1986 (6) TMI 23 - HC - Income Tax

Summary

Issues Involved:
1. Levy of penalty u/s 271(1)(a) for late filing of returns.
2. Presumption of extension of time for filing returns due to charging of interest u/s 139.
3. Consideration of reasonable cause for delay in filing returns.

Summary:

1. Levy of Penalty u/s 271(1)(a) for Late Filing of Returns:
The assessee, M/s. Dooars Transport, failed to file returns for the assessment years 1964-65, 1966-67, 1967-68, 1968-69, and 1969-70 within the prescribed time. The Income-tax Officer (ITO) imposed penalties for the late filing of returns u/s 271(1)(a). The assessee contended that the delay was due to operational difficulties, including the large number of branches and illness of employees. The ITO rejected these contentions and imposed penalties.

2. Presumption of Extension of Time for Filing Returns Due to Charging of Interest u/s 139:
The assessee argued before the Appellate Assistant Commissioner (AAC) and the Income-tax Appellate Tribunal (ITAT) that the charging of interest u/s 139 implied an extension of time for filing returns. The Tribunal rejected this argument, stating that the considerations for waiving interest and imposing penalties were different. However, the High Court, relying on the Supreme Court's decision in CIT v. M. Chandra Sekhar [1985] 151 ITR 433, held that charging interest up to the date of filing returns raises a presumption that the ITO extended the time for filing returns.

3. Consideration of Reasonable Cause for Delay in Filing Returns:
The assessee claimed that the delay was due to genuine difficulties, including the complexity of finalizing accounts for numerous branches and staff illnesses. The Tribunal held that these reasons were insufficient to establish that the delay was beyond the assessee's control. However, the High Court noted that the waiver of interest by the Commissioner of Income-tax indicated a prima facie case for reasonable cause. The High Court concluded that the Tribunal erred in not considering the waiver of interest as indicative of reasonable grounds for the delay.

Conclusion:
The High Court answered the question in the negative, ruling in favor of the assessee. It held that the levy of penalty u/s 271(1)(a) was not justified in law, given the presumption of extended time for filing returns due to the charging of interest and the reasonable cause for the delay. The Tribunal's decision was overturned, and the penalties were deemed unjustified. No order as to costs was made.