Penalty proceedings levy of penalty u/s 271(1)(a) in cases of partners of firms. - Income Tax - 412/CBDT

INSTRUCTION NO. 412/CBDT Dated: May 11, 1972 Section(s) Referred: 271 Statute: Income - Tax Act, 1961 The Revenue Audit of the C. A.G. has pointed out a case where the I.T. Officer proceeded to levy penalty u/s 271(1)(a) of the I.T. Act, 1961, on an assessee who was also a partner in a firm, on the basis of tax determined in the original assessment which took into account his share income from the firm only provisionally. Subsequently, the assessment of the firm was completed by another I.T. Officer in a different circle and the particulars of the share income of the partner were communicated to the I.T.O. assessing the partner. Accordingly, the assessment of the partner was rectified, adopting correct share income which happened to be substantially higher than what was returned by the partner. The levy of penalty on the basis of original assessment, without waiting for completion of the firm's assessment, has resulted in a loss of revenue of Rs. 21,756 when there was nearly 16 months' time before penalty proceedings to become time-barred. 2. In this case, the following extenuating circumstances were given to justify the action of the I.T. Officer:- (i) The assessment was done in a Salary Circle where the I.T. Officer had no idea that the share of income declared by the assessee from the firm would ultimately be fixed at a much higher figure, the firm being assessed in a different circle. (ii) The I.T. Officer was anxious to complete the penalty proceedings within one year of the completion of the assessment in this case; this was in accordance with Board's instructions contained in Para 19(vii)(b) of Chapter XII of Office Manual Vol. II Section II. 3. The Board feel that such hasty actions to augment disposals will adversely affect the interests of revenue and will also given cause for adverse criticism from Audit. The Board, therefore, desire that while finalising penalty proceedings in the cases of partners of firms etc., care should be taken to see that correct share income is adopted in the respective assessments as far as practicable. The I.T. Officers should see that big and important revenue yielding cases of firms etc. are disposed of as quickly as possible and details of share income communicated to the I.T. Officers assessing the partners promptly so that faults of the type mentioned earlier do not occur in future. 4. These instructions may please be brought to the notice of all the assessing officers in your Charge.