1981 (3) TMI 113 - AT - Income Tax

Summary

Issues:
- Imposition of penalty under section 271(1)(A) of the IT Act for failure to furnish income tax returns.
- Consideration of reasonable cause for not filing returns.
- Comparison of decisions from Mysore and Orissa High Courts regarding delay in filing returns.
- Assessment of penalty for two assessment years.

Analysis:

The judgment by the Appellate Tribunal ITAT Cochin involved two appeals by the assessee concerning the imposition of a penalty under section 271(1)(A) of the IT Act for failure to submit income tax returns. The assessee did not file a voluntary return of income for the assessment year 1974-75, leading to a best judgment assessment by the Income Tax Officer (ITO) under section 144 of the Act. Subsequently, penalty proceedings were initiated under section 271(1)(A) for non-filing of returns. The ITO imposed a penalty as the assessee did not respond to the show cause notice. A similar scenario occurred for the assessment year 1975-76, resulting in another penalty being imposed by the ITO.

Before the Appellate Tribunal, the authorized representative of the assessee argued that the delay in filing returns was due to the firm's failure to finalize its accounts, making it challenging for the assessee to ascertain their share of profits. The representative cited decisions from the Appellate Tribunal, Cochin Bench, where penalties were canceled in similar cases. However, the Appellate Commissioner rejected this argument, emphasizing the issuance of statutory notices under sections 139 and 148 of the Act.

The Tribunal considered the arguments presented, including references to decisions from the Mysore and Orissa High Courts. It concluded that the principle established by these High Courts applied to the assessee's case, even if the assessee had income from other sources besides the firm. The Tribunal acknowledged the difficulty in filing accurate returns when the firm did not finalize its accounts, stating that this constituted a reasonable cause for the delay in filing returns.

Despite the firm's assessment being completed, the Tribunal held that the assessee could have estimated their share of profits based on the firm's total income for filing returns. Therefore, the Tribunal determined that the assessee did not have a reasonable cause for failing to file returns even after the firm's assessments were finalized for the two assessment years.

In the final decision, the Tribunal partially allowed both appeals filed by the assessee, directing the recalibration of the penalty calculation for each assessment year based on the specific periods of default identified in the judgment.