TaxTMI 
TaxTMI 
1996 (3) TMI 171
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....f the amount into income-tax and interest was not given. The printed accounts disclosed a loss of Rs. 58,89,802. The aforesaid loss was reduced by an amount of Rs. 6,11,721 described as ' Income-tax/Surtax/Refund/Adjustment (for earlier years) '.The net loss was thus reduced to Rs. 52,78,080. 3. The assessee filed its return of income on 14-12-1990 disclosing a loss of Rs. 58,26,050. In the course of the assessment proceedings, the Assessing Officer appears to have verified the records for the earlier assessment years and noticed that the refund of Rs. 7,05,382 granted by refund voucher No. B.283205 dated 18-5-1989,consisted of the following amounts of interest : Rs. Asst. Year : 1979-80 - Interest u/s 244(1A) 4,54,244 Asst. Year : 1982-83 - Interest u/s 214 1,14,707 Asst. Year : 1983-84 - Interest u/s 214 ....
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....ion of a false return in view of the fact that there were huge losses. It was also submitted that the assessee cannot be accused of having concealed something which it has received from the Income-tax Department itself. Generally speaking, the refrain of the assessee in the reply to the penalty notice was that the omission to disclose the interest received in the return of income was not wilful or deliberate but was a bona fide error. 5. The ITO did not agree with the assessee's contention. He observed that the assessee itself was diligent enough to ask for interest on the refunds and the interest was granted pursuant to the assessee's request and in this background it was difficult to believe that the assessee was not aware of the fact that the refund included interest also. He was, therefore, of the view that as per provisions of clause (a) of Explanation 4 to section 271(1)(c), though the assessment was on a loss, the assessee was liable to pay penalty on the undisclosed interest of Rs. 6,80,287. In this view of the matter, he imposed a penalty of Rs. 4,04,092. 6. On appeal, the CIT(Appeals) confirmed the levy of penalty on substantially the same grounds. 7. Before us, ....
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....e more than one reason for extending the benefit of doubt to the assessee in the present case. Firstly, the refund has been credited to the books of account. An attempt appears to have been made while preparing the final accounts to verify as to what portion of the same related to the earlier years. It is quite possible that the assessee and its auditors, while preparing the final accounts, were exercised with the ascertainment of the refund relating to the year of account in order to eliminate transactions relating to the earlier years and that in carrying out this exercise, it simply did not strike them that the interest element embedded in the refund had to be declared as income. Secondly, the assessee had huge brought forward losses amounting to Rs. 1.87 crores and even for the year under appeal, the loss, without adjusting the income-tax refund, amounted to Rs. 58.89 lacs. It is quite possible that the assessee allowed itself to be a little lax, in view of the huge losses, in finding out whether there was any item of income which it has omitted to adjust against the losses. Thirdly, and this, in our opinion, is a very clinching reason, it is difficult to imagine that the asses....
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....inate conduct or definance of the law, penalty may not be levied. The power to decide whether the facts of a case give rise to a situation for imposition of penalty vests in the taxing officer in the same way as in the appellate authority. The Tribunal took stock of the entire aspect and in exercise of its appellate powers came to hold that the facts of the case did not warrant an imposition of penalty by the exercise of that jurisdiction. This, we are of the view, is a matter within the domain of the Tribunal's jurisdiction and once such a finding is reached or a recorded, there is hardly any question of law arising for being referred to the court or for being answered. In the facts of the case, we are inclined to think that the Tribunal did come to the conclusion that the facts were such that the assessee's conduct did not warrant visiting him with penalty. The question referred to us, therefore, is answered against the Revenue by holding that, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the penalty levied under section 271(1)(c) of the IT Act. " Applying the aforesaid test to the present case, as already stated, we are of the view th....