2005 (3) TMI 35 - HC - Income Tax

Court rules penalty unjustified under Income-tax Act due to bona fide mistake

Cheap Cycle Stores Versus Commissioner of Income-Tax.

Cheap Cycle Stores Versus Commissioner of Income-Tax. - [2006] 281 ITR 166, 196 CTR 173, 154 TAXMANN 284 Issues:Interpretation of provisions of section 139(4) and section 271(1)(c) of the Income-tax Act, 1961 regarding penalty for concealment and/or gross or wilful neglect.Analysis:The case involved a reference relating to penalty imposition under section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 1978-79. The applicant, assessed as a firm, originally declared an income of Rs. 38,590 which was later revised to Rs. 57,069 due to a mistake in the valuation of closing stock. The Assessing Officer added Rs. 11,562 to the income, initiating penalty proceedings under section 271(1)(c) and imposing a penalty of Rs. 15,000. The Appellate Assistant Commissioner set aside the penalty, deeming the mistake as bona fide. The Tribunal, however, restored the penalty order.During the proceedings, the applicant argued that the concealment was not detected by the Assessing Officer before the revised return was filed, thus the penalty was unjustified. The court noted that the order-sheet entry did not mention concealment being detected before the revised return was submitted. As the revised return was filed within the statutory period and no concealment was found in it, the penalty for the original return could not be justified. The court held that the Tribunal erred in concluding that the applicant concealed turnover, ruling in favor of the assessee and against the Revenue.In conclusion, the court answered the referred question in the negative, supporting the assessee, and decided there would be no order as to costs.