1990 (2) TMI 102 - AT - Income Tax

Summary

Issues Involved:
1. Legality of the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961.
2. Effect of non-mention of the penalty amount in the penalty order.
3. Validity of the penalty order in the context of statutory provisions and case laws.

Detailed Analysis:

1. Legality of the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961:

The appeal by the revenue challenges the order of the Appellate Assistant Commissioner (AAC) cancelling the penalty imposed on the assessee under section 271(1)(c) of the Income-tax Act, 1961. The Income Tax Officer (ITO) had added Rs. 29,851 to the assessee's income due to discrepancies found in the books of accounts seized during a search operation. The ITO initiated penalty proceedings under section 271(1)(c) on the grounds that the assessee concealed particulars of income by inflating creditors and deflating sundry debtors. The penalty imposed was 100% of the tax sought to be evaded, but the exact amount was left blank in the order.

2. Effect of non-mention of the penalty amount in the penalty order:

The AAC found the penalty order to be bad in law because it did not specify the amount of tax sought to be evaded. The AAC cancelled the penalty with the remark that the ITO did not provide the computation of the penalty and did not mention the amount of penalty in the order. The revenue argued that the non-giving of the calculation of penalty or penalty amount did not vitiate the penalty order and was merely an irregularity, not an illegality. However, the tribunal emphasized that every penalty order must give a direction to the defaulting assessee to pay the sum specified in addition to the tax payable. Without the specified amount, there is no direction and no penalty order.

3. Validity of the penalty order in the context of statutory provisions and case laws:

The tribunal referred to section 271(1)(c) and Explanation (4) to the sub-section, which defines "the amount of tax sought to be evaded." The tribunal also considered section 275, which provides the limitation for the levy of penalty. The tribunal concluded that the order imposing a penalty must specify the amount, and without it, the penalty order is invalid. The tribunal disagreed with the revenue's contention that non-mention of the penalty amount was a mere irregularity and held that computation of penalty is an inseparable part of penalty proceedings. The tribunal cited the decision of the Hon'ble Bombay High Court in the case of N.N. Kotak v. CIT, where it was held that an order imposing a penalty must specify the amount, and without it, the order is invalid.

The tribunal also distinguished the revenue's reliance on the Gauhati High Court decisions, stating that those cases did not suggest that a penalty order could be valid without specifying the amount of penalty. The tribunal upheld the AAC's order cancelling the penalty and dismissed the revenue's appeal. Consequently, the assessee's cross-objection was rendered infructuous and dismissed as such.

Conclusion:

The tribunal dismissed the revenue's appeal, upholding the AAC's order cancelling the penalty due to the non-mention of the penalty amount in the order. The tribunal emphasized that specifying the penalty amount is a mandatory requirement, and without it, the penalty order is invalid.