1981 (3) TMI 125 - AT - Income Tax

Summary

Issues:
- Appeal against penalty under section 271(1)(c) of the Income Tax Act.

Detailed Analysis:
The appeal before the Appellate Tribunal ITAT Jabalpur was against the penalty imposed by the Income-tax Appellate Commissioner (IAC) under section 271(1)(c) of the Income Tax Act. The assessee had declared an income of Rs. 4,085 from forest contract business for the relevant year. However, due to the absence of proper books of accounts, the Income Tax Officer (ITO) estimated sales at Rs. 60,000 and added a net profit rate of 15% to make an addition in the trading account. Additionally, the ITO added Rs. 10,000 on account of cash credits surrendered by the assessee during the assessment proceedings. The IAC issued a show-cause notice to the assessee, who explained that the declared gross profit was not accepted due to the absence of proper books of accounts and that a net profit of Rs. 9,000 was estimated. The assessee also challenged the jurisdiction of the IAC to levy the penalty. Despite the explanations provided by the assessee, the IAC levied a penalty of Rs. 14,915 under section 271(1)(c) of the Act.

The Tribunal considered the delay in levying the penalty as a crucial issue. The original assessment order was passed in March 1969, and the penalty was levied by the IAC in March 1971. However, on appeal, the Tribunal set aside the penalty order in April 1972 due to lack of opportunity given to the assessee. Subsequently, the IAC re-imposed the penalty in September 1979, after a delay of more than 7 years. The assessee argued that such a prolonged delay in levying the penalty has been a ground for quashing penalties by various High Courts. Citing relevant authorities, the assessee contended that the penalty should have been imposed within two years of the assessment order, which was not the case here. The Tribunal agreed with the assessee's argument, emphasizing that the limitation for imposing a penalty should be strictly construed. Since the penalty order was passed after more than 9 years from the assessment order and over 7 years after the Tribunal's order setting aside the penalty, the Tribunal held 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.

In conclusion, the Tribunal allowed the appeal filed by the assessee based on the issue of limitation regarding the imposition of the penalty. The Tribunal did not delve into discussing the merits of the case since the decision on the limitation issue was sufficient to dispose of the matter.