1980 (6) TMI 79 - AT - Income Tax

Summary

Issues:
1. Imposition of penalty under section 273(b) of the IT Act.
2. Assessment of the assessee's status as HUF and its impact on the penalty.

Detailed Analysis:
Issue 1: The appeal was filed against the order of the AAC of IT for the assessment year 1972-73, challenging the imposition of a penalty under section 273(b) of the IT Act. The ITO levied a penalty of Rs. 3,000 on the assessee for not complying with the provisions of section 212(3) of the Act, claiming that the assessee, previously assessed as an individual, was now an HUF and had failed to file an estimate and pay advance tax. The AAC reduced the penalty to Rs. 1,500 but upheld its imposition. The ITAT was approached, arguing that as the assessee was an old assessee, the penalty was unjustified. After careful consideration, the ITAT found that the assessee had been an individual until the assessment year 1967-68, and the change to HUF status in 1968-69 did not warrant the penalty. The ITAT concluded that as the assessee had paid the tax as required, there was no default under section 212(3) and thus no basis for imposing a penalty under section 273(b).

Issue 2: The Department representative contended that the assessee, by adopting HUF status in 1968-69, became a new assessee required to file an estimate voluntarily to avoid penalty. However, the ITAT determined that the change in status did not change the fact that the assessee remained the same entity, except for the change in status. The ITAT emphasized that as the assessee was an old assessee who had paid the tax demanded, no penalty could be imposed under section 273(b). Additionally, the Department's argument regarding a default under section 212(3A) was dismissed by the ITAT as it was not raised as a charge against the assessee, precluding the imposition of a penalty for this alleged default as well. Consequently, the ITAT canceled the penalty, ruling in favor of the assessee.