1988 (4) TMI 101 - AT - Income Tax

Tribunal cancels penalties, allows assessee's cross objections under section 271(1)(a) for assessment years 1970-71, 1972-73.

The Tribunal dismissed the Revenue's appeals and partly allowed the assessee's cross objections, affirming the AAC's decision to cancel penalties under s. ... - Issues:- Appeal by Revenue against AAC's cancellation of penalties under s. 271(1)(a) for asst. yrs. 1970-71 and 1972-73.- Assessee's cross objections supporting AAC's order and contending failure to consider various contentions.Analysis:1. The Revenue contested the AAC's decision to cancel penalties imposed under s. 271(1)(a) for the asst. yrs. 1970-71 and 1972-73. The assessee, in cross objections, supported the AAC's ruling and argued that the AAC overlooked several contentions presented by the assessee.2. The delay in filing returns for the two assessment years was attributed to a search conducted on the business premises, resulting in the seizure of relevant books of account. The assessee argued that the delay was justified due to the unavailability of essential records for finalizing accounts. Additionally, the assessee claimed that penalties were unwarranted as the advance-tax paid exceeded the tax due, excluding amounts disclosed under the Voluntary Disclosure Act.3. The AAC rejected the plea of mens rea by the assessee, citing legal precedents. He also found no legal flaw in the show-cause notices issued by the ITO and agreed with the exclusion of voluntarily disclosed income for penalty calculation. The AAC considered the delay in filing returns reasonable, given the circumstances of book seizure and subsequent challenges in preparing accurate accounts.4. The Tribunal examined the provisions of the Voluntary Disclosure Act and concluded that the voluntarily disclosed income should not be considered for penalty imposition. The Tribunal agreed with the AAC's decision to cancel penalties, emphasizing the absence of tax liability due to excess advance tax payments and the reasonable cause for delayed filings.5. The Tribunal also acknowledged the challenges faced by the assessee in reconciling accounts due to errors made during the copying process. It was noted that the ITO's grant of time for filing returns was affected by the ongoing search and seizure operations, justifying the delay. The absence of mens rea on the part of the assessee was highlighted, emphasizing the requirement to demonstrate reasonable cause rather than proving intent.6. The Tribunal dismissed the Revenue's appeals and partly allowed the assessee's cross objections, affirming the AAC's decision to cancel the penalties. The Tribunal found no merit in the Revenue's arguments and upheld the reasoning behind the cancellation of penalties for both assessment years.