1991 (1) TMI 182 - AT - Income Tax

Summary

Issues Involved:
1. Legitimacy of the penalty levied under section 271(1)(a) of the Income-tax Act, 1961.
2. Assessment of reasonable cause for delay in filing the income tax return.
3. Interpretation of the term "month" under section 271(1)(a) of the Income-tax Act, 1961.

Detailed Analysis:

Legitimacy of the Penalty Levied under Section 271(1)(a) of the Income-tax Act, 1961:
The assessee was required to file her return for the Assessment Year 1982-83 by 30-6-1982 but filed it on 29-10-1983. The Income Tax Officer (ITO) levied a penalty of Rs. 13,410 under section 271(1)(a) for a delay of 10 months. The assessee contended that she had applied for an extension due to the delay in receiving her share of profits from the firms where she was a partner. The ITO rejected this explanation as no copy of the extension application was provided.

Assessment of Reasonable Cause for Delay in Filing the Income Tax Return:
The Commissioner of Income Tax (Appeals) [CIT(A)] accepted the assessee's explanation that she had applied for an extension up to 30th September 1982 and condoned the delay up to that date. The CIT(A) found that the delay due to non-completion of the firm's accounts was a reasonable cause, relying on precedents from the Gujarat and Madhya Pradesh High Courts. However, the CIT(A) noted that the return of the firm M/s Arcoy Services, where the assessee was a partner, was filed on 3-8-1983, and thus, the delay beyond this date was not justified. Consequently, the CIT(A) directed the ITO to levy the penalty for only 2 months instead of 10 months.

Interpretation of the Term "Month" under Section 271(1)(a) of the Income-tax Act, 1961:
The term "month" in section 271(1)(a) was debated. The Allahabad High Court in CIT v. Laxmi Rattan Cotton Mills Co. Ltd. held that "month" should be a period of 30 days. Conversely, the Madras High Court in CIT v. Kadri Mills Coimbatore Ltd. and other High Courts interpreted "month" as per the British calendar month, in line with section 3(35) of the General Clauses Act, 1897. The Tribunal inclined towards the latter interpretation, agreeing with the Madras, Calcutta, and Karnataka High Courts, rejecting the 30-day period interpretation.

Revenue's Appeal:
The revenue argued that the assessee should have filed another extension application if the accounts were not completed within the first extension period. The Tribunal, referencing the Delhi High Court case of Madan Lamba v. CIT, found that the non-completion of accounts of the firms where the assessee was a partner constituted a reasonable cause for the delay. The Tribunal upheld the CIT(A)'s decision to condone the delay until 3rd August 1983 and dismissed the revenue's appeal.

Assessee's Cross Objection:
The assessee contended that the penalty should only be for one month. The Tribunal examined the interpretation of "month" and sided with the view that "month" should be reckoned according to the British calendar. Since the delay up to 3rd August 1983 was condoned, the only month of default was September 1983. Therefore, the Tribunal concluded that the penalty should be levied for only one month and allowed the assessee's cross objection.

Conclusion:
The Tribunal dismissed the revenue's appeal and allowed the assessee's cross objection, directing that the penalty under section 271(1)(a) be levied only for one month.