1979 (12) TMI 107 - AT - Income Tax

Summary

Issues:
1. Appeal against cancellation of penalty under section 221(1) of the IT Act, 1961 for the assessment year 1976-77.
2. Validity of the penalty imposed on the assessee for non-payment of taxes.
3. Assessment of the penalty by the Income Tax Officer (ITO) without proper consideration.
4. Justification for the cancellation of penalty by the Appellate Authority.

Analysis:
1. The appeal by the revenue challenged the cancellation of a penalty of Rs. 9,920 imposed on the assessee for non-payment of taxes for the assessment year 1976-77. The Appellate Assistant Commissioner (AAC) had cancelled the penalty based on the assessee's explanation and payment of the balance tax on 7th April, 1976.

2. The penalty was imposed by the ITO under section 221(1) of the IT Act, 1961, as the tax payable by the assessee was not paid. The ITO issued a notice of demand, and the penalty was imposed for the outstanding tax amount of Rs. 99,120. The assessee had paid Rs. 89,880 of the total tax due of Rs. 1,89,000 based on an income estimate filed on 14th March, 1976.

3. The revenue contended that the AAC's cancellation of the penalty was unwarranted as the assessee did not reply to the show cause notice. The revenue argued that the penalty was justified due to the assessee's default in advance tax payment. However, the AAC found that the penalty was not suitable considering the assessee's efforts to make payments promptly despite financial difficulties.

4. The Tribunal examined the penalty order and found it to be stereotyped, lacking judicious consideration. The penalty was imposed on the outstanding demand for the assessment year 1976-77, but it was noted that advance tax is payable during the financial year. The Tribunal held that the penalty imposition lacked justification and did not demonstrate contumacious conduct by the assessee.

5. The Tribunal upheld the AAC's decision to cancel the penalty, emphasizing that the revenue did not suffer any loss as the tax amount was eventually paid by the assessee. Citing precedents, the Tribunal concluded that the penalty proceedings should be quasi-judicial and penal in nature, requiring proper justification which was lacking in this case.

6. Consequently, the appeal by the revenue was dismissed, affirming the cancellation of the penalty by the AAC based on a thorough evaluation of the facts and circumstances of the case.