1986 (4) TMI 133 - AT - Income Tax

Tribunal upholds penalty under Income-tax Act, dismisses appeal

La - Medica. Versus Income-Tax Officer.

La - Medica. Versus Income-Tax Officer. - ITD 024, 235, Issues Involved:1. Validity of ex parte order by CIT (Appeals).2. Non-compliance with notice under section 148.3. Legitimacy of penalty imposition under section 271(1)(a).4. Entitlement to immunity under Voluntary Disclosure Scheme.5. Quantum of penalty calculation.Issue-Wise Detailed Analysis:1. Validity of Ex Parte Order by CIT (Appeals):The assessee argued that the ex parte order passed by the learned CIT (Appeals) was 'bad in law and facts of the case.' The order was challenged on grounds that the assessee was not allowed inspection of records and that the appeal was heard ex parte without granting an adjournment. However, the Tribunal noted that the appeal had been adjourned multiple times at the request of the assessee and was finally heard on several dates in February and March 1986. The Tribunal found no merit in the claim that the ex parte order was invalid.2. Non-Compliance with Notice Under Section 148:The Tribunal examined whether a proper notice under section 148 was issued and served on the assessee. The Revenue provided a photostat copy of the notice and other relevant documents, confirming that the notice was duly served. The Tribunal was satisfied with the service of the notice, dismissing the assessee's contention of non-service.3. Legitimacy of Penalty Imposition Under Section 271(1)(a):The Tribunal addressed the assessee's argument that penalty proceedings initiated during the original assessment were dropped, and therefore, no penalty should be imposed. However, the Tribunal held that once valid proceedings for reopening an already completed assessment are initiated, the previous assessment is set aside, and the entire assessment process starts afresh. The Tribunal referenced the Supreme Court's decision in V. Jaganmohan Rao v. CIT, which supports the notion that reassessment is equivalent to an original assessment, and all consequences, including penalty imposition, follow. Since the assessee failed to comply with the notice under section 148 and did not furnish the return of income, the penalty under section 271(1)(a) was deemed justified.4. Entitlement to Immunity Under Voluntary Disclosure Scheme:The assessee claimed immunity under the Voluntary Disclosure of Income and Wealth Act, 1976, arguing that the full tax due for the year was paid in bulk amounts covering several assessment years. However, the Tribunal noted that the immunity from penalty was available only to those who paid taxes as per the provisions of section 5 of the Ordinance. Since the assessee failed to pay the taxes on the disclosed income, immunity was not granted.5. Quantum of Penalty Calculation:The assessee contended that no penalty should be levied since no tax was due and payable on reassessment and that the penalty should be based only on the escaped income. The Tribunal referred to the Full Bench decision of the Patna High Court in Jamunadas Mannalal v. CIT, which held that a registered firm is liable to penalty calculated on the basis of tax on an unregistered firm, even if the firm has paid advance tax. The Tribunal concluded that the penalty should be based on the total assessed income of Rs. 8,40,097 as per the assessment order dated 20th March, 1980. The penalty was to be calculated from the date of service of the notice under section 148 to the date of assessment, and the Tribunal upheld the penalty imposed by the lower authorities.Conclusion:The Tribunal dismissed the appeal, affirming the penalty imposed under section 271(1)(a) of the Income-tax Act. The Tribunal found that the ex parte order by CIT (Appeals) was valid, the notice under section 148 was duly served, and the penalty was justified and correctly calculated based on the total assessed income. The assessee's claims for immunity under the Voluntary Disclosure Scheme and other contentions were rejected.