1995 (8) TMI 81 - AT - Income Tax

Summary

Issues:
Levy of penalty under s. 271(1)(a) of the IT Act for late filing of return of income.

Analysis:

Issue 1: Levy of Penalty

The appeal was against the order confirming the penalty of Rs. 26,350 under s. 271(1)(a) of the IT Act for late filing of the return of income. The due date for filing was 30th June, 1985, but the return was filed on 13th June, 1986, resulting in an 11-month delay. The Assessing Officer (AO) required the assessee to explain the delay, which was attributed to a dispute among partners leading to delayed finalization of accounts. The AO imposed the penalty citing contravention of s. 271(1)(a) of the IT Act due to late filing without a reasonable cause. The CIT(A) upheld the penalty, noting that extensions were only partly granted, and the assessee could not claim automatic grant of further extensions. The CIT(A) directed the AO to recalculate the penalty, leading to the appeal before the Tribunal.

Issue 2: Assessee's Arguments

The assessee contended that the delay was due to partner disputes, supported by multiple applications for extension of time using Form No. 6. The assessee argued that the AO's failure to respond to subsequent extension requests created a bona fide belief that extensions were granted. The counsel cited relevant case laws to support the contention that the delay did not amount to defiance of s. 139(1) of the IT Act. Additionally, the counsel highlighted evidence of partner disputes affecting the firm's operations and financials, indicating a reasonable cause for the delay in filing.

Issue 3: Department's Response

The Departmental Representative supported the CIT(A)'s order, arguing that the partial grant of the first extension did not justify the assessee's belief in automatic grant of subsequent extensions. The Department maintained that the CIT(A)'s decision was justified and required no interference.

Issue 4: Tribunal's Decision

After considering both sides' submissions and the appeal record, the Tribunal found merit in the assessee's case. The Tribunal noted the failure of the AO to communicate decisions on subsequent extension requests, leading to the assessee's genuine belief in the granted extensions. The Tribunal also acknowledged the partner disputes affecting the firm's financial situation. While some details regarding tax payments required further examination, the Tribunal ultimately reversed the CIT(A)'s order, allowing the appeal and rejecting the penalty.

Conclusion

The Tribunal ruled in favor of the assessee, overturning the penalty imposed for late filing of the return of income. The decision was based on the genuine belief held by the assessee regarding the granted extensions and the impact of partner disputes on the firm's operations, leading to a reasonable cause for the delay.