2005 (10) TMI 68 - HC - Income Tax

Penalty under section 271(1)(c) - Whether Tribunal was right in law to hold that penalty under section 271(1)(c) was chargeable in the case of the assessee in respect of excess claim of interest made by the assessee notwithstanding the fact that the assessee has subsequently volunteered the information co-operated with the Department? Whether Tribunal was right in law to uphold the penalty in regard to a sum of Rs. 10,22,770 being the amount remitted by the bank on the basis of compromise decree granted during the relevant assessment year notwithstanding the fact that the decree was satisfied in a subsequent assessment year? both questions are answered in the affirmative, i.e., in favour of the Revenue

Summary

Issues Involved:
1. Whether the Tribunal was right in law to hold that penalty under section 271(1)(c) was chargeable for excess interest claims, despite the assessee's voluntary disclosure and cooperation.
2. Whether the Tribunal was right in law to uphold the penalty regarding the sum remitted by the bank based on a compromise decree.
3. Whether the Tribunal was right in law to hold that the assessee was not liable to penalty for excess interest claims due to a misunderstanding of the decree.

Detailed Analysis:

Issue 1: Penalty under Section 271(1)(c) for Excess Interest Claims
The Tribunal found that the assessee had made wrong claims in the original returns for the assessment years 1983-84 to 1987-88. Despite the voluntary disclosure of the compromise decree, the Tribunal concluded that the omission of Rs. 10,22,770 and the wrong claim of Rs. 7,11,894 were not for bona fide reasons. The Tribunal held that the assessee was liable for penalty under section 271(1)(c) for these claims. However, the Tribunal deleted the penalty for Rs. 98,054, considering a possible misinterpretation of the decree. The penalty rate was reduced from 200% to 100% due to the assessee's cooperation during the assessment proceedings.

Issue 2: Penalty for Sum Remitted by the Bank
For the assessment year 1983-84, the Tribunal upheld the penalty regarding the sum of Rs. 10,22,770 remitted by the bank based on the compromise decree. The Tribunal found no provision in the decree that allowed for the revival of the waiver amount under any circumstances. The Tribunal concluded that the assessee's explanation was unconvincing and that the penalty was justified.

Issue 3: Penalty for Misunderstanding of the Decree
The Tribunal found that for the assessment years 1986-87 and 1987-88, the assessee had filed revised returns voluntarily offering the excess interest claimed. The Tribunal concluded that there was no material to suggest that the revised returns were filed after detection by the Assessing Officer. Therefore, the Tribunal held that the penalty for these years was not justified, as there was no conscious concealment of income.

Final Judgment:
The High Court upheld the Tribunal's decision for the assessment years 1983-84, 1984-85, and 1985-86, confirming the penalty for intentional and conscious concealment of income and furnishing inaccurate particulars. For the assessment years 1986-87 and 1987-88, the High Court found that the penalty was not justified due to the voluntary disclosure by the assessee. The High Court answered the questions in favor of the Revenue for the years 1983-84, 1984-85, and 1985-86, and in favor of the assessee for the years 1986-87 and 1987-88. The question raised by the Revenue was answered in favor of the assessee. The parties were left to bear their own costs.