By TIOL News Service

MUMBAI, AUG 25, 2017: THE issue before the Bench is - Whether the mandate of Section 274 for granting a fair opportunity to the assessee can be stretched to an act of seeking explanation relating to the quantum of penalty proposed. NO is the verdict.

Facts of the case

The assessee-company filed its return for the AY 1987-88. The assessment was reopened by the Revenue as it found that the assessee had concealed some particulars of the income returned. Accordingly, penalty was levied. The CIT (A) reduced the amount of penalty. On further appeal the Tribunal upheld the decision of the CIT(A).

On appeal, the High Court held that,

++ the requirement of Section 274 of the Act for granting reasonable opportunity of being heard in the matter cannot be stretched to the extent of framing a specific charge or seeking an explanation in respect of the quantum of penalty proposed to be imposed, as has been urged. The assessee was supplied with the findings recorded in the order of reassessment, which was passed on the same date on which the notice under Section 271(1)(c) was issued. The assessee had sufficient notice of the action of imposing penalty;

++ it is not in dispute that a reasonable opportunity of being heard in the matter, as required by Section 274 of the said Act was given to the assessee before imposing the penalty. The assessee furnished his explanation, which has been taken into consideration in the order. The mandatory requirement of obtaining the previous approval of the Inspecting Assistant Commissioner was followed. The penalty imposed by the Income Tax Officer was reduced by the Appellate Authority. There was no arbitrary exercise of discretion and the reasons are recorded after taking into consideration the explanation submitted by the assessee. The exercise of jurisdiction in respect of quantum of penalty is neither unjust nor beyond jurisdiction.

(See 2017-TIOL-1661-HC-MUM-IT)