1996 (1) TMI 147 - AT - Income Tax

Summary

Issues:
- Imposition of penalty under section 271(1)(a) for delay in filing original returns without initiation of penalty proceedings in original assessments.

Analysis:
The judgment involves two appeals consolidated and disposed of concerning the imposition of penalties under section 271(1)(a) of the Income-tax Act for delays in filing original returns without prior penalty proceedings initiation. The assessment years in question are 1981-82 and 1982-83. The primary issue revolves around whether penalties can be imposed for delays in filing original returns when no penalty proceedings were initiated during the original assessments for those years.

The assessee, a registered firm, had original assessments completed in 1983 and 1987 for the respective years. Subsequently, a survey revealed discrepancies in sales and stock declarations, leading to reassessment under section 147(a). The delayed filing of original returns was attributed to the absence of the auditor. The Income Tax Officer (ITO) initiated penalty proceedings under section 271(1)(a) due to positive incomes resulting from the reassessment, imposing penalties for the delays.

The assessee contended that penalty initiation in reassessment proceedings for delays in original returns, without prior penalty proceedings during the original assessments, was unjustified. The argument was supported by the absence of penalty initiation in the original assessments and timely compliance with notices under section 148. The department, however, argued that penalties were warranted based on revised returns showing positive incomes, emphasizing the authority to initiate penalties post-survey.

The tribunal ruled in favor of the assessee, holding that penalty initiation for delays in original returns during reassessment, without prior penalty proceedings in original assessments, was impermissible. It emphasized that penalties should have been initiated immediately after the completion of assessments based on original returns, not post-revised returns in response to section 148 notices. The tribunal canceled the penalties imposed for the assessment years in question, citing the lack of justification for penalty imposition based on reassessment incomes without prior penalty proceedings during original assessments.

In conclusion, the appeals filed by the assessee were allowed, and the penalties imposed under section 271(1)(a) for delays in filing original returns were canceled.