1994 (10) TMI 96 - AT - Income Tax

Assessment Proceedings, Bona Fide, Hedging Transaction, Penalty For Concealment, Revised Return

Summary

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

Comprehensive Analysis:
1. The appellant filed its return of income declaring a total income and disclosed a credit balance in the "India Pepper & Spices Trade Association Clearance Account." The appellant explained that the balance arose from hedging transactions related to export obligations. The Assessing Officer initiated penalty proceedings under section 271(1)(c) as the appellant did not include the speculation profits in the original return. The appellant contended that it believed the profits were to be accounted for only upon fulfillment of export obligations. The Assessing Officer imposed a penalty, which the appellant appealed against.

2. The CIT (Appeals) upheld the penalty, stating that the appellant voluntarily filed a revised return only after being questioned during assessment. The CIT found that the appellant was aware of the need to include speculation profits annually but failed to do so. The appellant's argument that the penalty was excessive was dismissed as it had been reduced to 50% of the minimum penalty. The appellant further appealed against this decision.

3. The Appellate Tribunal canceled the penalty levy, noting that the appellant had disclosed the credit balance in the books of account and balance-sheet. The Tribunal found that the appellant had not concealed the existence of the account and had included the balance in the subsequent year's income. The Tribunal considered the appellant's belief in deferring the inclusion of the balance as bona fide, even if legally untenable. The Tribunal emphasized that the appellant had voluntarily filed a revised return upon understanding the tax implications, indicating good faith. The Tribunal concluded that there was no deliberate concealment of income, and the penalty was canceled based on the circumstances and the waiver of 50% of the penalty by the Commissioner of Income-tax.

4. The Tribunal allowed the appeal, setting aside the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961.