1982 (3) TMI 81 - AT - Income Tax

Issues Involved:
1. Failure to disclose income from a partnership firm in original returns.
2. Delay in filing returns in response to notices under Section 148 of the IT Act.
3. Imposition of penalty under Section 271(1)(a) of the IT Act.
4. Obligation of the Income Tax Officer (ITO) to supply reasons for initiating proceedings under Section 147(a).

Issue-wise Detailed Analysis:

1. Failure to disclose income from a partnership firm in original returns:
The assessee, an individual, did not disclose his share income from the firm M/s Asian Textiles Co. in the original returns for the assessment years 1965-66 and 1966-67. The ITO discovered this omission post the completion of the original assessments under Section 143(3) and initiated proceedings under Section 147(a) read with Section 148 of the IT Act. The reassessment revealed that the assessee had received share income of Rs. 14,216 and Rs. 29,111 for the assessment years 1965-66 and 1966-67, respectively, which was subsequently added to his total income.

2. Delay in filing returns in response to notices under Section 148 of the IT Act:
Notices under Section 148 were served on the assessee on 12th Dec., 1973, requiring returns to be filed by 11th Jan., 1974. However, the returns were filed only on 20th Feb., 1978. The assessee contended that the delay was due to the ITO's failure to supply reasons for initiating proceedings under Section 147(a). The ITO issued multiple notices under Section 142(1) and a letter dated 5th Aug., 1974, stating that reasons for reopening the assessment would be furnished after filing the returns. Despite this, the assessee delayed filing the returns for about four years.

3. Imposition of penalty under Section 271(1)(a) of the IT Act:
The ITO initiated penalty proceedings under Section 271(1)(a) due to the considerable delay in filing the returns. The assessee's explanation for the delay was deemed untenable by the ITO, who imposed penalties of Rs. 25,000 and Rs. 26,000 for the assessment years 1965-66 and 1966-67, respectively. The Appellate Assistant Commissioner (AAC) upheld the imposition of penalties but reduced the amounts to Rs. 10,228 and Rs. 12,833. The Tribunal concurred with the AAC, stating that the assessee's conduct was contumacious and dishonest, and he failed to file the returns in conscious disregard of his obligation.

4. Obligation of the Income Tax Officer (ITO) to supply reasons for initiating proceedings under Section 147(a):
The assessee argued that the ITO's failure to supply reasons for initiating proceedings under Section 147(a) constituted a reasonable cause for the delay in filing returns. However, the Tribunal referenced the Supreme Court's decision in the case of S. Narayanappa, which clarified that the ITO is not obliged to supply reasons for reopening assessments to the assessee. The Tribunal concluded that the ITO's letter dated 5th Aug., 1974, clearly communicated that reasons would be provided after filing the returns, and the assessee's failure to comply was unjustified.

Conclusion:
The Tribunal dismissed the appeals, affirming the penalties under Section 271(1)(a) for both assessment years. The Tribunal found that the Department had sufficiently demonstrated the assessee's contumacious and dishonest conduct in failing to file returns within the stipulated time, and the assessee failed to establish any reasonable cause for the delay. The Tribunal upheld the AAC's findings and the reduced penalties, concluding that no interference was warranted.

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