisions:
The Tribunal analyzed sections 271(1)(a) and (b) in light of the absence of positive income for the years in question. It concluded that the penalties imposed by the ITO were not warranted in law due to the lack of taxable income to trigger penalty provisions.

8. Conclusion:
The Tribunal dismissed the appeals by the Revenue, affirming the cancellation of penalties by the CIT(A) for the assessment years 1983-84 and 1984-85.