1994 (5) TMI 49 - AT - Income Tax

Summary

Issues Involved:
1. Condonation of delay in filing appeals.
2. Cancellation of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
3. Cancellation of penalty under Section 271(1)(a) of the Income Tax Act, 1961.

Detailed Analysis:

1. Condonation of Delay in Filing Appeals:
The appeals were time-barred by three days, and the Revenue filed a petition for condonation of delay. The Tribunal was satisfied with the reasons provided for the delay and thus condoned the delay, allowing the appeals to be entertained.

2. Cancellation of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The assessee's residence was searched on 8th August 1985, leading to the discovery of promissory notes, bank passbooks, and other documents. Subsequently, the assessee filed returns for the assessment years 1978-79 to 1985-86, which were accepted with minor variations. The Assessing Officer levied penalties under Section 271(1)(c) for concealment of income.

The assessee contended that:
- He believed that as the business was conducted by a partnership firm, he was not required to file returns in his individual capacity.
- The returns were filed at the instance of the Assessing Officer.
- The assessments were completed on an agreed basis, and thus, penalties should not be levied.

The CIT(A) found that the income belonged to the firm and not the individual, relying on judicial precedents and evidence such as the partnership deed and bank accounts. The Tribunal upheld the CIT(A)'s decision, emphasizing that:
- There was no deliberate concealment of income.
- The penalties were not justified as the returns were filed within the period specified under Section 153(1)(a)(iii) for the assessment years 1983-84 to 1985-86.
- The Assessing Officer did not mention Explanation 3 to Section 271(1)(c) in the assessment order or the notice issued under Section 274.
- The penalty could not be sustained in law, referencing the Bombay High Court's decision in CIT vs. P.M. Shah.

3. Cancellation of Penalty under Section 271(1)(a) of the Income Tax Act, 1961:
Penalties were also levied under Section 271(1)(a) for the assessment years 1981-82, 1982-83, and 1984-85 due to the late filing of returns. The CIT(A) accepted the assessee's contention that:
- The business belonged to the unregistered firm, and the assessee believed he was not liable to file returns in his individual capacity.
- The returns were filed on the oral advice of the Assessing Officer.
- The assessee had reasonable cause for the delay, supported by the Rajasthan High Court's decision in CIT vs. R.K. Golecha.

The Tribunal upheld the CIT(A)'s decision, noting that:
- There was sufficient evidence to show that the income belonged to the firm.
- The Department did not provide any material to disprove this finding.
- The assessee's belief constituted a reasonable cause for the delay.

Conclusion:
The Tribunal dismissed the Departmental appeals, upholding the cancellation of penalties under Sections 271(1)(c) and 271(1)(a) of the Income Tax Act, 1961, for the assessment years 1978-79 to 1985-86. The Tribunal emphasized the lack of deliberate concealment, the reasonable cause for the delay, and the procedural lapses in invoking Explanation 3 to Section 271(1)(c).