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Issues:
1. Delayed filing of returns by the assessee leading to penalty imposition under section 271(1)(a). 2. Justification of penalty reduction by the Appellate Authority. Analysis: 1. The assessee, a registered firm engaged in business, filed returns for the assessment years 1967-68, 1968-69, 1975-76, and 1976-77 after the due dates. The Income Tax Officer (ITO) initiated penalty proceedings under section 271(1)(a) for the delayed filings, imposing penalties ranging from Rs. 1,368 to Rs. 3,954. The assessee cited reasons for the delay, including illness of the previous accountant and subsequent difficulties in obtaining information, but the ITO deemed the explanation unsatisfactory. 2. The Appellate Authority Commissioner (AAC) considered the assessee's representation along with legal precedents, such as Hindustan Steel Ltd. vs. State of Orissa and a Gujarat High Court decision, and concluded that the assessee failed to provide sufficient justification for the default. Despite this, the AAC reduced the penalties for all years to a uniform amount of Rs. 500 each, prompting the departmental appeals against this decision. 3. The department's counsel argued that the penalties were imposed for specific periods of delay, and the AAC's reduction to a fixed amount of Rs. 500 for each year was arbitrary and illegal. The counsel highlighted the assessee's consistent history of late filings and contended that there was no valid reason for penalty reduction, emphasizing the need for upholding the full penalties imposed by the ITO. 4. The assessee's defense centered on claiming sufficient cause for the delayed filings, attributing the delays to legitimate reasons. The counsel argued against the imposition of penalties, citing cases and legal provisions to support the contention that the AAC's decision to reduce the penalties was reasonable and within the scope of the authority granted to the AAC. 5. The Tribunal observed that while the primary onus is on the assessee to justify the delay in filing returns, the department must establish willfulness or unacceptability of the explanation once the primary onus is discharged. The Tribunal expressed uncertainty regarding the justification for penalty imposition and noted that the AAC's reduction to Rs. 500 per year was not necessarily a distortion of legal provisions, given the presented reasons for delayed submissions. 6. Additionally, the Tribunal raised concerns about the assessee's continuous delays in filing returns over several years and questioned why the ITO did not resort to ex-parte assessments under section 144 to prevent the accumulation of penalties. The Tribunal emphasized the importance of authorities taking proactive measures to prevent offenses rather than allowing penalties to accumulate due to repeated delays. 7. Ultimately, the Tribunal upheld the AAC's decision to reduce the penalties to Rs. 500 per year and dismissed the departmental appeals, noting the absence of an appeal or cross-objection from the assessee. The Tribunal highlighted the need for authorities to take preventive actions to address repeated delays in filing returns effectively.
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