1980 (12) TMI 66 - AT - Income Tax

Summary

Issues:
1. Appeal against cancellation of penalty under section 271(1)(a) of the IT Act for assessment year 1974-75.

Detailed Analysis:
The Revenue filed an appeal against the cancellation of a penalty of Rs. 15,389 by the CIT, Jullundur for the assessment year 1974-75. The penalty was imposed under section 271(1)(a) of the IT Act due to the delay in filing the return of income by the assessee. The assessee was served a notice under section 148 on 2nd June 1976, and was required to file the return by 1st July 1976, but filed it only on 7th March 1977. The assessee claimed that the delay was due to questions regarding the disallowance of gratuity reserve being considered by the management, which caused a delay in deciding whether to claim a deduction for contribution to the reserve. The ITO levied the penalty, but the CIT, Jullundur cancelled it based on the assessee's explanation that there was no assessed tax payable, as the advance tax paid exceeded the tax found due after reassessment.

The Revenue contended that the penalty under section 271(1)(a) should be levied based on the assessed tax payable by the assessee, and not on the absence of assessed tax. The D.R. argued that the liability for penalty should be determined based on the delay in filing the return and the explanation provided by the assessee, without making it dependent on the concept of assessed tax.

After hearing both parties, the ITAT Amritsar found merit in the assessee's arguments. The ITAT rejected the Revenue's contention that assessed tax should be the basis for determining the penalty under section 271(1)(a). The ITAT noted that the assessee had paid advance tax exceeding the tax found due after reassessment, resulting in no assessed tax payable. Citing a decision in a similar case, the ITAT upheld the CIT's decision to cancel the penalty, concluding that no penalty was leviable on the assessee for the assessment year in question.

In conclusion, the ITAT dismissed the Revenue's appeal, affirming the CIT's cancellation of the penalty imposed under section 271(1)(a) for the assessment year 1974-75.