1979 (8) TMI 96 - AT - Income Tax

Summary

Issues:
1. Imposition of penalty under section 271(1)(a) for the assessment years 1972-73 and 1973-74.
2. Reasonable cause for belated filing of returns.
3. Consideration of auditors' reports and approval timelines.
4. Bona fide belief regarding taxable income and obligation to file returns.
5. Application for extension of time for filing returns.
6. Assessment of penalties by the Appellate Assistant Commissioner (AAC).
7. Appeal against the penalties imposed.

Detailed Analysis:
1. The appeals were against the penalty imposed by the Income Tax Officer (ITO) under section 271(1)(a) for the assessment years 1972-73 and 1973-74. The assessee failed to file returns on time and penalties were levied.

2. The assessee claimed a reasonable cause for the delay in filing the returns, citing the non-completion of statutory audits as the reason. The ITO did not accept this explanation, leading to the imposition of penalties.

3. The Appellate Assistant Commissioner (AAC) upheld the penalties, stating that the completion of audits should not be a reason for delayed filing. The AAC emphasized the importance of filing returns within the specified time for the benefit of carrying forward losses from earlier years.

4. The assessee argued that it believed its income was not taxable, thus had no obligation to file returns within the specified time. Citing judicial precedents, the assessee contended that penalties should not be imposed in such cases.

5. The AAC found that the assessee did not file for an extension of time and paid advance taxes after the due dates. The AAC confirmed the penalties, noting the absence of immediate filing after audit completion.

6. Upon further appeal, the Appellate Tribunal considered the factual aspects. It observed that penalties should not be imposed if the assessee genuinely believed their income was not taxable. The Tribunal canceled the penalty for the assessment year 1972-73.

7. For the assessment year 1973-74, the Tribunal acknowledged the delay but reduced the penalty duration to four months. The Tribunal directed the ITO to recompute the penalty for this year accordingly, noting the timely filing before the shareholders' meeting.

In conclusion, the Tribunal allowed the appeal for the assessment year 1972-73 and partially allowed it for the assessment year 1973-74, reducing the penalty duration.