1991 (6) TMI 95 - AT - Income Tax

Summary

Issues:
1. Penalty imposed under section 140A(3) of the Income-tax Act, 1961 for the assessment year 1984-85.
2. Exemption under section 249(4) for the remaining tax due on self-assessment.
3. Ownership of seized assets and tax liability.

Analysis:
1. The appeal concerned the penalty imposed under section 140A(3) of the Income-tax Act, 1961 for the assessment year 1984-85. The department appealed against the order of the Commissioner (Appeals) canceling the penalty. The case revolved around assets seized from bank lockers operated by the assessee and his wife, leading to a dispute over ownership and tax liability. The department levied a penalty of Rs. 10,49,871 under section 140A(3) which was contested by the assessee. The Commissioner (Appeals) found that the assessee had reasonable cause for not paying the self-assessment tax, considering the assets were seized and retained by the department, making it difficult for the assessee to raise funds to meet the tax liability.

2. The assessee filed a petition for exemption under section 249(4) for the remaining tax due on self-assessment, arguing that the seized assets could be sold to liquidate the tax liability. The Commissioner (Appeals) granted the exemption, noting that the assets in question were ornaments and jewellery seized and retained by the department, making it practically impossible for the assessee to pay the tax liability. The Commissioner found the assessee's request to sell the seized assets a reasonable proposition, given the circumstances.

3. The issue of ownership of the seized assets and tax liability was also raised during the proceedings. Both the assessee and his wife claimed ownership of the assets at different points, leading to parallel tax proceedings against them. The department retained the seized assets, preventing the assessee from paying the self-assessment tax. The Tribunal found that the assessee's explanation for non-payment of tax was reasonable, considering the assets were still in possession of the department. The department's arguments regarding the availability of liquid resources with the assessee were dismissed for lack of substantiating evidence.

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) to cancel the penalty imposed under section 140A(3) and dismissed the appeal by the department, citing the reasonable cause shown by the assessee for non-payment of self-assessment tax and the impracticality of meeting the tax liability given the seized assets were retained by the department.