2013 (6) TMI 356 - AT - Income Tax

Penalty u/.s. 271(1)(b) - CIT(A) deleted the penalty - Held that - CIT(A) has taken into consideration the fact that the AO has never refuted the plea of the assessee that the appellant had filed first return on a provisional account and it was beyond the control of the corporation to influence the CAG to complete the audit before the due date of filing the return. Reopening had been done only for a small issue of depreciation, which was taken from the Form 3CD filed by the assessee on the basis of the original provisional return. Admittedly, in the return in response to the notice u/s. 148 much higher income was disclosed which is on the basis of CAG report, which was not even in the knowledge of the AO. Further as for both the assessment years the assessment has been passed u/s. 143(3), thus once, an assessment order is passed u/s. 143(3) that too accepting the returned income, it is presumed that the AO has condoned the action of the delay in furnishing of the returns in response to notice u/s. 148 - cancellation of penalty confirmed. In favour of assessee. Penalty u/s 271(1)(c) - CIT(A) deleted the penalty - Held that - CIT(A) in his order also recognized the fact that the assessee has after completion of the statutory audit by the CAG had truthfully come forward and had filed the details of the true income and even before filing of the return the corresponding taxes have been paid. Perusal of the assessment order clearly shows that the income returned by the assessee in its return in response to the notice u/s. 148 has also been accepted by the AO without any tinkering thereto. Thus it cannot be said that the assessee has concealed any particulars of its income or has furnished any inaccurate particulars of income. Cancellation of penalty confirmed. In favour of assessee.

Summary

Issues:
Appeals by revenue against CIT(A) orders canceling penalties u/s. 271(1)(b) and 271(1)(c) for AYs 2004-05 and 2005-06.

Analysis:
1. The revenue filed appeals against CIT(A) orders canceling penalties u/s. 271(1)(b) and 271(1)(c) for the assessment years 2004-05 and 2005-06. The assessee filed Cross Objections supporting the CIT(A) orders.

2. Regarding penalty u/s. 271(1)(b), the revenue argued non-cooperation by the assessee in filing returns in response to notice u/s. 148. The CIT(A) canceled the penalty citing reasonable cause under section 273B. The AR supported the CIT(A)'s decision.

3. The ITAT noted that the AO did not refute the assessee's claim of filing original returns based on provisional accounts due to audit delays. The CIT(A) considered the circumstances, including the higher income declared in response to the notice u/s. 148, accepted by the AO. The penalty cancellation was upheld based on reasonable cause.

4. For penalty u/s. 271(1)(c), the revenue argued a significant difference between original and revised returns post notice u/s. 148. The CIT(A) canceled the penalty invoking section 273B, disputed by the revenue. The AR contended that the higher income was voluntarily disclosed.

5. The ITAT found that the CIT(A) correctly applied section 273B for both penalties. The assessee disclosed true income post CAG audit, paid taxes, and filed returns before knowing the audit results. The AO accepted the revised income without changes, supporting the assessee's explanation.

6. The ITAT upheld the CIT(A)'s decision to cancel penalties u/s. 271(1)(c) based on reasonable cause and accepted income variations. The Cross Objections supporting CIT(A) were upheld, rendering the revenue's appeals and Cross Objections infructuous.

This detailed analysis covers the issues of penalty cancellation under sections 271(1)(b) and 271(1)(c) for the mentioned assessment years, highlighting the arguments, decisions, and reasoning provided by the parties and the tribunal.