2002 (1) TMI 251 - AT - Income Tax

Summary

Issues Involved:

1. Deletion of penalty under section 271(1)(c) of the Income-tax Act, 1961.
2. Validity of penalty proceedings in terms of section 275 of the IT Act.
3. Timeliness of Cross Objection filed by the assessee.
4. Merits of the penalty order and whether the assessee concealed income or furnished inaccurate particulars.

Detailed Analysis:

1. Deletion of Penalty under Section 271(1)(c):

The Revenue argued that the CIT(A) erred in canceling the penalty of Rs. 5,10,000 imposed by the Assessing Officer, asserting that the assessee concealed particulars of its income and furnished inaccurate particulars regarding the amount of Rs. 7,82,728 written off under the flood/fire rescue account and a wrong claim of depreciation on the boiler amounting to Rs. 55,841. The CIT(A) had confirmed these additions, and the assessee did not appeal to the ITAT, supporting the department's view with the decision in Rampur Finance Corpn. Ltd. v. CIT.

2. Validity of Penalty Proceedings:

The assessee contended that the penalty proceedings were barred by limitation under section 275 of the IT Act. The original assessment order was passed on 24-3-1987 without initiating penalty proceedings under section 271(1)(c). The fresh assessment order, following a remand by the CIT(A), was passed on 16-1-1991, initiating penalty proceedings for the first time. The penalty order was passed on 25-8-1995. The assessee argued that the period of limitation expired six months after the CIT(A)'s order dated 24-8-1992, relying on section 275(1)(c) and various judicial precedents.

3. Timeliness of Cross Objection:

The Cross Objection was filed by the assessee on 26-12-2001, which the Revenue objected to as time-barred. However, the Tribunal noted that there was no acknowledgment of the grounds being served earlier, and the assessee only became aware of the appeal upon receiving the notice on 10-12-2001. The Tribunal found the grounds legal in nature and allowed the Cross Objection, determining no delay in filing.

4. Merits of the Penalty Order:

The Tribunal examined whether the assessee concealed income or furnished inaccurate particulars. It was noted that the assessee had been transparent about the expenses incurred for repairs due to flood and fire, which were settled by the Insurance Company in January 1983. The expenses were claimed in the relevant assessment year only after the settlement. The Tribunal found that the assessee had incorporated all details in its Balance Sheet and Annual Report, and these details were available with the Revenue Authorities. The Tribunal referenced several judicial precedents, including Saurashtra Cement & Chemical Industries Ltd. v. CIT, which supported the assessee's position that the expenses, though related to earlier years, could be claimed in the year they were settled.

The Tribunal concluded that it was not a case of concealment or filing of inaccurate particulars, and the CIT(A) rightly deleted the penalty. The Tribunal also found that the penalty order was barred by limitation, as the relevant assessment order was not the subject matter of an appeal before the ITAT that would extend the limitation period under section 275(1)(a). Consequently, the appeal of the Revenue was dismissed, and the Cross Objection by the assessee was allowed.