Commissioner of Income Tax, Lucknow vs Hari Om Ashok Kumar Sugar Works

The income tax Appellate Tribunal, Delhi, has referred the following question of law u/s 256(1) of the income tax Act, 1961 (hereinafter referred to as ''the Act'') for opinion to this Court : "Whether, on the facts and in the circumstances of the case, the Tribunal was, in law, justified in holding that penalty provisions u/s 271(1)(c) of the Act are not attracted in this case and, thus, in deleting the penalty imposed u/s 271(1)(c) of the Act?"

The dispute relates to the assessment years 1980-81 and 1981-82. The respondent/assessee, a registered firm, filed its return showing the total income of Rs. 29,280 but the assessment was completed on a total income of Rs. 57,740. The Assessing Officer during the course of assessment proceedings for the assessment year 1981-82 found that the assessee had sold its machinery for Rs. 20,000 in the earlier assessment year 1980-81. Consequently, the reassessment proceedings to assess the profits earned on sale of machinery in the relevant year were initiated. The reassessment was completed on a total income of Rs. 61,680 considering the relief allowed by the Appellate Assistant Commissioner in appeal filed against the original assessment. On the basis of the aforesaid addition, the Income- tax Officer initiated penalty proceedings u/s 271(1)(c) of the Act. In reply to the show-cause notice it was contended by the assessee that all the details of purchase and sale of machinery were filed along with the original return and after seeing the details the assessment was completed u/s 143(3) of the Act. The assessee submitted that it did not file inaccurate particulars of its return of income. It was under the impression that on the sale of machinery no income tax would be attracted and as such the profit on sale of machinery would not be disclosed in the return. Plea of ignorance of provisions of income tax Law was also invoked. The income tax Officer levied a penalty of Rs. 70,000 in the assessment year 1980-81.

For the assessment year 1981-82, the income tax Officer held that the assessee-firm sold three plots of land which were acquired in the years 1975-76, 1976-77 and 1977-78, but the profit was not disclosed by the assessee in the return. He found that the profit comes to Rs. 7,462 and is taxable u/s 41(2) of the Act and addition was made accordingly. On the basis of the addition in the income of the assessee the penalty proceedings u/s 271(1)(c) were initiated for the assessment year 1981-82 also. As sum of Rs. 7,000 was levied as penalty u/s 271(1)(c) of the Act.

The Deputy Commissioner of income tax (Appeals) confirmed the penalty orders in the two appeals filed by the assessee in respect of the aforesaid two assessment years. In further appeal, the Tribunal found that the assessee filed the full particulars of its income at the original stage. The further finding is that inaccuracy of the particulars cannot be attributed and it set aside the penalty orders.

We have heard Sri A.N. Mahajan, learned standing counsel for the Department.

The Tribunal has recorded a finding that the assessee is from Chandausi and it furnished the particulars in both the assessment years about machinery, its sale and also about the land and its sale. An inference was to drawn by the Assessing Officer in terms of the provisions of the Act. The Assessing Officer was obliged to have made the assessment in accordance with the provisions of the Act and the assessee is obliged to furnish full and true facts. It has been found by the Tribunal that the assessee has not concealed any facts about any of the above transactions. In view of these findings, we are of the opinion that the Tribunal has rightly set aside the penalty orders for the assessment years in question. We do not find any error in the order of the Tribunal. In view of the above, we answer the aforesaid question referred to us in the affirmative, i.e., in favour of the assessee and against the department. There shall be no order as to costs.