COMMISSIONER OF INCOME TAX Vs. RAHULJEE AND CO

JUDGEMENT

(1.) IN this appeal under S. 260A of the INCOME TAX ACT, 1961 (in short 'the Act') challenge is to the order dt. 11th Nov., 1999, passed by Income -tax Appellate Tribunal, Delhi Bench -A (in short 'Tribunal') holding that cancellation of penalty levied under S. 271(1)(c) of the Act was proper. It has to be noted that AO imposed penalty which was cancelled by the Commissioner of Income -tax (Appeals) [in short 'CIT(A)]' in an appeal filed by the assessee. Revenue's appeal has been dismissed by the Tribunal. Dispute relates to asst. year 1987 -88.

(2.) BRIEF reference to the factual aspects would suffice. Assessee obtained order for supply of imported video cassettes to Czechoslovakia. It obtained import licence to import video cassettes from a Korean company in semi -knocked down (SKD in short) condition. It was to be assembled in India by the assessee and then to the re -exported to Czechoslovakia. Goods were despatched by the Korean company to the assessee along with the bill of entry which indicated the words "video blank cassettes tape in SKD'. When the goods reached India, Customs authorities raised some doubts and accordingly they opened one of the packets. On opening it was noticed by the authorities that though the bill of entry mentioned that cassettes were in SKD condition from the contents it was revealed that the cassettes were imported in assembled form. Since it was found that assessee imported cassettes in finished form i.e., not in SKD condition, Collector of Customs confiscated the goods. Goods were later released by the Collector of Customs on payment of fine of Rs. 3 lakhs and a penalty of Rs. 50,000. Assessee claimed the said amount as deduction. However, AO held that as this payment was on account of breach of statutory rules relating to customs duty and, therefore, was not allowable. He also initiated penal proceedings under S. 271(1)(c) of the Act. Against the disallowance assessee preferred appeal before the CIT(A) who deleted the addition. But on appeal by Revenue, Tribunal restored the addition. In view of the above factual background AO, as noted above, issued notice to the assessee to show -cause as to why penalty under S. 271(1)(c) of the Act should not be imposed. Assessee furnished its reply. Its stand was that disallowance was made only on the basis of order of the Collector of Customs Bombay. Neither the AO nor the Tribunal had adjudicated the legal position about leviability of such amount. It was claimed that the assessee had to export cassettes to Czechoslovakia profit made therefrom was subjected to tax and, therefore, expenditure incurred should have been allowed. It was also submitted that penalty is imposable only if there was concealment of income or submission of inaccurate particulars of income. All the relevant factual aspects were before the authority. There was neither concealment nor furnishing of inaccurate particulars. AO did not accept the plea and levied penalty of Rs. 2,20,500 after obtaining prior approval of the concerned Deputy Commissioner of Income -tax (in short Dy. CIT). Assessee preferred appeal before the CIT(A) against the imposition of penalty. Said authority observed that in view of Explanation -I to S. 271(1) (c) penalty was not leviable. Matter was carried in appeal before the Tribunal by Revenue. Tribunal upheld the deletion of penalty and observed as follows :

(3.) WE find that Tribunal in quantum appeal had observed as follows :