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Issues:
- Whether penalty under section 271(1)(a) could be imposed for the assessment years 1964-65 and 1965-66? Detailed Analysis: The case involved a reference made by the Addl. Commissioner of Income-tax, Rajasthan, Jaipur, under section 256(1) of the Income Tax Act, 1961, regarding the imposition of penalties for the assessment years 1964-65 and 1965-66. The assessee had filed returns after the prescribed time, leading to penalties being imposed by the Income Tax Officer (ITO). However, the Appellate Assistant Commissioner (AAC) set aside the penalties, citing that the assessee had already paid sums exceeding the taxes and had reasonable cause for the delay. The matter was then taken to the Income-tax Appellate Tribunal, where differing opinions were presented by the members, resulting in a reference to the President of the Tribunal. Eventually, a third member agreed with the accountant member that penalties were not leviable, leading to the rejection of the Department's appeals. Subsequently, the Department filed an application under section 256(1) for the High Court's opinion. The High Court examined the provisions of section 271(1) of the Income Tax Act, particularly focusing on the requirement of reasonable cause for failure to furnish returns and the imposition of penalties. The Court referred to a judgment of the Calcutta High Court, later upheld by the Supreme Court, which emphasized interpreting taxing provisions in favor of the assessee, especially in penalty cases. The Court noted an amendment to section 271(1) post the Supreme Court's judgment, replacing "tax" with "assessed tax," which impacted the interpretation of penalties. In the present case, the Court considered the circumstances surrounding the assessee's failure to file returns, including a raid on the premises by the Forward Markets Commission in 1962, resulting in the seizure of documents and cash. It was highlighted that the assessee had no malicious intent to delay filing returns and was in negotiations with the Department regarding taxes and penalties. Citing precedent, the Court emphasized that penalties under section 271(1)(a) require a deliberate defiance of the law or contumacious conduct, which was not evident in this case. Based on the analysis of the facts and legal principles, the High Court concluded that the Tribunal was correct in holding that penalty under section 271(1)(a) could not be imposed for the assessment years 1964-65 and 1965-66. The Court answered the question in the affirmative, leaving the parties to bear their own costs.
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