1980 (1) TMI 117 - AT - Income Tax

Summary

Issues:
1. Imposition of penalty for non-submission of income-tax returns by a dissolved assessee firm for the assessment years 1974-75, 1975-76, and 1976-77.
2. Whether the internecine quarrels among the partners of the firm constituted a reasonable cause for the delay in filing income-tax returns.
3. Determination of the period of default and calculation of penalty for the respective assessment years.

Analysis:
1. The dissolved assessee firm did not file income-tax returns for the assessment years 1974-75, 1975-76, and 1976-77, resulting in best judgment assessments and imposition of penalties by the Income Tax Officer (ITO). The Appellate Assistant Commissioner (AAC) canceled the penalty for 1975-76, which was not appealed by the department. The firm appealed against the penalties imposed for the other two years.

2. The firm, consisting of a mother and her five sons, faced internecine quarrels leading to the failure to file returns after the dissolution of the firm in March 1976. The Tribunal considered the history of assessments, correspondence between the ITO and the assessee, and found that the quarrels among partners hindered the filing of returns. The Tribunal held that the quarrels were a reasonable cause for the delay, as they pertained to the determination and division of profits, not the ongoing business activities like sales tax filings.

3. The Tribunal determined that the delay in filing the return for 1974-75 was reasonable until the dissolution of the firm in March 1976, after which the profits were ascertained, and any further delay was unjustified. The default period was calculated as 8 months. For the assessment year 1976-77, where profits were already ascertained by the dissolution date, the Tribunal dismissed the appeal, stating that there was no valid reason for the delay in filing the return. The Tribunal allowed a partial appeal for 1974-75, confirming the penalty but adjusting the default period to 8 months.

4. In conclusion, the Tribunal allowed the appeal for 1974-75 in part, confirming the penalty with an adjusted default period. The appeal for 1976-77 was dismissed, with the option for the assessee to rectify any errors in the penalty computation with the ITO.