1976 (10) TMI 58 - AT - Income Tax

Summary

Issues Involved:
1. Delay in filing income tax returns.
2. Validity of penalties imposed under Section 271(1)(a) of the Income Tax Act, 1961.
3. Reasonableness of the explanation provided by the assessees for the delay.
4. Proper procedure and due process by the Income Tax Officer (ITO).
5. Calculation of the delay period for penalty purposes.

Detailed Analysis:

1. Delay in Filing Income Tax Returns:
The returns of income for the assessment year 1970-71 were due by 30th September 1970. The assessees claimed to have filed the returns on 30th March 1972, while the ITO stated the returns were filed on 3rd April 1972. The ITO considered the delay to be 18 months.

2. Validity of Penalties Imposed under Section 271(1)(a):
The ITO imposed penalties of Rs. 33,005 on M/s. Sahoo Brothers and Rs. 15,915 on Shri Nathulal Osanji for the delay in filing returns. The penalties were challenged on the grounds that the explanations provided by the assessees were not properly considered.

3. Reasonableness of the Explanation Provided by the Assessees:
The assessees argued that their account books were seized by the Sales-tax Department on 18th March 1970, which made it impossible to file accurate returns on time. They filed returns based on estimated sales and gross profit and later filed revised returns after the books were returned.

The AAC observed that the assessees did not make efforts to obtain necessary information or seek an extension for filing returns. However, the Tribunal found the explanations reasonable, noting that the books were seized for nearly the entire relevant accounting year, making it difficult for the assessees to prepare complete accounts.

4. Proper Procedure and Due Process by the Income Tax Officer (ITO):
The ITO filled in entries in a prepared proforma without proper discussion or consideration of the assessees' explanations. The Tribunal criticized this approach, stating that the ITO should have opened up his mind to the assessees and probed the matter further if not satisfied with their explanations. The ITO's summary rejection of the explanations was deemed improper.

5. Calculation of the Delay Period for Penalty Purposes:
The AAC did not conclusively determine whether the returns were filed on 3rd April 1972 or 30th March 1972, but directed the ITO to re-calculate penalties based on an 18-month delay. The Tribunal, however, noted that even if the returns were filed on 30th March 1972, the delay would be 17 months, not 18, as the due date was up to 30th September 1970.

Conclusion:
The Tribunal found the penalty orders unsustainable. The explanations provided by the assessees were reasonable and plausible. The ITO failed to properly consider the explanations and summarily rejected them without adequate discussion or investigation. The penalties were therefore quashed, and the appeals were accepted, deleting the penalties imposed on both assessees.