1983 (1) TMI 40 - HC - Income Tax

Summary

Issues Involved:

1. Whether the Tribunal was right in upholding the levy of penalty under section 271(1)(a) of the Income-tax Act.
2. Whether the penalty should have been levied under section 139(1) instead of section 139(2).

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271(1)(a):

The core issue was whether the Tribunal was correct in upholding the penalty imposed under section 271(1)(a) of the Income-tax Act for the assessee's failure to file the return within the stipulated time. The assessee contended that the delay was due to disturbed conditions around Kohima, lack of intention to delay, and that the imposition of interest under section 139 precluded penalty under section 271(1)(a). The ITO, AAC, and Tribunal rejected these contentions, noting the absence of evidence for disturbances, the lack of intention to delay being unsubstantiated, and the legal position that interest under section 139 does not bar penalty under section 271(1)(a).

The High Court examined the statutory provisions under sections 139 and 271(1)(a) and relevant case law, including CIT v. Anwar Ali, CIT v. Khoday Eswarsa and Sons, and Hindustan Steel Ltd. v. State of Orissa. It was emphasized that penalty proceedings are quasi-criminal and require the Department to establish the absence of reasonable cause for the delay. The burden of proof initially lies with the Department to show the failure to file the return. Once this is done, the onus shifts to the assessee to demonstrate reasonable cause.

The Court held that the assessee's explanation of disturbances around Kohima was not supported by evidence and was prima facie unreasonable. The Tribunal's finding that the cause shown did not justify the delay was upheld. The decision to not file the return within the required time without reasonable cause indicated a reprehensible state of mind, fulfilling the mens rea requirement for penalty under section 271(1)(a). Therefore, the Tribunal was right in upholding the penalty.

2. Section 139(1) vs. Section 139(2):

The assessee argued that even if penalty was leviable, it should have been under section 139(1) and not section 139(2). The High Court noted that the penalty proceedings were consistently based on the failure to file the return as required by the notice under section 139(2). The contention regarding section 139(1) was not raised at any stage of the proceedings and was not within the scope of the question referred to the High Court. Therefore, this submission was not entertained.

Conclusion:

The High Court concluded that the Tribunal was correct in upholding the levy of penalty under section 271(1)(a) of the Income-tax Act. The reference was answered in favor of the Department and against the assessee.