1996 (9) TMI 204 - AT - Income Tax

Assessing Officer, Assessment Order, Assessment Year, Levy Of Penalty, Non-resident Company, Penalty For Concealment, Penalty Proceedings, Total Income

Issues Involved:
1. Cancellation of penalty under section 271(1)(c) by the CIT(A).
2. Determination of tax liability and the role of the Commissioner under section 264.
3. Initiation of penalty proceedings for concealment of income versus filing inaccurate particulars.

Detailed Analysis:

1. Cancellation of Penalty under Section 271(1)(c) by the CIT(A):

The appeal by the revenue and the cross objection by the assessee pertain to the assessment year 1985-86 and focus on the cancellation of penalty under section 271(1)(c) by the CIT(A). The facts of the case involve the ship M.V. Ken Lucky, owned by Nedlloyd Bulk B.V. Botterdam and represented in India by Patvolk, Vasco. The ship was hire-chartered to Mineral Import Export, Bucharest for carrying iron ore, with freight charges fixed at $12.00 per metric ton. Patvolk applied for a 'No objection certificate' from the Income-tax Officer (ITO) for customs clearance, which was issued on 30-11-1984. The Agents filed the return of income under section 172(3) and provided several documents, arguing that the charter hire did not attract taxability in India.

The Assessing Officer (AO) did not accept the Agents' contentions and determined the tax payable at Rs. 4,44,168 but did not initiate penalty proceedings under section 271(1)(c). The Agents did not appeal but filed a petition under section 264 to the Commissioner of Income-tax, who set aside the original assessment order and directed the AO to reassess the case. In the reassessment, the AO maintained the tax liability but initiated penalty proceedings for concealment of income, leading to a penalty of Rs. 4,44,168.

The CIT(A) cancelled the penalty, observing that there was no suppression of material facts by the appellant, and the issue was a matter of difference of opinion. The revenue's appeal against this cancellation was dismissed as the Tribunal upheld the CIT(A)'s decision, noting that the penalty was not justified as the assessee had disclosed all material facts and there was no misrepresentation.

2. Determination of Tax Liability and the Role of the Commissioner under Section 264:

The Commissioner's role under section 264 was scrutinized, emphasizing that the revisional power should not result in an order prejudicial to the assessee. The Commissioner set aside the AO's original order to reassess the case but did not direct the AO to initiate penalty proceedings. The Tribunal highlighted that the Commissioner's order indirectly led to the penalty, which was prejudicial to the assessee, contrary to the provisions of section 264.

The Tribunal noted that the AO, in the reassessment, did not find any new facts or concealment by the assessee. The assessee had fully disclosed all material facts during the original assessment, and the reassessment merely reiterated the original tax determination. Therefore, the initiation of penalty proceedings was deemed unwarranted.

3. Initiation of Penalty Proceedings for Concealment of Income versus Filing Inaccurate Particulars:

The Tribunal addressed the discrepancy between the initiation of penalty proceedings for concealment of income and the actual levy of penalty for filing inaccurate particulars. The learned counsel for the assessee argued that the penalty could not be levied for filing inaccurate particulars if the initiation was for concealment. The Tribunal, while upholding the CIT(A)'s order, did not find it necessary to delve into this issue further, as the penalty itself was cancelled.

Conclusion:

The Tribunal dismissed the revenue's appeal and upheld the cancellation of the penalty under section 271(1)(c) by the CIT(A). The cross objection by the assessee was also dismissed as infructuous due to the cancellation of the penalty. The Tribunal emphasized that the penalty proceedings were not justified as the assessee had disclosed all material facts, and the reassessment did not uncover any new facts warranting the penalty.

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