1994 (9) TMI 128 - AT - Income Tax

Assessment Year, Failure To Pay Advance Tax, False Estimate, Penalty For Concealment, Revised Return

Summary

Issues Involved:
1. Penalty under Section 271(1)(c)
2. Penalty under Section 273(2)(a)

Issue-wise Detailed Analysis:

1. Penalty under Section 271(1)(c):

Facts:
The assessee, a private limited company engaged in the manufacture and export of carpets and durries, claimed a deduction of Rs. 1,06,583 for commission paid to an individual. Despite multiple requests from the ITO to provide confirmation from the individual, the assessee failed to comply and eventually revised the return to include the commission amount. The ITO initiated penalty proceedings under Section 271(1)(c).

Assessee's Argument:
The assessee contended that the revised return was filed voluntarily to avoid litigation and maintain peace. They argued that the commission payment was genuine and for business purposes, and the individual had refused to cooperate.

Assessing Officer's Findings:
The Assessing Officer dismissed the assessee's claims, noting the lack of compliance with repeated requests for confirmation. He concluded that the deduction claim was knowingly false and imposed a penalty of Rs. 72,743, representing 100% of the tax sought to be evaded.

CIT(A) Decision:
The CIT(A) upheld the penalty, stating:
- It was unclear if the previous year's deduction claim had been similarly scrutinized.
- The assessee failed to substantiate the claim, neither producing the individual nor filing a confirmation.
- The amount was still outstanding at the assessment order date.

Tribunal's Analysis:
The Tribunal noted new facts presented by the assessee's counsel, revealing the commission payment was part of an arrangement to bypass FERA provisions, with the individual acting as a nominee for her son. The Tribunal concluded the payment was a sham and upheld the penalty, stating the claim was not valid and proper in the eyes of the law. The revised return was not voluntary but made after ITO's inquiries.

2. Penalty under Section 273(2)(a):

Facts:
The Assessing Officer noted discrepancies between the income on which advance tax was paid, the returned income, and the assessed income. The assessee argued that the differences arose due to unforeseen additions and disallowances, claiming their income estimate was true to the best of their knowledge.

Assessing Officer's Findings:
The Assessing Officer rejected the assessee's submissions, noting that most additions were confirmed on appeal, and imposed a penalty of Rs. 26,850, representing 20% of the shortfall.

CIT(A) Decision:
The CIT(A) reduced the penalty to Rs. 13,425, being 10% of the shortfall.

Tribunal's Analysis:
The Tribunal confirmed the penalty under Section 273(2)(a), aligning with the reasoning for the Section 271(1)(c) penalty. It was within the assessee's knowledge that the commission claim was invalid, thus their income estimate for advance tax was incorrect. The Tribunal directed the Assessing Officer to recompute the penalty in light of any relief granted in the quantum appeal.

Conclusion:
The Tribunal upheld the penalties under Sections 271(1)(c) and 273(2)(a), concluding that the assessee knowingly made false claims and failed to provide accurate income estimates. The appeals were partly allowed for statistical purposes, with directions for the Assessing Officer to recompute penalties based on any relief granted in the quantum appeal.