2006 (4) TMI 69 - HC - Income Tax

On receipt of information that income in the form of investment in construction of building and installation of plant and machinery had escaped assessment, a notice was issued to the assessee on February 14, 1980 - filed return on November 3, 1984 allegation of escapement of income was found correct delay of 56 months in filing return after the notice u/s 148 assessee even did not respond to SCN issued u/s 271(1)(a) - penalty under section 271(1) (a) is imposable

Summary

Issues: Justification for penalty under section 271(1)(a) of the Income-tax Act, 1961

Analysis:
1. The case involved an appeal by the assessee challenging the imposition of a penalty under section 271(1)(a) of the Income-tax Act, 1961. The original assessment was made in 1978, and subsequent assessments were framed due to discrepancies in income disclosure related to construction and machinery. The penalty was imposed after it was found that the assessee had deliberately not disclosed the correct income, with the return being filed 56 months after the notice under section 148 of the Act.

2. The Tribunal affirmed the penalty, stating that the assessee had been given multiple opportunities to explain the discrepancies but failed to provide a reasonable cause for the delay in filing the return. The Tribunal emphasized that the delay of 56 months without any explanation justified the imposition of the penalty under section 271(1)(a) of the Act.

3. The appellant's counsel argued that there was no record of satisfaction that the assessee failed to furnish the return without reasonable cause. However, the Tribunal found that the assessee had not provided any valid reasons for the significant delay in filing the return, which was crucial for justifying the penalty under the Act.

4. The Tribunal's decision highlighted that the purpose of allowing opportunities to the assessee was to explain the reasons for the delay in filing the return. The lack of any valid explanation from the assessee regarding the delay of 56 months led to the rejection of the appellant's contention that the penalty was imposed without allowing an opportunity.

5. The Tribunal's findings led to the dismissal of the appeal, with the court stating that no substantial question of law arose. The judgments cited by the appellant's counsel were deemed inapplicable in the present case based on the Tribunal's findings and the lack of reasonable cause provided by the assessee for the delay in filing the return.

6. The judgment also referred to decisions by other High Courts emphasizing that the failure to file a return itself invites a penalty under section 271(1)(a) of the Act, without requiring mens rea or contumacious conduct. The burden is on the assessee to prove a reasonable cause for the delay, and explanations offered in response to notices become crucial in determining the imposition of penalties for failure to file returns on time.