1983 (9) TMI 145 - AT - Income Tax

Summary

Issues:
- Appeal against the order of the AAC cancelling the penalty imposed by the ITO under section 273(a) of the Act for the assessment year 1976-77.
- Validity of the notice issued by the ITO for initiating penalty proceedings.
- Justification of cancelling the penalty by the AAC due to lack of evidence of service.
- Consideration of the assessee's explanation regarding unexpected large payments received by Government contractors towards the end of the financial year.

Analysis:
The appeal before the Appellate Tribunal ITAT Indore involved a challenge by the ITO against the order of the AAC cancelling the penalty imposed under section 273(a) of the Act for the assessment year 1976-77. The ITO had levied a penalty of Rs. 1,370, which was contested by the assessee. The primary issue revolved around the validity of the notice issued by the ITO for initiating penalty proceedings. The departmental representative argued that the notice was duly issued, although there was no acknowledgment of service from the post office. On the other hand, the assessee's representative contended that without evidence substantiating the service, the AAC was justified in cancelling the penalty.

In its judgment, the Tribunal disagreed with the AAC's conclusion and held that the notice sent by registered post on 11th Jan 1982 was considered served on the assessee, despite the lack of acknowledgment on record. The Tribunal noted that the ITO's office may not operate as a well-maintained commercial office, explaining the absence of acknowledgment. Therefore, the Tribunal inferred that the notice had been served on the assessee, upholding the validity of the penalty initiation.

Furthermore, the Tribunal considered the explanation provided by the assessee's representative regarding the nature of the assessee's business as Government contractors. The representative highlighted that Government contractors often receive significant payments towards the end of the financial year, impacting their tax estimates. The Tribunal acknowledged this practice and accepted the explanation, concluding that no penalty was leviable in this case. Consequently, the Tribunal dismissed the appeal by the department based on the merits of the case, emphasizing the unique circumstances faced by Government contractors in receiving unexpected large payments at the close of the financial year.