1990 (3) TMI 94 - AT - Income Tax

Summary

Issues:
1. Levy of penalty under section 273(1)(b) of the IT Act, 1961 for failure to file a statement of advance tax.
2. Interpretation of the requirement to file a statement of advance tax under section 209(1)(a).
3. Justifiability of penalty imposition based on the circumstances of a substantial unexpected income due to a company's undertaking takeover.

Analysis:

Issue 1: The appeal challenged the penalty of Rs. 19,000 imposed on the appellant under section 273(1)(b) of the IT Act, 1961, based on the order of the CIT (A).

Issue 2: The appellant contended that the statement of advance tax was not required to be filed as per section 209(1)(a) before the due date of the first installment of advance tax, given the history of assessed income below the taxable limit in the preceding years. The appellant relied on the decision in Patel Aluminium Pvt. Ltd. vs. ITO to support this argument.

Issue 3: The unexpected substantial income due to the takeover of the company's undertaking by the Gujarat Electricity Board was highlighted as the reason for the significant increase in assessed income. The appellant argued that the penalty should be canceled considering the circumstances surrounding the compensation received and subsequent tax treatment under section 41(2).

The ITAT Ahmedabad-B, comprising Member(s) R. M. Mehta and M. A. A. Khan, examined the contentions of both parties and reviewed the orders of the tax authorities. The tribunal found the facts of the case akin to the precedent set by the Bombay High Court in Patel Aluminium Pvt. Ltd. The tribunal agreed that the appellant, with no taxable income in the preceding assessment years, was not obligated to file a statement of advance tax under section 209(1)(a) before the due date of the first installment. The tribunal also acknowledged the unique circumstances of the substantial compensation received due to the company's undertaking takeover, leading to a fluid state of income assessment. Consequently, the tribunal held that no penalty was justifiable and canceled the imposed penalty of Rs. 19,000 under section 273(1)(b) of the IT Act, 1961.

In conclusion, the tribunal allowed the appeal, ruling in favor of the appellant and canceling the penalty.