1985 (7) TMI 155 - AT - Income Tax

Summary

Issues:
- Imposition of penalty for late filing of income tax return for asst. yr. 1976-77
- Justification of penalty imposition based on reasons for delay in filing return
- Assessment of reasons provided by the assessee for the delay
- Consideration of impact of search operations on the ability of the assessee to prepare the return
- Application of legal principles regarding imposition of penalty for failure to perform statutory obligations

Analysis:
The appeal in this case concerns the imposition of a penalty for the late filing of the income tax return for the assessment year 1976-77. The return was originally due on 31st July 1976 but was filed on 27th Sept. 1976, resulting in a delay of 13 months. The assessee attributed the delay to difficulties in obtaining information about income earned outside India and the impact of IT Department proceedings under s. 132 of the IT Act, which led to the seizure of books of accounts. The Assessing Officer rejected these reasons and imposed a penalty of Rs. 32,908 on the assessee.

Upon appeal, the ld. CIT (A) upheld the penalty. However, the Tribunal, after considering the submissions made, found that the imposition of the penalty was not justified in this case. The Tribunal acknowledged the impact of the search operations on the assessee's ability to prepare the return, especially when it had to be based on seized material. The Tribunal accepted the assessee's explanation for the delay, noting that the seized material being in the custody of the Department constituted a reasonable cause preventing timely filing of the return.

The assessee also relied on legal principles regarding the imposition of penalties for failure to perform statutory obligations. Citing a decision of the Hon'ble Rajasthan High Court, the assessee argued that penalties should not be imposed unless there is deliberate defiance of the law or contumacious conduct. The Tribunal found that the ld. CIT (A) erred in not accepting this legal authority and instead cited decisions from other High Courts. The Tribunal emphasized the obligation to follow the decision of the High Court within whose jurisdiction the assessee resides.

In conclusion, the Tribunal reversed the decision of the ld. CIT (A) and canceled the penalty imposed on the assessee, thereby allowing the appeal. The Tribunal's decision was based on the acceptance of the reasons provided for the delay in filing the return and the application of legal principles regarding the imposition of penalties for failure to perform statutory obligations.