Law:

Section:

Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1980-81 - By an order dated 20-3-1980, Government of India cancelled fine in lieu of confiscation - As assessee received said order after assessment year in question had ended, it filed its return of income showing liability to pay fine and said amount was offered to tax in following assessment year when Government order was received by it - Assessing Officer levied penalty under section 271(1)(c) on assessee on ground that when return was filed, assessee had knowledge of fact that fine in lieu of confiscation had been cancelled - Whether on facts, it could be said that lapse was not deliberate and at highest it was an inadvertent error of and, therefore, no penalty could be imposed on assessee - Held, yes EDITOR'S NOTE In view of decision of the Bombay High Court dated 25-7-2005 in ITR No. 38 of 1989 in respect of same assessee and same assessment year holding that liability on account of L/C opened with bank had in fact been incurred, no penalty under section 271(1)(c) could be imposed on assessee on account of disallowance of claim of liability on account of L/C opened with banks. JUDGMENT 1. The question which has been referred to us under section 256 of the Income-tax Act is as follows :- "Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the assessee's case clearly attracted the application of section 271(1)(c) of the Income-tax Act, 1961 and as a sequel thereto confirming the penalty and further giving directions to the Income-tax Officer that the quantum be worked out as per the tax ultimately fixed by the ITAT in assessee's quantum appeal?" 2. The assessment year to which the question pertains is 1980-81. 3. The penalty under section 271(1)(c) was imposed on 3 items which are as under :- (i)Disallowance of claim of liability on account of L/C opened with Andhra Bank Rs. 9,75,876 (ii)Disallowance of claim of liability on account of L/C opened with UBI Rs. 28,89,093 (iii)Disallowance of fine in lieu of confiscation of goods paid Rs. 14,25,000. 4. As far as item No. (i ) which…

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