2003 (4) TMI 13 - HC - Income Tax

Penalty u/s 271(1)(a) Whether the Tribunal was right in holding that there was a sufficient cause for delayed filing of the returns - Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in cancelling the levy of penalty under section 271(1)(a) by holding that the habitual default caused by the assessee has no relevance and would not constitute wilful default? - We are of the clear opinion that the so called questions of law as drafted in the memo of appeal cannot amount to substantial questions of law. Even on merits, we find that the Tribunal has applied its mind to all the factors argued before it. We are therefore of the clear opinion that the appeal deserves to be dismissed.

Issues:
1. Appeal against order quashing penalties under section 271(1)(a) of the Income-tax Act, 1961.
2. Substantial questions of law raised by the Revenue.
3. Justification of penalty cancellation by the Appellate Tribunal.
4. Condonation of delay in filing the appeal.
5. Admissibility of argument based on facts before the Tribunal.

Issue 1:
The appeal was directed against the Tribunal's order quashing penalties imposed by the assessing authority and the Commissioner of Income-tax (Appeals) under section 271(1)(a) of the Income-tax Act, 1961. The Tribunal accepted the explanations provided by the assessee and canceled the penalties. The relevant year was 1985-86, with returns due by June 30, 1985, but filed on December 14, 1987, leading to the penalty imposition by the assessing authority. The Tribunal, however, found a reasonable cause for the delay in filing the returns and decided to let off the assessee without penalty.

Issue 2:
The substantial questions of law raised in the appeal included whether habitual default constitutes willful default, the relevance of a criminal court's finding of willful default, acceptance of the explanation for non-filing of returns by the Tribunal, justification for condoning the delay in filing the appeal, and the admissibility of an argument based on facts before the Tribunal. The court emphasized that the discretion lies with the taxing authorities to determine if there was a reasonable cause for the failure to furnish returns under section 271(1)(a).

Issue 3:
The Tribunal considered various circumstances, including the closure of the business, the role of the tax consultant, and the delay due to audit requirements, to establish a reasonable cause for the delayed filing of returns. The Tribunal also noted that the Department did not contest the affidavits filed by the assessee, supporting their reasons for the delay. The Tribunal's decision to cancel the penalty was based on a thorough examination of the facts and circumstances surrounding the delay.

Issue 4:
The Tribunal justified the condonation of the delay in filing the appeal by the assessee by considering the reasons provided, such as the involvement of the tax consultant, audit delays, and missing information required for the audit. The court upheld the Tribunal's decision, emphasizing that the delay was for a reasonable cause, which was a question of fact rather than a substantial question of law.

Issue 5:
The court rejected the argument that the criminal court's findings of willful default against the assessee should influence the Tribunal's decision. The Tribunal independently considered the reasons for the delay in filing the returns and acquitted the assessee based on the established reasonable cause. The court found no substantial error of law in the Tribunal's decision and dismissed the appeal, emphasizing that the reported decisions cited by the Department were not relevant to the case at hand.

In conclusion, the High Court upheld the Tribunal's decision to cancel the penalties imposed under section 271(1)(a) of the Income-tax Act, 1961, based on the established reasonable cause for the delayed filing of returns by the assessee. The court emphasized the discretionary power of the taxing authorities to determine the presence of a reasonable cause and rejected the relevance of criminal court findings in the tax appeal process.

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