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Issues Involved:
1. Whether disputes or non-cooperation among partners constituted "reasonable cause" for the failure to furnish the return of income within the meaning of section 271(1)(a) of the Income-tax Act. Summary: Issue 1: Disputes or Non-Cooperation Among Partners as "Reasonable Cause" The High Court of Rajasthan was tasked with determining whether the disputes or non-cooperation among the partners of the assessee firm constituted "reasonable cause" for the failure to furnish the return of income within the meaning of section 271(1)(a) of the Income-tax Act. The assessee, a registered firm, was required to file the return for the assessment year 1962-63 by August 31, 1962. An extension was granted until October 31, 1962, but the return was ultimately filed on February 24, 1965. The Income-tax Officer (ITO) initiated penalty proceedings u/s 271(1)(a) read with s. 274 of the Act due to the delay. The assessee argued that the delay was due to disputes among partners, which prevented the completion of accounts. The ITO, however, found no evidence supporting this claim and imposed a penalty. The Appellate Assistant Commissioner (AAC) upheld this decision, stating there was no reasonable excuse for the delay. On further appeal, the Tribunal was divided; the Accountant Member found reasonable cause for the delay until June 2, 1964, while the Judicial Member disagreed. The third Member sided with the Accountant Member, leading the Tribunal to conclude there was reasonable cause for the delay until June 2, 1964, but not beyond. The High Court examined the concept of "reasonable cause" and noted that the onus was on the assessee to prove it. The court scrutinized letters submitted by the assessee, which indicated disputes among partners but did not specifically relate to the accounting year in question. The court also noted that the assessee had initially sought an extension due to accounts being under audit, not due to partner disputes. The court concluded that the assessee's failure to file the return on time was without reasonable cause, as the business continued, and the firm was obligated to complete its accounts and file the return. The court emphasized that the responsibility to file the return lay with the firm, regardless of internal disputes. Conclusion: The High Court answered the referred question in the negative, ruling in favor of the Revenue and against the assessee. The court held that disputes or non-cooperation among partners did not constitute "reasonable cause" for the delay in filing the return. The parties were ordered to bear their own costs.
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