1991 (9) TMI 123 - AT - Income Tax

Summary

Issues Involved:
1. Confirmation of penalty under section 271(1)(a) of the Income-tax Act, 1961.
2. Reasonable cause for late submission of the return.
3. Treatment of payments made after the financial year as advance tax.

Issue-wise Detailed Analysis:

1. Confirmation of Penalty under Section 271(1)(a):
The primary issue in this case is the confirmation of a penalty of Rs. 3,13,340 levied under section 271(1)(a) for the late filing of the income tax return for the assessment year 1982-83. The return, due on June 30, 1982, was filed on May 17, 1983, resulting in a delay of 10 months. The Assessing Officer initiated penalty proceedings due to this delay and imposed the penalty, which was subsequently confirmed in appeal.

2. Reasonable Cause for Late Submission of the Return:
The assessee argued that the delay in filing the return was due to financial stringency, which prevented the payment of advance tax and self-assessment tax on time. The assessee cited the Tribunal's decision in Hazarimal Lalooram v. ITO, where it was held that the inability to attach audited financial statements due to financial constraints constituted a reasonable cause for the delay. The assessee also highlighted that self-assessment tax of Rs. 24,495 was paid on May 13, 1983, and the return was filed within four days thereafter.

However, the Tribunal rejected this argument, stating that even if the assessee faced financial difficulties, it was not prevented from filing the return on time. The Tribunal noted that the books of account had already been audited, and thus, the ratio of the decision in Hazarimal Lalooram was not applicable. The Tribunal emphasized that the return could be filed without attaching the proof of advance tax or self-assessment tax, and such a return would not be considered defective under section 139(9) of the Act.

3. Treatment of Payments Made After the Financial Year as Advance Tax:
The assessee contended that payments amounting to Rs. 14,75,000, made after March 31, 1982, should be considered as advance tax under Chapter XVII-C of the Act. The Tribunal examined the scheme of the Act relating to advance tax and noted that any sum paid or recovered as advance tax should be treated as payment of tax under Chapter XVII-C and given credit for under section 219.

The Tribunal referred to the Supreme Court decision in CIT v. Kohinoor Flour Mills (P.) Ltd., which held that delayed payments of advance tax made before the end of the financial year should be considered for determining the basis for imposing penalty. The Tribunal concluded that the payments made by the assessee, although after the financial year but before the filing of the return and much before the completion of the regular assessment, retained their character as advance tax.

The Tribunal also considered the decisions of the Karnataka High Court in Bangalore Animal Food Corpn. Ltd. and the Rajasthan High Court in Jaipur Udyog Ltd., which supported the view that delayed payments of advance tax do not lose their character as advance tax payments.

Conclusion:
The Tribunal directed the Assessing Officer to calculate the penalty under section 271(1)(a) by considering the additional amount of Rs. 14,75,000 as advance tax. The penalty was to be calculated at 20% on the amount of assessed tax after reducing the sum of Rs. 36,90,000, which included the additional advance tax payments. Consequently, the appeal was partly allowed.