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Penalty for delay in filing income tax return. Analysis: The judgment revolves around the penalty imposed on a partnership firm for a delay in filing its income tax return for the assessment year 1966-67. The Income Tax Officer (ITO) levied a penalty of Rs. 6,974 calculated at the rate of 2% per month on the tax payable by the assessee for a delay of 43 months. The assessee provided explanations for the delay, and the Appellate Assistant Commissioner (AAC) accepted that there was a reasonable cause for the delay only up to 31st December 1968. The AAC directed the ITO to recompute the penalty based on the default period without reasonable cause from January 1, 1969, until the return filing date. Additionally, the penalty was to be calculated based on the reduced total income resulting from an appeal. The assessee appealed to the Appellate Tribunal, which agreed that there was a reasonable cause for the delay only up to December 31, 1968. However, the Tribunal concluded that no penalty could be levied beyond 25 months, citing Section 271(1)(a) of the Income-tax Act, 1961, which limits the penalty to 50% of the tax payable. The Tribunal believed that once 25 months had passed, no further penalty could be imposed. Consequently, the Tribunal canceled the penalty levied on the assessee, leading to the Commissioner appealing to the High Court. The High Court disagreed with the Tribunal's interpretation, emphasizing that Section 271(1)(a) allows for a penalty if the assessee fails to furnish the return without reasonable cause. The Court clarified that the penalty could be imposed for each month of default, as indicated by the provision allowing a penalty of 2% per month, not exceeding 50% of the tax. The Court rejected the Tribunal's view that immunity from penalty could be claimed after 25 months, asserting that the penalty was applicable for the period of default from January 1, 1969, to February 9, 1970. Furthermore, the Court addressed the Tribunal's reliance on a Supreme Court decision regarding the reopening of assessments, stating that the analogy was not applicable in this case. The Court highlighted an error in the Tribunal's phrasing of the question but deemed it immaterial to the decision. Ultimately, the High Court ruled in favor of the Commissioner, upholding the imposition of a penalty on the assessee for the default period beyond the initial 25 months.
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