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Issues Involved:
1. Burden of proof under Section 271(1)(a) of the Income-tax Act. 2. Interpretation of the word "and" in Section 271(1)(a). 3. Maintainability of a writ application under Article 226 of the Constitution when a reference under Section 256(1) is not sought. 4. Validity of a return filed under Section 139(4) as a return under Section 139(1) for penalty purposes under Section 271(1)(a). Issue-wise Detailed Analysis: Issue 1: Burden of Proof under Section 271(1)(a) The court analyzed Section 271(1)(a) and (1)(c) of the Income-tax Act, 1961. The language specifies that mere failure to file the return in time does not automatically entail a penalty; the failure must be "without reasonable cause." The burden of proof lies on the assessee to demonstrate the reasonable cause, which must be substantiated by evidence or existing records. The court emphasized that the burden can be discharged by preponderance of probabilities, akin to a civil case, and not beyond reasonable doubt. The court referenced the Supreme Court decision in Hindustan Steel Ltd. v. State of Orissa, noting that penalty imposition requires a judicial consideration of all relevant circumstances, and mere technical or venial breaches should not attract penalties. Issue 2: Interpretation of "and" in Section 271(1)(a) The court examined whether the word "and" in Section 271(1)(a) should be read conjunctively or disjunctively. The argument for the revenue suggested it should be read as "or," meaning failure to file within the time allowed or in the manner prescribed would attract a penalty. The court agreed with the revenue, aligning with the decision in P. V. Devassy v. Commissioner of Income-tax, which held that the legislative intent was to ensure timely and proper filing of returns to facilitate assessment within the statutory period. The court concluded that "and" should be construed as "or" to fulfill the legislative purpose. Issue 3: Maintainability of Writ Application under Article 226 The court addressed the procedural aspect where the assessee did not pursue the adverse finding of the Income-tax Officer at higher appellate stages and did not seek a reference under Section 256(1). The court held that the assessee should have asked for a reference if aggrieved by the Tribunal's omission to address the sufficiency of the explanation. Citing Girdhardas & Co. Ltd. v. Commissioner of Income-tax, the court affirmed that a successful party before the Tribunal could seek a reference on an issue adversely decided. The court dismissed the writ application, emphasizing that procedural lapses barred the assessee from seeking relief under Article 226. Issue 4: Validity of Return Filed under Section 139(4) The court examined whether a return filed under Section 139(4) could be deemed as filed under Section 139(1) for penalty purposes under Section 271(1)(a). The court referenced Commissioner of Income-tax v. Kulu Valley Transport Co. P. Ltd., which dealt with loss returns under the 1922 Act. The court clarified that Section 139(4) is a concession for assessment purposes and does not extend to penalty proceedings. It emphasized that the plain language of Section 271(1)(a) excludes returns filed under Section 139(4) from being considered as timely under Section 139(1). The court concluded that the Tribunal erred in relying on Kulu Valley's case and held that the assessee's return under Section 139(4) does not exempt it from penalty under Section 271(1)(a). Conclusion: 1. The burden of proof under Section 271(1)(a) is on the assessee, discharged by preponderance of probabilities. 2. The word "and" in Section 271(1)(a) is to be construed as "or." 3. The writ application is not maintainable as the assessee did not pursue the adverse finding through proper appellate channels. 4. A return filed under Section 139(4) is not deemed as filed under Section 139(1) for penalty purposes under Section 271(1)(a). Judgment: The writ application was dismissed, and the reference was accepted in favor of the revenue. The Tribunal's reliance on Kulu Valley's case was deemed incorrect, and the penalty under Section 271(1)(a) was upheld.
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