2006 (1) TMI 200 - AT - Income Tax

Summary

Issues:
- Penalty under s. 271(1)(a)
- Penalty under s. 273(1)(b)
- Penalty under s. 271(1)(c)

Penalty under s. 271(1)(a):
The case involved penalties imposed by the AO under sections 271(1)(a), 273(1)(b), and 271(1)(c) for the asst. yr. 1985-86. The AO imposed a penalty under s. 271(1)(a) due to a delay of 93 months in filing the return. The assessee declared income of Rs. 11,500, which was below the taxable limit, but the AO estimated higher income. The Tribunal reduced the estimated income, and the AO allowed deductions in fresh proceedings. The Tribunal held that the impression of the assessee about income being below taxable limit was a reasonable cause for the delay in filing the return, citing relevant High Court decisions. Consequently, the penalty under s. 271(1)(a) was not justified, and the appeal of the assessee was allowed.

Penalty under s. 273(1)(b):
The AO imposed a penalty under s. 273(1)(b) for failure to furnish a statement of advance tax, which was confirmed in the first appeal. The Tribunal applied the reasoning from the penalty under s. 271(1)(a) to this penalty as well. Since the income was below the taxable limit, there was no requirement to furnish a statement of advance tax. The subsequent adjustments in income levels justified the non-imposition of the penalty, leading to the deletion of this penalty upon appeal.

Penalty under s. 271(1)(c):
The penalty under s. 271(1)(c) was based on enhancements made by the AO on estimated income from Gadai and interest. Judicial precedents were cited to support that penalties are not sustainable when income is estimated. The Tribunal noted that additions based on estimates or disallowances do not conclusively show concealment of income or furnishing inaccurate particulars of income, hence not constituting a basis for penalty under s. 271(1)(c). The Tribunal found that the additions made were not sufficient for the imposition of the penalty, leading to the deletion of this penalty upon appeal.

In conclusion, the Tribunal allowed all three appeals by the assessee, ruling in favor of the assessee against the penalties imposed under sections 271(1)(a), 273(1)(b), and 271(1)(c) for the asst. yr. 1985-86.