1981 (3) TMI 124 - AT - Income Tax

Summary

Issues:
1. Levy of penalty under section 271(1)(c) of the Act.
2. Jurisdiction of the IAC to levy the penalty.
3. Delay in levying the penalty.

Detailed Analysis:
The judgment by the Appellate Tribunal ITAT Jabalpur involved an appeal by the assessee against the penalty imposed by the IAC under section 271(1)(c) of the Act. The assessee had declared an income of Rs. 4,085 from forest contract business, but discrepancies were noted by the IAC due to the absence of proper books of accounts. The ITO estimated sales at Rs. 60,000 and added further amounts on account of cash credits surrendered by the assessee. The IAC issued a show cause notice, and the assessee explained the discrepancies, attributing them to the lack of proper books of accounts and the desire to avoid conflict with the tax authorities. The assessee also challenged the jurisdiction of the IAC to levy the penalty, which was rejected by the IAC, leading to the penalty of Rs. 14,915.

Regarding the delay in levying the penalty, the Tribunal considered the timeline of events. The original assessment was done in 1969, and the penalty was first levied in 1971 but was set aside by the Tribunal in 1972 due to lack of opportunity given to the assessee. However, the IAC re-imposed the penalty in 1979, more than seven years later. The assessee argued that such a delay in levying penalties has been questioned by various High Courts and cited relevant authorities to support this claim. The Tribunal noted that the limitation for imposing penalties should be strictly construed, especially when it is only two years as in this case. Given the significant delay in re-imposing the penalty, the Tribunal concluded that the IAC was not justified in levying the penalty under section 271(1)(c) of the Act. Consequently, the penalty imposed was canceled, and the appeal by the assessee was allowed without delving into the merits of the case.

In conclusion, the Tribunal ruled in favor of the assessee, emphasizing the importance of adhering to the statutory limitations for imposing penalties and highlighting the implications of undue delays in such actions. The judgment underscored the need for timely and lawful execution of penalty provisions under the Act, ensuring fair treatment and procedural adherence in tax assessments and penalty impositions.