1990 (11) TMI 115 - HC - Income Tax

Summary

Issues:
1. Burden of proof on the Department for delay in filing return
2. Legality of canceling the penalty

Analysis:

Issue 1: Burden of proof on the Department for delay in filing return
The case involved the question of whether the Tribunal was justified in casting the burden on the Department to prove that the assessee had no reasonable cause for the delay in furnishing the return. The assessee, a registered firm, failed to file the return for the assessment year 1971-72 by the extended deadline. The Income-tax Officer imposed a penalty under section 271(1)(a) of the Income-tax Act, 1961. The Appellate Assistant Commissioner rejected the plea that the delay was due to the illness of the munim as no evidence was presented to support this claim. The Tribunal observed that the burden of proof cannot be shifted to the Department based solely on the explanation provided by the assessee. The Tribunal's decision was found erroneous as it failed to establish wilful failure on the part of the assessee without proper evidence. The judgment referred to the decision in Gujarat Travancore Agency v. CIT [1989] 177 ITR 455, where a similar approach was disapproved. The High Court directed the Tribunal to reconsider the case without shifting the burden of proof to the Department.

Issue 2: Legality of canceling the penalty
The second issue pertained to the legality of canceling the penalty imposed by the Income-tax Officer. The Tribunal, in its initial decision, canceled the penalty based on the reasoning that the Department failed to prove the assessee's wilful failure to file the return without reasonable cause. However, the High Court found this decision flawed due to the incorrect placement of the burden of proof on the Department. The High Court answered both questions negatively and directed the Tribunal to reconsider the appeal in accordance with the law and observations provided in the judgment. The High Court concluded that the Tribunal's finding was vitiated by the wrong placement of the burden of proof, rendering it unsustainable.

In conclusion, the High Court judgment highlighted the importance of establishing wilful failure on the part of the assessee without shifting the burden of proof to the Department. The decision emphasized the need for proper evidence to support claims and directed the Tribunal to reconsider the case in line with legal principles and observations outlined in the judgment.