1996 (1) TMI 96 - HC - Income Tax

Summary

Issues:
1. Waiver of interest under rule 117A for late filing of income tax returns.
2. Imposition of penalty under section 271(1)(a) of the Income-tax Act, 1961.
3. Discrepancy in treatment of explanations by different income-tax authorities.

Analysis:
The High Court of PUNJAB AND HARYANA addressed two connected Income-tax Cases involving the same assessee for the assessment years 1974-75 and 1975-76. The assessee filed returns late for these years, citing the loss of account books as the reason for delay. The Income-tax Officer accepted this explanation and waived the interest under rule 117A for one year and reduced it by 50% for the other. However, penalty proceedings were initiated under section 271(1)(a) for both years, resulting in substantial penalties being levied. The Commissioner of Income-tax (Appeals) confirmed the penalties, leading to appeals before the Income-tax Appellate Tribunal, which upheld the penalties. The assessee then filed petitions under section 256(2) for a reference to the High Court, questioning the rejection of their explanation for late filing of returns in penalty proceedings.

The High Court noted that the Income-tax Officer had accepted the assessee's explanation for late filing of returns while waiving the interest under rule 117A. The court emphasized that the same explanation should have been considered by the income-tax authorities, including the Tribunal, in penalty proceedings under section 271(1)(a) of the Act. Citing a decision of the Karnataka High Court, the court found that there was a discrepancy in the treatment of explanations by different authorities. Consequently, the High Court directed the Tribunal to refer the question of law to the court regarding the rejection of the assessee's explanation for late filing of returns in penalty proceedings, despite its acceptance for waiving interest under rule 117A. The applications were allowed, and no costs were imposed in this matter.