2001 (7) TMI 275 - AT - Income Tax

Summary

Issues:
1. Appeal against cancellation of penalty under section 273(1)(a) of the Income Tax Act, 1961 for assessment year 1985-86.
2. Appeal against cancellation of penalty under section 271(1)(c) of the Income Tax Act, 1961 for assessment year 1985-86.

Analysis:

Issue 1:
The first appeal by the Revenue was against the cancellation of penalty under section 273(1)(a) of the Income Tax Act for the assessment year 1985-86. The assessee had initially declared a total income of Rs. 73,77,347, but the assessment was completed on a total income of Rs. 96,93,478. The penalty was levied under section 273(1)(a) due to a substantial difference between the returned estimated income and the assessed income. The AO observed that the estimate was filed near the close of the accounting year and that the income from non-trading activities could have been accounted for. However, the CIT(A) canceled the penalty, noting that the assessee did not have full knowledge that an incorrect estimate was being filed. The Tribunal upheld the CIT(A)'s decision, stating that the Revenue failed to prove deliberate default or filing an untrue estimate knowingly. The penalty under section 273(1)(a) was deemed not exigible, and the cancellation of the penalty was justified.

Issue 2:
The second appeal by the Revenue was against the cancellation of penalty under section 271(1)(c) of the Income Tax Act for the same assessment year. The assessee had omitted dividend income in the computation of total income, leading to a penalty being levied under section 271(1)(c). The CIT(A) canceled the penalty, citing that the omission was unintentional and without a mala fide motive. The Tribunal agreed with the CIT(A), noting that the omission of dividend income was a genuine mistake without any deliberate attempt to conceal income. Referring to a decision of the Karnataka High Court, the Tribunal upheld the cancellation of the penalty under section 271(1)(c). Consequently, both appeals filed by the Revenue were dismissed, affirming the decisions of the CIT(A) in canceling the penalties under sections 273(1)(a) and 271(1)(c) for the assessment year 1985-86.