1998 (1) TMI 99 - AT - Income Tax

Summary

Issues:
1. Penalty under section 271(1)(c) for furnishing inaccurate particulars of income.
2. Penalty under section 273(2)(aa) based on estimated income discrepancy.

Analysis:

Issue 1: Penalty under section 271(1)(c)
The appellant filed returns showing a loss, which was assessed at an income lower than claimed. The Assessing Officer (AO) initiated penalty proceedings under section 271(1)(c) for inaccurate particulars of income. The main contention was regarding a deduction claimed under section 80HHC, which the AO found to be in excess. The CIT(A) upheld the penalty, stating that the appellant failed to prove a bona fide belief in the excess deduction claimed. The appellant argued that there was no deliberate attempt to furnish inaccurate particulars. The appellant relied on a High Court decision to support their claim that penalty should not be imposed when there is no tax payable due to a loss. The Tribunal agreed, emphasizing that penalty provisions apply to positive income, not losses. The Tribunal noted that the AO's penalty order was based on the same findings as the assessment order, without evidence of deliberate misrepresentation. The Tribunal canceled the penalty, citing that a minor variation in calculation does not constitute concealment.

Issue 2: Penalty under section 273(2)(aa)
The AO imposed a penalty under section 273(2)(aa) based on an estimate filed by the appellant, which was deemed incorrect due to the final assessed income being lower. The AO and CIT(A) confirmed the penalty, but the Tribunal overturned it, noting that the assessed income was ultimately settled at a lower amount, resulting in no penalty liability. The Tribunal accepted the appeal, canceling the penalty.

In conclusion, both penalties under sections 271(1)(c) and 273(2)(aa) were canceled by the Tribunal based on the lack of deliberate misrepresentation and the final settlement of assessed income at a lower amount than initially estimated.