1990 (5) TMI 56 - AT - Income Tax

Summary

Issues:
1. Penalty levied under section 271(1)(a) of the Income Tax Act, 1961 for late filing of return of income by a registered firm for the assessment year 1982-83.
2. Effect of advance tax payment in excess of assessed tax on the levy of penalty.
3. Interpretation of the deeming fiction under section 271(2) in the context of penalty imposition on registered firms.

Analysis:
The judgment by the Appellate Tribunal ITAT Ahmedabad-C involved the consideration of penalty imposed under section 271(1)(a) of the Income Tax Act, 1961 on a registered firm for the delay in filing its income tax return for the assessment year 1982-83. The firm had filed the return with a delay of 15 months, leading to penalty proceedings initiated by the Income Tax Officer (ITO). The grounds raised by the firm to resist the penalty included the illness of its accountant, a requested extension, and the payment of advance tax exceeding the tax assessed.

The ITO rejected the illness ground, citing its continuous plea since the assessment year 1977-78, and levied a penalty of Rs. 59,110. Upon appeal, the Appellate Commissioner (AAC) confirmed the penalty, disregarding the extension application filed by the firm and distinguishing a relevant case law regarding advance tax payment. The AAC upheld the penalty based on the provisions of section 271(1) and 271(2) of the Act.

The main controversy in the appeal centered around the effect of advance tax payment exceeding the assessed tax on the penalty imposition for late filing. The Tribunal referred to various cases decided by the Gujarat High Court, emphasizing the principle that penalty should not be levied unless contumacious conduct is established. The court highlighted that the conduct of the assessee, particularly in making advance tax payments in excess of the assessed tax, indicates non-fraudulent behavior, leading to the cancellation of the penalty in such cases.

In the specific case under consideration, the Tribunal found that the firm had made an advance tax payment surpassing the assessed tax, resulting in a refund entitlement, which indicated non-contumacious conduct. Consequently, the Tribunal ruled in favor of the assessee, canceling the penalty and allowing the appeal. The judgment underscored the importance of assessing the conduct of the assessee in determining the imposition of penalties under section 271(1)(a) of the Income Tax Act, 1961.