1981 (3) TMI 133 - AT - Income Tax

Summary

Issues: Appeal against penalty under section 273(c) of the IT Act, 1961 for assessment year 1973-74.

Analysis:
The appeal was filed by Shri Ramprakash Jaggi challenging the penalty of Rs. 4,285 imposed by the Income Tax Officer (ITO) under section 273(c) of the IT Act, 1961 for the assessment year 1973-74. The penalty was confirmed by the Appellate Assistant Commissioner (AAC) 'A' Range, Madras. The assessee, a partner in three firms, was issued a demand for advance tax based on the last completed assessment. However, the actual income declared by the assessee was significantly higher than the estimated income, leading to a discrepancy in the advance tax demand. The ITO noticed this discrepancy and initiated penalty proceedings under section 273(c) for the assessee's failure to revise the advance tax demand under section 212(3A) of the Act. The AAC upheld the penalty, stating that the assessee's explanation regarding the delay in closing the firms' accounts was not acceptable as a valid excuse. The assessee argued that the share income from one of the firms should not have been included in his individual income as it belonged to the family, and that it was challenging to anticipate higher income due to the extensive business operations of the firms. The assessee also highlighted that the firms themselves filed returns late and were penalized for the same default. The assessee's representative contended that penalizing the assessee for the firms' default would amount to a double penalty. The ITO dropped penalty proceedings under section 273(1)(a) due to the same reason of delayed closure of the firms' accounts. The Departmental Representative argued that the assessee could not use the firms' default as an excuse for his individual case.

Upon careful consideration of the records and arguments presented, the Appellate Tribunal found merit in the assessee's claim that the delay in closing the firms' accounts rendered it difficult to anticipate profits accurately. The Tribunal noted that penalties had been imposed on the firms for the same default, and there was no evidence to suggest that the assessee was individually responsible for the firms' defaults. The Tribunal accepted the assessee's explanation that he was unable to predict the profits accurately due to the delayed closure of the firms' accounts. Consequently, the Tribunal allowed the assessee's appeal and canceled the penalty of Rs. 4,285 imposed under section 273(c) of the IT Act, 1961 for the assessment year 1973-74.