1988 (10) TMI 100 - AT - Income Tax

Appeals allowed for 1965-69, penalties canceled. 1970 appeal dismissed, penalty confirmed. Lack of jurisdiction.

RS. PICHAKARA GANDAR. Versus SECOND INCOME TAX OFFICER.

The appeals for the assessment years 1965-66 to 1969-70 were allowed, and the penalties levied by the ITO were canceled due to lack of jurisdiction. ... - Issues Involved:1. Condonation of delay in filing appeals.2. Justification of penalties under Section 271(1)(c) of the Income Tax Act, 1961.3. Jurisdiction of the Income Tax Officer (ITO) to levy penalties.Detailed Analysis:1. Condonation of Delay in Filing Appeals:The appeals were marked as time-barred by three days. The appellant filed a petition for condonation of the delay, explaining that the delay was due to illness and undergoing medical treatment, which prevented timely instructions to the Auditor. The appellant argued that the delay was not willful or due to negligence but due to circumstances beyond control. The departmental representative opposed, stating that the reasons did not constitute sufficient cause. The tribunal, after considering the submissions, found the reasons genuine and condoned the delay, proceeding to dispose of the appeals on merits.2. Justification of Penalties under Section 271(1)(c) of the Income Tax Act, 1961:The appeals were directed against the orders of the AAC sustaining penalties levied under Section 271(1)(c) for the assessment years 1965-66 to 1970-71. The penalties were for concealment of income in the money lending business, which was not disclosed in the original returns but admitted in revised returns filed in response to notices under Section 148 after search operations. The appellant argued that there was no concealment or furnishing of inaccurate particulars, and the income was estimated due to the absence of proper books of accounts. The appellant relied on various judicial decisions to support the contention that penalties should not be levied for estimated additions.The departmental representative argued that penalties were justified as the appellant concealed the source of income, which was revealed only after search operations. The appellant admitted the income in revised returns, and thus, no further onus was on the Department to prove concealment. The tribunal, relying on judicial precedents, held that the levy of penalty was justified as the additional income was not disclosed in the original returns and was admitted only after the search.3. Jurisdiction of the Income Tax Officer (ITO) to Levy Penalties:The appellant contended that penalties could only be levied with reference to the law applicable on the date of concealment, i.e., the date of filing the original returns. For the years 1965-66 to 1969-70, the original returns were filed before the amendment to Section 274(2) by the Taxation Laws (Amendment) Act, 1970, which enlarged the jurisdiction of the ITO. Thus, the ITO had no jurisdiction to levy penalties for these years, and only the IAC had jurisdiction. The departmental representative argued that this point was not raised earlier and should not be considered. However, the tribunal found it to be a question of law that could be examined on the existing record.The tribunal, relying on judicial decisions, held that for the years 1965-66 to 1969-70, the ITO had no jurisdiction to levy penalties, and only the IAC could do so. Therefore, the penalties for these years were canceled. For the year 1970-71, the return was filed after the amendment, and the ITO had valid jurisdiction to levy the penalty. The penalty for this year was confirmed.Conclusion:The appeals for the assessment years 1965-66 to 1969-70 were allowed, and the penalties levied by the ITO were canceled due to lack of jurisdiction. The appeal for the assessment year 1970-71 was dismissed, and the penalty levied by the ITO was confirmed.