1974 (5) TMI 19 - HC - Income Tax

Summary

Issues:
1. Whether the Appellate Tribunal was justified in deleting the penalty under section 271(1)(a) of the Income-tax Act?
2. Whether the question of law regarding reasonable cause for late filing of return constitutes a pure question of fact?
3. Can the High Court issue a direction to the Tribunal to refer a question of fact for its decision?

Analysis:
1. The case involved a petition by the Commissioner of Income-tax to direct the Income-tax Appellate Tribunal to refer a question of law regarding the deletion of penalty under section 271(1)(a) of the Income-tax Act. The Tribunal deleted the penalty based on the assessee's contentions of reasonable cause for the delay in filing the return of income. The Tribunal found that the same set of circumstances that were considered reasonable for the preceding 16 months continued to exist for the subsequent three months, justifying the deletion of the penalty. The High Court upheld the Tribunal's decision, emphasizing that the determination of reasonable cause is a question of fact, not law.

2. The High Court addressed the issue of whether the question of reasonable cause for late filing of the return constitutes a pure question of fact. It cited previous judgments to establish that determining the existence of a reasonable cause is a factual inquiry based on the specific circumstances of each case. The Appellate Tribunal's decision to delete the penalty was upheld as a valid exercise of fact-finding within its jurisdiction.

3. The High Court clarified that under section 256(2) of the Income-tax Act, a direction can only be issued to the Tribunal to refer a question of law, not a question of fact. It referenced previous cases where it was established that questions of fact, such as the presence of a reasonable cause for delay, are not subject to review by the court. Therefore, the High Court dismissed the petition, affirming that the Tribunal's decision on the penalty deletion was a factual determination and not a question of law.

In conclusion, the High Court affirmed the Tribunal's decision to delete the penalty under section 271(1)(a) based on the factual finding that the assessee had a reasonable cause for the delay in filing the return of income. The court emphasized that questions of fact, including the existence of a reasonable cause, are outside the scope of review by the court and cannot be directed for a referral as a question of law.