1979 (6) TMI 63 - AT - Income Tax

Summary

Issues: Penalty imposition under section 271(1)(A) of the IT Act, 1971 for delay in filing the return of income under sections 139(1) and 139(2) for the assessment year 1965-66.

In this case, the appeal was filed against the penalty imposed under section 271(1)(A) of the IT Act, 1971 for the delay in filing the return of income for the assessment year 1965-66. The assessee, a registered firm, was required to file the return by 30th Sept., 1965 under section 139(1). However, the ITO issued a notice under section 139(2) on 7th May, 1965, setting a deadline of 6th June, 1965 for filing the return. The return was eventually filed on 11th Oct., 1965, citing reasons such as non-compilation of final accounts and partners' absence from headquarters. The ITO imposed a penalty of Rs. 4,180 for a default of four months, considering it a violation of section 139(2). The AAC reduced the default period to three months but upheld the penalty. The ITAT, upon further appeal, analyzed the provisions of sections 139(1) and 139(2) and held that the penalty cannot be imposed if the time allowed under section 139(1) was available to the assessee until 30th Sept., 1965. The tribunal emphasized that the ITO must establish that the assessee was not entitled to the time under section 139(1) for penalty imposition under section 271(1)(A). Additionally, the tribunal found that the imposition of penalty was unjustified on the merits as well. The delay in filing the return due to finalization of accounts and partners' absence was considered reasonable, and the penalty was cancelled due to lack of clear findings on the absence of reasonable cause for non-compliance with the notice under section 139(2).

This judgment clarifies the interplay between sections 139(1) and 139(2) of the IT Act, emphasizing that penalty imposition under section 271(1)(A) requires a lack of reasonable cause for non-compliance with the notice under section 139(2). The tribunal highlighted that the time available under section 139(1) must be considered before penalizing a delay in response to a notice under section 139(2. The decision underscores the importance of establishing the absence of reasonable grounds for penalty imposition and the need for clear findings to support such penalties.