1979 (11) TMI 126 - AT - Income Tax

Summary

Issues:
Levy of penalty under section 273(c) of the Income Tax Act, 1961 for failure to file an estimate under section 212(3) - Opportunity of being heard before imposing penalty - Correct section under which penalty was imposed.

Analysis:

1. The appellant, a limited company, appealed against a penalty of Rs. 40,000 under section 273(c) of the Income Tax Act, 1961. The penalty was imposed by the Income Tax Officer (ITO) for the alleged failure to file an estimate under section 212(3) for the assessment year 1972-73. The appellant contended that as an old company, the provisions of section 212(3) were not applicable. The ITO, however, concluded that the estimate was not filed deliberately and imposed the penalty.

2. The appellant argued before the Appellate Assistant Commissioner (AAC) that a nil estimate was filed under section 212(1) earlier, and therefore, the penalty under section 273(c) was incorrect. The AAC noted that the appellant failed to provide a satisfactory explanation for filing a nil estimate initially, followed by a return showing substantial income.

3. The appellant's counsel contended that the penalty was imposed under section 273(c) despite the notice being issued under section 273(b), depriving the appellant of the opportunity to be heard. Citing legal precedents, the counsel argued that the penalty order was illegal as the specific offense was not brought to the appellant's notice before imposition.

4. The departmental representative argued that mentioning the wrong section in the notice did not invalidate the penalty order. The initiation of penalty proceedings under section 273, even if the notice mentioned a different section, was deemed valid. However, the appellant maintained that the lack of opportunity to explain the conduct leading to the penalty rendered the order illegal.

5. The Tribunal found that while the penalty was imposed under section 273(c), the appellant was not given an opportunity to present its case regarding the alleged default under section 212(3). Considering the facts and legal arguments presented, the Tribunal concluded that the penalty order was illegal due to the absence of a fair hearing. Consequently, the orders of the lower authorities were set aside, and the ITO was directed to refund the penalty amount if already collected.

6. As a result of the detailed analysis and legal arguments presented, the Tribunal allowed the appeal, emphasizing the importance of providing an opportunity for the assessee to be heard before imposing penalties under the Income Tax Act, 1961.