1978 (7) TMI 178 - AT - Income Tax

Summary

Issues:
1. Penalty under section 271(1)(c) of the IT Act, 1961 for failure to file return of income.
2. Interpretation of section 271(3)(a) regarding imposition of penalty based on total income not exceeding the maximum amount not chargeable to tax.
3. Application of case laws in determining penalty imposition for discrepancies in total income.

Detailed Analysis:
1. The judgment revolves around the imposition of a penalty under section 271(1)(c) of the IT Act, 1961 on the assessee firm for failing to file its return of income by the due date. The assessee eventually filed the return after the due date, admitting an income of Rs. 10,750, although the assessment was completed on a higher income of Rs. 17,764. The Assessing Officer and the Appellate Authority confirmed the penalty, leading to an appeal before the ITAT Madras-C.

2. The crux of the issue lies in the interpretation of section 271(3)(a) of the IT Act, which states that no penalty shall be imposed if the total income does not exceed the maximum amount not chargeable to tax by a specified limit. The assessee argued that since its income was below the prescribed limit, no penalty should be levied. The Revenue contended that the income returned should not be considered for penalty calculation, citing relevant case laws like Sunderlal Rathi vs. ITO and Partap Steel Rolling Mills vs. CIT.

3. The Tribunal analyzed the facts of the case, noting that the additions to the income were made based on cash credits, which were explained by the assessee and confirmed by the creditors. The Tribunal also referred to precedents like the Gauhati High Court case of CIT vs. Assam Automobile and Accessories Agency, emphasizing that if the returned income is below the taxable limit, there is no obligation to file a return under section 139(1) even if the assessed income exceeds the non-taxable amount. Rulings such as CIT vs. N. Khan and Brothers were cited to support this interpretation.

4. Ultimately, the Tribunal held that as per the provisions of section 271(3)(a), no penalty was exigible in the present case since the total income of the assessee did not exceed the threshold amount. Following the precedent set by the Gauhati High Court, the Tribunal concluded that the penalty imposed under section 271(1)(c) was not justified and proceeded to delete the penalty, allowing the appeal in favor of the assessee.