1983 (2) TMI 88 - AT - Income Tax

Summary

Issues:
- Appeal against cancellation of penalty under section 271(1)(c) of the Income-tax Act, 1961.

Detailed Analysis:
1. The assessment year in question was 1974-75, with the return of income filed on 25-11-1974. The assessment was completed on 15-3-1977, resulting in various additions to the income, including unproved cash credits and trading account adjustments.

2. The assessee appealed the assessment order before the AAC, who reduced the trading addition but confirmed the rest. Subsequently, the Tribunal deleted even the reduced trading addition.

3. The Income Tax Officer (ITO) issued a penalty notice under section 271(1)(c) on 17-3-1977, levying a penalty of Rs. 20,000 on 28-3-1979. The penalty was challenged by the assessee, leading to the AAC canceling it on 26-3-1981, which the revenue contested.

4. The departmental representative argued that the Explanation is substantive law, placing reliance on relevant case laws. The assessee contended that the Explanation was not invoked by the ITO and highlighted the timing of the penalty order concerning the Tribunal's decision.

5. The Tribunal found that the penalty was invalid as the income was not finally determined when the penalty was imposed. The law applicable at the time of filing the return did not authorize the ITO to levy a penalty for concealed income exceeding Rs. 25,000.

6. The Tribunal dismissed the revenue's appeal, emphasizing that the penalty was canceled due to the ITO lacking the authority to levy it at the time and the income not being finally determined. The decision was supported by legal precedents and the principle that the law in force when the return is filed governs penalty imposition.

7. The Tribunal rejected the revenue's arguments based on the Explanation, onus of proof, and case laws cited, asserting that the penalty was invalid due to procedural and substantive legal deficiencies.

8. The Tribunal's decision was based on the timing of the penalty imposition, the amount of concealed income, and the applicable legal provisions at the relevant times, ultimately leading to the dismissal of the revenue's appeal.