1991 (7) TMI 145 - AT - Income Tax

Summary

Issues Involved:
1. Penalties levied under section 271(1)(a) of the Income-tax Act for late submission of returns.
2. Penalties levied under section 271(1)(b) of the Income-tax Act for non-compliance with statutory notices.

Issue-wise Detailed Analysis:

Penalties under Section 271(1)(a):

Facts and Background:
The assessee, a firm with three partners, faced penalties for late submission of returns for the assessment years 1979-80 to 1982-83. The delay ranged from 28 to 31 months, and the penalties imposed were substantial. The main reasons provided by the assessee for the delay were labor trouble in the factory of M/s. Anand Synthetics Pvt. Ltd. and disputes among the partners.

Assessee's Arguments:
The assessee contended that the labor trouble and the resulting delay in receiving information from M/s. Anand Synthetics Pvt. Ltd. caused the delay in filing returns. Additionally, the strained relationships among the partners were cited as a contributing factor. The assessee argued that the penalties should not be automatic and relied on various case laws to support the contention that there was no deliberate defiance of law.

Department's Arguments:
The Department argued that the assessee was maintaining regular books of account and had all necessary purchase vouchers. The explanation provided by the assessee was deemed insufficient, and the Department emphasized that the assessee had not demonstrated a practice of delaying returns due to reconciliation issues in previous years.

Tribunal's Findings:
The Tribunal noted that the assessee was aware of its statutory obligations and had filed extension applications, indicating awareness of the need to file returns on time. The Tribunal found that the reasons provided by the assessee were not sufficient to justify the delay. The Tribunal emphasized that the burden of proving reasonable cause for the delay rested with the assessee, which it failed to discharge. The Tribunal also rejected the argument that delays in earlier years justified subsequent delays.

Legal Precedents:
The Tribunal referred to various High Court decisions, including those from Orissa, Madhya Pradesh, Punjab & Haryana, Andhra Pradesh, and Kerala, which clarified that mens rea (guilty mind) is not required to be proven for penalties under section 271(1)(a). The Supreme Court's affirmation in Gujarat Travancore Agency v. CIT was particularly noted, emphasizing that the penalty under section 271(1)(a) focuses on the fact of loss of revenue rather than the need to establish mens rea.

Conclusion:
The Tribunal upheld the penalties under section 271(1)(a) for all assessment years, concluding that the assessee had not shown reasonable cause for the delays. The appeals were dismissed.

Penalties under Section 271(1)(b):

Facts and Background:
The assessee faced penalties for non-compliance with statutory notices issued under sections 142(1) and 143(2) of the Income-tax Act for the same assessment years. The non-compliance was admitted by the assessee.

Assessee's Arguments:
The assessee argued that one of the partners, who usually handled tax matters, was preoccupied with resolving disputes at the factory of M/s. Anand Synthetics Pvt. Ltd. Additionally, the disputes among the partners were cited as a reason for non-compliance. The assessee claimed that the explanation provided was not properly considered by the Department.

Department's Arguments:
The Department contended that the notices required the production of books of account, which any responsible person from the firm could have produced. The Department emphasized that the assessee failed to show reasonable cause for non-compliance.

Tribunal's Findings:
The Tribunal found that the assessee did not provide sufficient evidence to support the claims of disputes among the partners or the inability to comply with the notices. The Tribunal emphasized that the burden of proving reasonable cause for non-compliance rested with the assessee, which it failed to discharge. The Tribunal noted that the existence of disputes, if any, was not proven to be so severe as to prevent compliance with statutory notices.

Conclusion:
The Tribunal upheld the penalties under section 271(1)(b) for all assessment years, concluding that the assessee had not shown reasonable cause for non-compliance. The appeals were dismissed.

Summary:
The Tribunal dismissed all appeals filed by the assessee for penalties levied under sections 271(1)(a) and 271(1)(b) of the Income-tax Act. The Tribunal found that the assessee failed to demonstrate reasonable cause for the delays in filing returns and for non-compliance with statutory notices. The penalties imposed by the Assessing Officer and confirmed by the first appellate authority were upheld.