1986 (10) TMI 86 - AT - Income Tax

Issues Involved:
1. Levy of penalty under section 271(1)(a) of the Income-tax Act, 1961 for delay in filing the return.
2. Reasonable cause for delay in filing the return.
3. Burden of proof for reasonable cause.
4. Impact of interest charged under section 139(8) on penalty under section 271(1)(a).
5. Impact of non-issuance of notice under section 139(2) on penalty.

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271(1)(a):
The assessee filed the return for the assessment year 1978-79 after a delay of 24 months. The Income Tax Officer (ITO) levied a penalty of Rs. 9,00,598 for this delay, considering it a default under section 271(1)(a) of the Income-tax Act, 1961. The Commissioner (Appeals) upheld the penalty, and the assessee appealed to the Tribunal.

2. Reasonable Cause for Delay in Filing the Return:
The assessee provided multiple reasons for the delay:
- The dealing assistant, Shri K.L. Bhasin, resigned on 9-8-1978, and no replacement could be procured.
- The accounts were under audit.
- The ITO kept the assessee busy with assessments for previous years.
- The Secretary of the company died in March 1978.
- The wife of an ex-director, who assisted the company, died.

The Tribunal found these reasons insufficient. The resignation of an assistant accountant was not deemed significant enough to delay the return. The audit of accounts was completed in May 1980, indicating the delay was on the part of the assessee. The contention regarding the ITO keeping the assessee busy was raised for the first time before the Tribunal and was not entertained. The deaths of the Secretary and the ex-director's wife were also not considered valid reasons for the delay.

3. Burden of Proof for Reasonable Cause:
The Tribunal emphasized that the initial burden of proof to show reasonable cause for delay lies on the revenue, which can be discharged by demonstrating the assessee's awareness of the obligation to file the return. The Tribunal cited several cases, including Shakuntla Mehra v. CWT and P.N. Sikand v. CIT, to support this view. In this case, the assessee was a large public limited company, aware of its obligations, and had sought extensions for filing the return, thereby discharging the initial burden on the revenue.

4. Impact of Interest Charged under Section 139(8) on Penalty under Section 271(1)(a):
The assessee argued that since interest under section 139(8) was charged, no penalty under section 271(1)(a) could be levied, relying on the Supreme Court judgment in CIT v. M. Chandra Sekhar. The Tribunal rejected this argument, noting that the provisions of section 139(8) were materially changed with effect from 1-4-1971. The amendment allowed interest to be charged even if the return was filed after the specified date without an extension by the ITO, making the Supreme Court's ruling inapplicable for the assessment year 1978-79.

5. Impact of Non-Issuance of Notice under Section 139(2) on Penalty:
The assessee contended that no notice under section 139(2) was issued, and thus, the return was filed voluntarily without contumacy. The Tribunal dismissed this argument, stating that the assessee, being aware of its legal obligations and having sought extensions, could not benefit from the non-issuance of a notice under section 139(2).

Conclusion:
The Tribunal concluded that the assessee had no reasonable cause for the delay in filing the return and upheld the penalty levied by the ITO. The appeal was rejected.

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