1980 (4) TMI 73 - HC - Income Tax

Summary

Issues Involved:
1. Whether proceedings for imposition of penalty could be taken for not furnishing the return under section 139(1) in the assessment proceedings under section 139(2).
2. Whether the onus to establish that failure to furnish the return was without reasonable cause under section 271(1)(a) was rightly placed by the Tribunal upon the assessee.
3. Whether the Tribunal correctly interpreted the expression "the amount of tax payable" in section 271(1)(a)(i) to mean the tax payable on the date of final assessment.

Issue-Wise Detailed Analysis:

1. Imposition of Penalty for Not Furnishing Return Under Section 139(1):
The main point urged by the assessees was that with the issue of a notice under section 139(2), the default under section 139(1) ceases to exist. The court found this contention difficult to accept. It was held that sections 139(1) and 139(2) deal with two different situations: the first imposes an obligation to file a return suo motu, and the second to furnish a return in compliance with the notice under section 139(2). The issue of a notice under section 139(2) cannot per se have the effect of wiping out the earlier period of default. This view was supported by precedents from CIT v. Hindustan Industrial Corporation and Shiv Shankar Lal v. CGT. The court decided that the default under section 139(1) continues until the return is filed or the assessment is made, whichever is earlier. Therefore, the ITO was entitled to consider the period of default under section 139(1) as five months in I.T. Reference No. 83 of 1972 and two months in I.T. Reference No. 109 of 1972.

2. Onus to Establish Reasonable Cause Under Section 271(1)(a):
The assessee argued that the initial onus of establishing the lack of reasonable cause was on the I.T. authorities, citing decisions from the Gujarat High Court in Addl. CIT v. I.M. Patel and Co. and the Rajasthan High Court in CIT v. Rawat Singh and Sons. The court held that the department had shown that the assessee had no reasonable cause for filing the return late. The conduct of the assessee indicated a deliberate defiance of law or conscious disregard of its obligation. The slight initial onus had been discharged by the department, and it was for the assessee to show reasonable cause, which he failed to do. Therefore, the court answered this question in the affirmative and in favor of the revenue.

3. Interpretation of "Amount of Tax Payable" in Section 271(1)(a)(i):
Question No. 3 in I.T. Reference No. 83 of 1972 was not pressed by the learned counsel for the assessee in view of the retrospective amendment of the section subsequent to the decision of the Supreme Court in CIT v. Vegetable Products Ltd.

Conclusion:
The court answered the questions regarding the imposition of penalty and the onus of establishing reasonable cause in the affirmative and in favor of the revenue. The question regarding the interpretation of "the amount of tax payable" was not pressed by the assessee's counsel. As a result, the revenue was entitled to one set of costs in I.T. Reference No. 83 of 1972.