1985 (12) TMI 73 - AT - Income Tax

Summary

Issues:
1. Contention regarding penalty imposed under section 273(b) of IT Act, 1961.

Analysis:
The judgment revolves around the appeal concerning the imposition of a penalty of Rs. 35,000 under section 273(b) of the IT Act, 1961. The assessee initially filed a return of income showing Rs. 45,726, but the assessment concluded the income at Rs. 1,96,730, which was later adjusted to Rs. 1,82,240 by the Tribunal. The penalty proceedings were initiated by the Income-tax Appellate Tribunal (IAC) under section 273(b) of the Act. The assessment was conducted in the status of a registered firm, and subsequently, the registration was canceled, and the assessment was ordered to be made in the status of an association of persons. The IAC imposed the penalty on the assessee in the new status, despite the initiation being against the registered firm.

The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who confirmed the penalty but directed its re-calculation based on the revised income determined by the Tribunal. The appeal before the Appellate Tribunal challenged the penalty imposition. The first argument presented was that since the penalty proceedings were initiated against a registered firm, imposing a penalty on an association of persons was not justified. This argument was supported by precedents such as C.P. Venkataraman vs. CIT (1970) 75 ITR 65 (Mad) and CIT vs. Lalit Mohan (1977) 106 ITR 817 (All). The second argument highlighted the lack of a formal show cause notice, with only a reminder being issued.

The Appellate Tribunal, considering the submissions and previous decisions, ruled in favor of the assessee. It noted that a similar issue had been addressed in a previous order where the Tribunal had canceled a penalty under section 271(1)(c) of the Act. The Tribunal held that since the penalty proceedings were initiated against a registered firm, imposing a penalty on the association of persons was not valid. The judgment emphasized the importance of the previous order and concluded by allowing the appeal, thereby overturning the penalty imposed under section 273(b) of the IT Act, 1961.