1996 (6) TMI 100 - AT - Income Tax

Assessing Officer, Assessment Year, Failure To Pay Advance Tax, False Estimate, Penalty Proceedings, Show-cause Notice, Total Income

Summary

Issues Involved:
1. Credit for TDS not properly given.
2. Lack of reasonable opportunity for the assessee to be heard.
3. Penalty initiated under one section but levied under another.
4. Validity of estimates filed by the assessee.

Issue-wise Detailed Analysis:

1. Credit for TDS Not Properly Given:
The assessee contended that the full effect of TDS was not credited, thereby affecting the penalty calculation. The CIT(A) called for information from the Assessing Officer regarding this claim but received no response. Consequently, the CIT(A) directed the Assessing Officer to redetermine the assessed tax.

2. Lack of Reasonable Opportunity for the Assessee to be Heard:
The assessee argued that they were not given a proper opportunity to be heard as the second notice was served only two days before the hearing date. The CIT(A) did not consider this contention, possibly because the explanation was reconsidered at the appellate stage.

3. Penalty Initiated Under One Section but Levied Under Another:
The penalty proceedings were initiated under section 273(1)(b), but the penalty was ultimately levied under section 273(1)(a). The CIT(A) accepted the assessee's claim and noted that the revised estimate filed on 15-12-1986 fell within section 209A(4), implying that the penalty should be levied under section 273(2)(aa). The Tribunal observed that the initiation of penalty proceedings under section 273(1)(b) was incorrect and invalidated the proceedings, emphasizing that a notice specifying the exact charge is mandatory under section 274.

4. Validity of Estimates Filed by the Assessee:
The assessee claimed that the estimates were bona fide given the nature of their business and that it was only their second year of operation. The CIT(A) found the explanation unsatisfactory due to the significant gap between the estimated and returned income. The Tribunal, however, noted that the penalty proceedings are quasi-criminal and require a clear charge. The Tribunal also highlighted that the CIT(A) does not have the power to impose a penalty under a different sub-clause without issuing a specific notice.

Conclusion:
The Tribunal concluded that the penalty proceedings were invalid due to the incorrect initiation under section 273(1)(b) and the lack of a proper notice under section 273(1)(a). The Tribunal emphasized the importance of following the mandatory procedure of issuing a notice specifying the exact charge. The order of the CIT(A) was set aside, and the penalty imposed by the Assessing Officer was quashed. The Tribunal also noted that the CIT(A) does not have the power to set aside the penalty order for fresh consideration by the Assessing Officer. The appeal filed by the assessee was allowed.