1991 (6) TMI 111 - AT - Income Tax

Summary

Issues Involved:

1. Levy of penalty under Section 271(1)(c) of the Income-tax Act.
2. Determination of the amount on which penalty is leviable.
3. Bona fide belief of the assessee regarding claims.
4. Timeliness of the Department's appeal.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):

The core issue was whether the penalty under Section 271(1)(c) was leviable on the assessee. The IAC (Asst) imposed a penalty of Rs. 7,10,152 on the assessee, M/s Oriental Power Cables Ltd., for various disallowed expenses and additions totaling Rs. 12,01,102. The CIT(A) reduced the penalty leviable to Rs. 7,65,688, categorizing the expenses into two groups: those that were bona fide claims and those that were exaggerated or false. The Tribunal ultimately held that mere disallowance of a claim or making an addition does not attract penalty under Section 271(1)(c). The Tribunal found that the explanations furnished by the assessee were bona fide and that there was no deliberate attempt to furnish false claims.

2. Determination of the Amount on Which Penalty is Leviable:

The IAC (Asst) identified several items totaling Rs. 12,01,102 on which penalty was considered. These included professional fees, salaries, duty drawback, donations, miscellaneous expenses, selling expenses, disallowance under Section 37(3A), duty drawback written off, disallowance under Section 40A(5), expenses on exports, compensation for belated supplies, and travelling expenses. The CIT(A) further categorized these into bona fide claims and exaggerated claims. The Tribunal reviewed each item and found that the claims were either debatable or made under a bona fide belief, thus not attracting penalty.

3. Bona Fide Belief of the Assessee Regarding Claims:

The Tribunal emphasized that the assessee maintained proper books of account and furnished all relevant details and clarifications during the assessment proceedings. The Tribunal noted that the income finally assessed was less than the returned income, indicating that more taxes were paid than due. Specific items such as professional fees, salaries, duty drawback, donations, miscellaneous expenses, selling expenses, disallowance under Section 37(3A), duty drawback written off, disallowance under Section 40A(5), expenses on exports, and compensation for belated supplies were examined in detail. The Tribunal concluded that these claims were made under a bona fide belief and were not false or exaggerated.

4. Timeliness of the Department's Appeal:

The assessee raised an objection that the Department's appeal was time-barred. However, the Tribunal found that the appeal was filed within the permissible period of 60 days, as it was filed on the 59th day after the communication of the order appealed against. Therefore, the objection was not factually well-founded.

Conclusion:

The Tribunal concluded that none of the items referred to attracted any penalty under Section 271(1)(c). The penalty levied was, therefore, canceled in its entirety. The assessee's appeal (ITA No. 286/Jp/87) was allowed, the Department's appeal (ITA No. 287/Jp/87) was dismissed, and the assessee's Cross-Objection (No. 20/Jp/89) was partly accepted.