1989 (2) TMI 70 - HC - Income Tax

Summary

Issues:
1. Validity of canceling penalty under section 271(1)(a) for assessment year 1965-66.
2. Determining if the default in filing the return was wilful.

Analysis:

Issue 1: The court was tasked with determining the validity of canceling the penalty of Rs. 34,435 imposed under section 271(1)(a) for the assessment year 1965-66. The assessee, a registered firm engaged in the export of textile goods, filed its return after a delay, prompting penalty proceedings. The Income-tax Officer and the Appellate Assistant Commissioner upheld the penalty. However, the Appellate Tribunal canceled the penalty, citing the absence of wanton disregard by the assessee in meeting its statutory obligation. The Tribunal inferred this from the grant of time by the Income-tax Officer for filing the return. The Revenue contended that the Tribunal's conclusion lacked material support, as the assessee failed to provide any reasonable cause for the delay. The court, after thorough analysis, held that the Tribunal's decision to cancel the penalty was unsupported by the evidence, leading to a negative answer to the first question in favor of the Revenue.

Issue 2: The second issue revolved around determining if the default in filing the return was wilful. The Tribunal found that the assessee failed to provide a reasonable cause for the delay but inferred no wanton disregard based on the granted extension. The assessee argued that the difficulty in finalizing accounts persisted, justifying the cancellation of the penalty. However, the court emphasized that the Tribunal's inference lacked clarity and was not supported by the facts. It noted the absence of any explanation for the delay post the granted extension, leading to the conclusion that the Tribunal erred in absolving the assessee of default warranting the penalty. Consequently, the court answered the second question in the negative and in favor of the Revenue, highlighting the lack of justification for the delayed filing of the return.