1987 (11) TMI 139 - AT - Income Tax

Summary

Issues:
Appeal against penalty under s. 271(1)(c) - imposition of penalty of Rs. 24,484; Validity of penalty order; Notices served on all legal heirs; Time limitation for penalty imposition.

Analysis:
The case involved an appeal against the imposition of a penalty under section 271(1)(c) amounting to Rs. 24,484. The facts of the case revolved around the death of the assessee, with the return filed by one of his legal heirs on a provisional basis. The assessment proceedings were conducted against the legal heir, resulting in an addition to the income of the deceased assessee related to his business of dealing in silver bullion and ornaments. The legal heir filed the return based on estimates due to the unavailability of the books, which were seized by the sales-tax authorities. The assessment was concluded based on these estimates, leading to the initiation of the penalty proceedings. The legal heir contested the penalty on the grounds that notices were not served on all legal heirs, the penalty order was time-barred, and there was no intentional concealment on the part of the assessee.

The counsel for the assessee relied on various legal precedents to argue that the penalty was unwarranted due to the circumstances under which the return was filed. The Departmental Representative, on the other hand, contended that the penalty order was within the prescribed time limit and that the lack of cooperation from the assessee justified the penalty imposition. The Tribunal carefully considered the arguments and the material on record, emphasizing that the legal heir had filed the return to the best of his ability and knowledge, without any intention to conceal information. The observations from the CIT(A) and the Tribunal in the quantum appeal highlighted the lack of background knowledge of the business by the legal heir and the estimation basis on which the return was filed. The Tribunal noted that the penalty was imposed solely on estimated additions without establishing the necessary prerequisites under section 271(1)(c), such as intent to conceal. Consequently, the Tribunal quashed the penalty, finding it to be unjustified in the given circumstances.

Regarding the legal issues raised, the Tribunal determined that the penalty order was well within the time limit prescribed by section 275, and the argument about notices not being served on all legal heirs was deemed untenable since the return was filed by the legal heir. The Tribunal allowed the appeal in part based on these findings, ultimately canceling the penalty imposed.