1982 (2) TMI 59 - HC - Income Tax

Issues Involved:
1. Applicability of penalty under Section 271(1)(a) of the Income-tax Act, 1961 for late filing of return under Section 22(2) of the Indian Income-tax Act, 1922.
2. Relevance of the decision in Commissioner of Income-tax v. Kulu Valley Transport Co. P. Ltd. [1970] 77 ITR 518 (SC) to penalty proceedings under Section 271(1)(a) of the Income-tax Act, 1961.

Detailed Analysis:

Issue 1: Applicability of Penalty under Section 271(1)(a) of the Income-tax Act, 1961
The primary issue was whether the assessee was liable for penalty under Section 271(1)(a) of the Income-tax Act, 1961, for failing to file the return within the time allowed under Section 22(2) of the Indian Income-tax Act, 1922.

The Tribunal had set aside the penalty, reasoning that Section 22(3) of the 1922 Act allowed the filing of a return or revised return at any time before the assessment was completed. The Tribunal held that compliance with Section 22(3) implied compliance with Section 22(2), thereby negating the applicability of Section 271(1)(a) of the 1961 Act.

However, the High Court disagreed, emphasizing that Section 28 of the 1922 Act explicitly penalized the failure to file a return within the time specified in the notice under Section 22(2). The Court clarified that the liability to penalty arises immediately upon failure to file the return within the prescribed time unless a reasonable cause is shown. The Court stated, "A liability to penalty is, therefore, immediately attracted in case a person either fails to file return as required by the notice under s. 22(2) or, though he files a return, he does not file it within the time prescribed by the notice under s. 22(2)."

The Court further noted that Section 22(3) of the 1922 Act, which allowed filing returns before the assessment, was irrelevant for determining penalty liability under Section 28. The Court concluded that the Tribunal erred in its interpretation and that the provisions of Section 28 must prevail.

Thus, the High Court answered Question No. 1 in the negative and against the assessee, indicating that the penalty under Section 271(1)(a) was applicable.

Issue 2: Relevance of the Decision in CIT v. Kulu Valley Transport Co. P. Ltd.
The second issue was whether the Tribunal erred in applying the Supreme Court's decision in CIT v. Kulu Valley Transport Co. P. Ltd. to the penalty proceedings under Section 271(1)(a) of the Income-tax Act, 1961.

The High Court noted that the Tribunal had relied on the Supreme Court's observation that Section 22(3) of the 1922 Act should be read as a proviso to Section 22(1). However, the High Court clarified that these observations were made in a different context, specifically regarding the carry-forward of losses under Section 24(2) of the 1922 Act, and were not relevant for penalty provisions under Section 28.

The Court highlighted that the Supreme Court's decision did not address the penalty provisions and that the Tribunal's reliance on it was misplaced. The Court stated, "The observations made by the Supreme Court that if s. 22(3) is complied with, s. 22(1) also must be held to have been complied with do not affect the power of the ITO to levy a penalty if the requirements of s. 28 are satisfied."

Regarding the specific provisions mentioned in Question No. 2, the Court found no reference to Sections 271(3)(b) or 271(4A)(ii) in the Tribunal's order and deemed them irrelevant to the case. Consequently, the Court declined to answer Question No. 2, stating, "We, therefore, decline to answer the question because it does not arise out of the order of the Tribunal in appeal."

Conclusion:
The High Court concluded by answering Question No. 1 in the negative and against the assessee, affirming the applicability of the penalty under Section 271(1)(a). Question No. 2 was not answered due to its irrelevance to the Tribunal's order. No order as to costs was made.

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