2008 (9) TMI 32 - HC - Income Tax

High Court Overturns Tribunal's Penalty Order on Income Tax Act; Remands for Reconsideration

The High Court set aside the Tribunal's order on penalty imposition under Section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 1997-1998. ... Assessee plea is that they claimed deduction wrongly so it is a bona fide mistake– tribunal accepted revenue’s submission understanding that the assessee had not paid any advance tax on the said amount – since assessee has paid the advance tax, decision of the Tribunal on merits requires re-consideration - insofar as the plea of validity of proceedings u/s 271 (1)(c) are concerned, the revenue’s appeal is allowed inasmuch as sub-section (1B) is introduced with retrospective effect from 1.4.89 Issues:Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 1997-1998.Analysis:The High Court heard appeals by the revenue and the assessee against the Tribunal's order regarding the penalty under Section 271(1)(c) of the Income Tax Act, 1961. The Tribunal had set aside the penalty imposition due to the absence of necessary recorded satisfaction before initiating penalty proceedings. However, on the merits, the Tribunal ruled in favor of the revenue concerning the deduction claim of Rs.23,50,000 by the assessee. The revenue argued that the claim was not a bona fide mistake but intentional misrepresentation. The Tribunal was influenced by the lack of advance tax payment on this amount by the assessee. The assessee contended that it had indeed paid advance tax on the claimed amount, contradicting the Tribunal's understanding. The High Court noted the introduction of sub-section (1B) by the Finance Act, 2008 with retrospective effect from 01.04.1989, requiring the revenue's appeal on the validity of penalty proceedings to be allowed. However, the Court found the Tribunal's decision on merits needed reconsideration as the assessee demonstrated prima facie that advance tax was paid on the disputed amount. Thus, the matter was remanded to the Tribunal for fresh consideration on this aspect.Consequently, the High Court set aside the Tribunal's order on both the satisfaction recording and merits issues. The matter was remanded to the Tribunal for a fresh review, allowing the parties to present all relevant submissions. The Court clarified that no opinion was expressed on the merits of the case.