2015 (1) TMI 958 - AT - Income Tax

Penalty levied u/s 271(1)(C) - deemed income being loss claimed and disallowed - CIT(A) dismissed the appeal of the assessee both on the ground that the delay and on merits - Held that - As when the company is under liquidation, and when any official liquidator was appointed and was in charge of the affairs of the company, he should have filed the appeal and perused the matter. We are of the view that the contention of the assessee that it was under a bonafide belief, that the appeal would have been filed by the official liquidator, is correct. We are of the view that the Ld.CIT(A) should have condoned the delay in filing of the appeal before him. - Decided in favour of assessee. As stated the AO has passed the order in a summary manner, without specifying the grounds of disallowance, item wise. The AO has also not specified the charge on which penalty is being levied. The explanation given by the assessee, during the course of assessment proceedings, explaining the variation between the provisional books and the audited records, were not considered by the AO. Under these facts and circumstances, we hold that the penalty levied cannot be sustained. Hence we quash the order levying penalty u/s 271(1)(c) and allow the appeal of the assess. - Decided in favour of assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Merits of the penalty levied under Section 271(1)(c) of the Income Tax Act.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The primary issue was whether the delay in filing the appeal by the assessee should be condoned. The Ld. CIT(A) had dismissed the appeal on the grounds of delay, stating that the assessee was aware of the penalty proceedings, the main director was alive during the passing of the penalty order, and no cogent reason was provided for the delay.

However, the Tribunal found these findings factually incorrect. The assessee company was declared sick, and an official liquidator was appointed by the Delhi High Court. The penalty order was served on the assessee instead of the official liquidator, who was the competent authority. The company had acted diligently by informing the official liquidator, showing its bona fide. The main director had passed away, and his widow, a housewife unfamiliar with tax laws, had to manage the company's affairs. The Tribunal concluded that the delay was due to sufficient cause and should be condoned.

2. Merits of the Penalty Levied Under Section 271(1)(c):
The second issue was the validity of the penalty levied under Section 271(1)(c). The Tribunal observed that the assessment order was passed in a cursory and summary manner without detailed analysis or reasons for disallowance. The AO did not specify the charge on which the penalty was being levied, nor did he consider the explanations provided by the assessee regarding the discrepancies between provisional and audited records.

The Tribunal referred to case laws, including the Hon'ble Jurisdictional High Court's decision in New Holland Tractors India (P) Ltd. vs. CIT and the Hon'ble Karnataka High Court's decision in CIT vs. Manjunatha Cotton and Ginning Factory, which emphasized that penalty proceedings should be clear, specific, and based on concrete findings. The Tribunal concluded that the penalty could not be sustained due to the lack of detailed reasoning and the failure to specify the charge.

Conclusion:
The Tribunal allowed the appeal, condoning the delay in filing the appeal and quashing the penalty levied under Section 271(1)(c). The order was pronounced in the Open Court on 16th January 2015.