1986 (9) TMI 117 - AT - Income Tax

Bank Deposits, Compulsory Deposit Scheme, Failure To Pay Advance Tax, False Estimate, Income Tax, Penalty Proceedings

Summary

Issues:
1. Cancellation of penalties under section 10(3) of the Compulsory Deposit Scheme (CDS) Act and under section 273(1)(b) of the Income-tax Act, 1961 for the assessment year 1984-85.

Detailed Analysis:
The judgment involves two appeals by the department challenging the cancellation of penalties imposed under the CDS Act and the Income-tax Act, 1961 for the assessment year 1984-85. The assessee, a doctor, had filed his income tax return declaring an income of Rs. 1,21,150, which was completed on 31-8-1984 after a raid on his premises on 3-2-1984. The settlement petition dated 19-4-1984 led to an order on 1-5-1984, determining the income based on seized assets. The penalties were imposed due to failure to estimate advance tax and make compulsory deposits. The explanations provided by the assessee were not accepted by the Income Tax Officer (ITO), leading to penalty proceedings and subsequent cancellation by the Appellate Authority (AAC).

The department argued that penalties were justified as the settlement order did not exclude penalties, and the assessee failed to comply without reasonable cause. The assessee contended that there was a genuine belief that income remained below taxable limits, citing relevant case laws to support the argument. The AAC had cancelled the penalties based on the assessee's reasonable cause for non-compliance.

The Tribunal analyzed the facts and legal precedents cited by both parties. It noted that the settlement order did not preclude penalties and that only minimum penalties were imposed by the ITO. The Tribunal considered the similarity in language between the CDS Act and the Income-tax Act regarding non-compliance without reasonable cause. It referenced various case laws to determine the requirement of reasonable cause for penalty imposition. The Tribunal concluded that in the present case, the defaults were without reasonable cause, given the substantial difference between declared and assessed income post-raid. Therefore, it upheld the imposition of penalties at the minimum prescribed, reversing the AAC's decision.

In conclusion, the appeals filed by the department were allowed, and the penalties under both provisions were upheld. The Tribunal found the assessee's defaults were without reasonable cause, justifying the penalty imposition as per the minimum prescribed by law.