1992 (10) TMI 133 - AT - Income Tax

Tribunal upholds penalty for tailoring charges suppression under section 271(1)(c)

V. Gopalan And Another. Versus Income-Tax Officer.

The Tribunal upheld the CIT's order invoking section 263, setting aside the AO's decision to drop penalty proceedings, and directed the AO to pass a fresh ... Assessing Officer, Assessment Proceedings, Levy Of Penalty, Orders Prejudicial To Interests, Penalty For Concealment, Penalty Proceedings, Revised Return Issues Involved:1. Legitimacy of the order dropping penalty proceedings.2. Applicability of the Amnesty Scheme.3. Whether penalty under section 271(1)(c) is exigible.4. Whether the revised return was voluntary.5. Application of Explanation 1(A) or 1(B) to section 271(1).6. Limitation period under section 275.Detailed Analysis:1. Legitimacy of the Order Dropping Penalty Proceedings:The Tribunal held that the minute recorded by the Assessing Officer (AO) to drop the penalty proceedings is an order within the meaning of section 263 of the Act. The power to levy penalty includes the power not to levy penalty, and thus, a minute to drop proceedings is an order. Orders prejudicial to the interests of the Revenue are those that are not in accordance with law and prevent realization of revenue lawfully due to the State. The Tribunal emphasized that the decision to drop penalty proceedings is an order because it has civil consequences, favoring the assessee by not obligating them to pay penalty and disfavoring the revenue by not collecting penalty.2. Applicability of the Amnesty Scheme:The Tribunal concluded that the revised return filed by the assessee could not be regarded as voluntary under the Amnesty Scheme. The scheme did not encompass cases where the department had detected concealment during search and seizure operations. The Tribunal noted that the revised return was filed only after the search revealed systematic suppression of tailoring charges, indicating that the filing was not voluntary in the true sense.3. Whether Penalty Under Section 271(1)(c) is Exigible:The Tribunal found that this was a fit case for levy of penalty under section 271(1)(c) of the Act. The systematic suppression of tailoring charges was detected during search operations, and the assessee admitted to suppressing receipts. The Tribunal held that the AO's decision to drop the penalty proceedings was arbitrary and erroneous, as it was contrary to the facts of the case, which clearly warranted the levy of penalty.4. Whether the Revised Return was Voluntary:The Tribunal held that the revised return filed by the assessee was not voluntary. It was filed only after the search and seizure operations revealed systematic suppression of tailoring charges. The Tribunal emphasized that for the return to be considered voluntary, it should have been filed without any compulsion or detection by the department.5. Application of Explanation 1(A) or 1(B) to Section 271(1):The Tribunal concluded that the case was governed by Explanation 1(A) to section 271(1) because the assessee failed to offer any explanation for the suppression of tailoring charges. The Tribunal noted that the details of the tailoring charges received were within the personal knowledge of the assessee, and he failed to make a clean breast of the whole thing. Therefore, Explanation 1(B) and its proviso could not avail the assessee.6. Limitation Period Under Section 275:The Tribunal rejected the argument that the period of limitation for passing a penalty order expired on 28-2-1989, making the order in revision infructuous. It held that the period of limitation prescribed by section 275 applies only to the initial orders passed by the AO and not to orders passed pursuant to directions from superior officers like the Commissioner or CIT(Appeals).Conclusion:The Tribunal upheld the CIT's order invoking section 263 of the Act, setting aside the AO's minute dropping penalty proceedings, and directing the AO to pass a fresh order under section 271(1)(c) in accordance with law. The assessee's appeal was dismissed.