1991 (11) TMI 107 - AT - Income Tax

Summary

Issues:
- Appeal against deletion of penalties under sections 271(1)(b), 273, and 271(1)(c) of the Income-tax Act, 1961.
- Validity of cancellation of penalties based on application under section 146.
- Dispute regarding the assessment made on a minor and penalties imposed by the ITO.

Analysis:
1. The DC(Appeals) deleted penalties citing lack of clear terms on providing a reasonable opportunity to the assessee and the application under section 146 not being acted upon by the ITO within 90 days. The revenue contended that the penalties were cancelled based on the application under section 146, which they disputed. The assessee, a minor, had her assessment completed by the ITO on a protective basis, considering investments made by her father. No appeal was filed against this assessment.

2. The assessee claimed to have filed an application under section 146 after the assessment, which the ITO allegedly did not act upon within the stipulated 90 days, leading to the application being deemed accepted. The ITO initiated penalty proceedings during the assessment, resulting in penalties being levied under sections 271(1)(b), 273, and 271(1)(c), subsequently cancelled by the DC(Appeals).

3. The revenue argued that the application under section 146 was not on record, challenging the cancellation of penalties. The assessee's counsel presented evidence of filing the application and argued that non-action within 90 days deemed it accepted, relying on legal precedent. They contended that penalties were not justified due to the protective nature of the assessment and lack of a reasonable opportunity before levy.

4. The Tribunal agreed with the assessee's counsel, emphasizing the mandatory disposal of section 146 applications within 90 days. Citing legal precedent, they held that non-action on the application implied acceptance, leading to the cancellation of the assessment. The Tribunal also noted that penalties on a protective assessment were unsustainable, requiring conclusive determination of income ownership before levy. Legal judgments were cited to support the view that protective penalties are not permissible under the Income-tax Act, resulting in the dismissal of the appeals.