1991 (12) TMI 96 - AT - Income Tax

Assessment Order, Delay In Filing Return, Failure To Pay Advance Tax, False Estimate, Late Filing, Levy Of Penalty, Original Assessment, Penalty Proceedings

Summary

Issues Involved:

1. Penalty under Section 273 of the Income-tax Act, 1961.
2. Penalty under Section 271(1)(a) of the Income-tax Act, 1961.
3. Recording of satisfaction by the Income Tax Officer (ITO).
4. Cryptic nature of penalty orders.
5. Reasonable cause for delay in filing the return.
6. Quantum of penalty.

Issue-wise Detailed Analysis:

1. Penalty under Section 273 of the Income-tax Act, 1961:

The ITO levied a penalty of Rs. 14,945 under Section 273(b) for the assessee's failure to pay the advance tax of Rs. 1,83,481 as per the estimate filed on 15-3-1980. The CIT (A) confirmed this penalty, stating that paucity of funds was not a reasonable cause for non-payment of advance tax. The Tribunal found that the penalty was levied not for any failure to file an estimate of advance tax but for non-payment of advance tax as per the estimate. Since the assessee had filed an estimate, there was no default under Section 273(b), making the penalty unsustainable.

2. Penalty under Section 271(1)(a) of the Income-tax Act, 1961:

The ITO imposed a penalty of Rs. 27,898 for the assessee's delay of 7 months in filing the return for the assessment year 1980-81. The CIT (A) upheld this penalty, citing non-cooperation and negligence. The Tribunal found that the reasons for the delay, such as incomplete accounts of the partnership firm and the illness of the accountant, constituted a reasonable cause. The Tribunal held that the delay was a technical or venial breach and no penalty should be levied.

3. Recording of Satisfaction by the Income Tax Officer (ITO):

The Tribunal noted that the final assessment order dated 28-3-1990 did not record any satisfaction by the ITO for initiating penalty proceedings under Sections 273 or 271(1)(a). The earlier assessment order dated 20-9-1985, which initiated penalty proceedings, was set aside. The Tribunal referred to the Supreme Court decision in D.M. Manasvi v. CIT, which emphasized that satisfaction of the ITO in the course of assessment proceedings is a condition precedent for initiating penalty proceedings. The absence of such satisfaction rendered the penalties unsustainable.

4. Cryptic Nature of Penalty Orders:

The Tribunal agreed with the assessee's counsel that the penalty orders were cryptic and did not provide reasons for rejecting the assessee's explanations. Citing the Supreme Court decisions in Sampat Tatyada Shinde v. State of Maharashtra and Travancore Rayons Ltd. v. Union of India, the Tribunal emphasized the necessity of passing a speaking order with sufficient reasons. The failure to do so made the penalty orders liable to be struck down.

5. Reasonable Cause for Delay in Filing the Return:

The Tribunal found that the reasons provided by the assessee, such as incomplete accounts of the partnership firm and the illness of the accountant, constituted a reasonable cause for the delay in filing the return. The Tribunal held that the delay was not due to any contumacious conduct or conscious disregard of statutory obligations but was a technical or venial breach of the provisions of law.

6. Quantum of Penalty:

The Tribunal noted that the penalty levied was highly excessive in light of the final tax determined in the assessment order dated 28-3-1990. However, since the entire penalty was deleted, it was unnecessary to consider the alternative plea regarding the quantum of the minimum penalty leviable.

Conclusion:

The Tribunal allowed both appeals, canceling the penalties levied under Sections 273 and 271(1)(a) of the Income-tax Act, 1961. The penalties were found to be unsustainable due to the absence of recorded satisfaction by the ITO, the cryptic nature of penalty orders, and the reasonable cause for the delay in filing the return.