1979 (4) TMI 17 - HC - Income Tax

Summary

Issues:
Failure to file return under s. 139(1) of the Act within prescribed time, imposition of penalty under s. 271(1)(a) of the Act, onus of proof on department in penalty proceedings, belief of the assessee regarding taxable income, existence of borrowing, application for reference under s. 256(2) of the Act.

Analysis:
The case involved an application under s. 256(2) of the Income Tax Act, 1961 on behalf of the assessee, who failed to file a return for the assessment year 1967-68 within the prescribed time. Despite a notice under s. 139(2) served by the ITO, the return was filed late, showing income below the taxable limit for a registered firm. The ITO added back interest paid by the assessee to partners, considering the income above the limit, and imposed a penalty under s. 271(1)(a) of the Act.

The AAC and the Income-tax Appellate Tribunal upheld the penalty, emphasizing the lack of explanation for the delay in filing the return and questioning the genuineness of the belief held by the assessee regarding the income being below the taxable limit. The Tribunal rejected an application for reference to the High Court, deeming the questions as factual.

The assessee argued that the burden of proof lies with the department in penalty proceedings, citing precedents emphasizing the department's obligation to establish the failure to file the return was without reasonable cause. The legal burden initially rests on the department, but once discharged, the assessee must show reasonable cause for the delay.

The Tribunal concluded that the belief of the assessee regarding the income being below the taxable limit was not genuine, as there was no actual borrowing involved. The Tribunal's findings on factual aspects were not contested by the assessee, leading to the dismissal of the application under s. 256(2) of the Act.

In light of the above discussion, the High Court dismissed the application, as no question of law arose from the Tribunal's findings. The judgment highlighted the importance of factual considerations in penalty proceedings and the burden of proof on the department to establish the failure to file the return without reasonable cause.