1975 (8) TMI 29 - HC - Income Tax

Summary

Issues Involved:
1. Justification of the Tribunal in upholding the penalty under section 271(1)(a) of the Income-tax Act, 1961, despite the assessee's petition for extension of time.
2. Validity of the Income-tax Officer's order regarding the period of default and quantification of the penalty amount.

Detailed Analysis:

Issue 1: Justification of the Tribunal in Upholding the Penalty Under Section 271(1)(a)

The primary issue revolves around whether the Tribunal was justified in holding that the Income-tax Officer was justified in imposing the penalty under section 271(1)(a) of the Income-tax Act, 1961, despite the petition for extension of time filed by the assessee on April 24, 1964.

The facts reveal that a notice under section 139(2) of the Act was served on the assessee on May 29, 1963, for the assessment year 1963-64, with the return due by June 28, 1963. The assessee did not file the return by this date and subsequently submitted an application for extension on April 25, 1964. The Income-tax Officer noted this application but found the reasons for delay unconvincing and imposed the penalty.

The Tribunal upheld the penalty, and the assessee argued that the Income-tax Officer should have considered the extension request. The court referred to Form No. 6 under rule 13 of the Income-tax Rules, 1962, which allows for an extension request even after the due date, provided it is before the assessment. However, the court emphasized that the Income-tax Officer is not obligated to consider belated applications unless valid reasons are provided.

The court cited the case of T. Venkata Krishnaiah & Co. v. Commissioner of Income-tax, which held that the Income-tax Officer is not bound to pass an order on an extension application filed after the due date. The court agreed with this view, stating that it is the assessee's duty to file an application for extension before the due date and obtain the extension. The court concluded that the Income-tax Officer had considered the application but found the reasons unconvincing, thereby justifying the penalty imposition.

Issue 2: Validity of the Income-tax Officer's Order Regarding the Period of Default and Quantification of the Penalty Amount

The second issue pertains to whether the Tribunal was justified in holding that the Income-tax Officer's order was valid despite not quantifying the penalty amount. The assessee contended that the order was defective and inoperative due to the lack of specific penalty quantification.

The court opined that while it would be preferable for the penalty amount to be specified, the failure to do so does not invalidate the order if the amount is computable by referring to the relevant statutory provisions. Under section 271(1)(i) of the Act, the penalty is calculated as a sum equal to two percent of the tax for each month of default, not exceeding fifty percent of the tax. The period of default in this case was ten months, and the tax due was undisputed, making the penalty calculation straightforward.

The court referenced a similar view in Commissioner of Income-tax v. Smt. Ratna Kanti Bhuyan, where it was held that the omission to record the penalty basis is not material if the calculation basis is clear from the statute and records. Thus, the Tribunal's decision to uphold the penalty was valid.

Additional Observations:

The Tribunal had remanded the matter to the Appellate Assistant Commissioner to determine if there was a reasonable cause for the delay. The court noted that a reference under section 256(1) of the Act remains admissible even if the matter is remanded, as it involves questions about the assessee's rights or obligations.

Conclusion:

Both questions were answered in favor of the revenue. The Tribunal was justified in upholding the penalty under section 271(1)(a) despite the extension petition, and the Income-tax Officer's order was valid despite not quantifying the penalty amount, as the period of default and penalty calculation were clear.