1993 (8) TMI 90 - AT - Income Tax

Summary

Issues Involved:
1. Levy of penalty under Section 273(2)(c) of the IT Act, 1961.
2. Levy of penalty under Section 271(1)(c) for Assessment Year 1979-80.
3. Order under Section 154 of the IT Act.
4. Levy of penalty under Section 271B for Assessment Year 1985-86.

Detailed Analysis:

1. Levy of Penalty under Section 273(2)(c) of the IT Act, 1961:

The issue pertains to ITA No. 610/Ahd/1989 involving a penalty of Rs. 1,24,096 imposed by the Assessing Officer (AO) under Section 273(2)(c) of the IT Act, 1961. The AO issued a notice under Section 210 on 16th Nov., 1978, asking the assessee to pay advance tax of Rs. 11,29,357. The assessee paid the advance tax as per the notice but failed to file an estimate of advance tax, which led to the penalty. The CIT(A) confirmed the penalty, relying on Section 292B.

The assessee argued that the notice under Section 210 was invalid as it was issued before the first regular assessment, making Section 212(3A) inapplicable. The assessee complied with the notice and paid the advance tax, believing no further estimate was required. The Tribunal found that the penalty could not be sustained as the notice under Section 210 was invalid, and the assessee acted in good faith by paying the demanded advance tax. Thus, the penalty was canceled.

2. Levy of Penalty under Section 271(1)(c) for Assessment Year 1979-80:

In ITA No. 612/Ahd/89, the AO levied a penalty of Rs. 64,862 under Section 271(1)(c) for concealed income of Rs. 99,480, comprising excess consumption of colors and chemicals and suppression in closing stock. The CIT(A) confirmed the penalty.

The assessee contended that the addition of Rs. 44,345 was accepted to avoid litigation and did not result in additional tax liability. The Tribunal accepted this argument and directed the cancellation of the penalty for this amount. However, for the addition of Rs. 55,142 due to alleged inflation in the consumption of colors and chemicals, the Tribunal upheld the penalty. The assessee failed to produce original issue slips or relevant persons to substantiate the corrections in consumption figures, thus failing to rebut the presumption under Explanation 1 to Section 271(1)(c). The penalty for this amount was confirmed.

3. Order under Section 154 of the IT Act:

In ITA No. 613/Ahd/1989, the appeal was against the CIT(A)'s order upholding the AO's order under Section 154 regarding the levy of interest under Sections 139(8) and 217(1A). The Tribunal had already restored the matter to the AO in ITA No. 4164/Ahd/1989, directing compliance with its earlier order and a fresh decision on interest. Consequently, this appeal was dismissed as infructuous.

4. Levy of Penalty under Section 271B for Assessment Year 1985-86:

In ITA No. 611/Ahd/1989, the AO levied a penalty of Rs. 1 lakh under Section 271B for not complying with Section 44AB. The CIT(A) confirmed the penalty. The assessee argued that the statutory audit under the Companies Act was completed on 26th Nov., 1985, and the tax audit was completed on 31st March, 1986. The tax audit report was submitted with the revised return on 30th April, 1986. The Tribunal noted that for the first year of tax audit (AY 1985-86), a liberal approach should be adopted as per the Gujarat High Court's observations. The delay was due to reasonable causes, including the completion of statutory audit and the challenge to the validity of Section 44AB. The Tribunal found that the penalty was not validly imposable and canceled it.

Conclusion:

- ITA No. 610/Ahd/1989: Penalty under Section 273(2)(c) canceled.
- ITA No. 612/Ahd/1989: Penalty partly canceled (Rs. 44,345) and partly confirmed (Rs. 55,142).
- ITA No. 613/Ahd/1989: Appeal dismissed as infructuous.
- ITA No. 611/Ahd/1989: Penalty under Section 271B canceled.