1985 (2) TMI 93 - AT - Income Tax

Summary

Issues:
1. Confirmation of penalty under section 271(1)(a) by the AAC.
2. Validity of penalty imposed by the ITO for late filing of return.
3. Assessment proceedings and subsequent penalty imposition.
4. Justification for penalty and reasonable cause for delay in filing return.

Analysis:

The appeal pertains to the confirmation of a penalty of Rs. 24,258 by the AAC under section 271(1)(a) of the Income-tax Act, 1961, for the assessment year 1972-73. The ITO had levied the penalty due to the late filing of the return by the assessee. The original return was filed on 14-9-1972, a month after the due date of 31-7-1972. Subsequent assessment proceedings resulted in a total income of Rs. 53,060, which was determined by the Tribunal. However, the ITO, in a penalty order dated 30-6-1982, found the original return to be invalid due to lack of verification. This led to a reassessment and the imposition of the penalty, which was confirmed by the AAC.

Upon review, the Tribunal expressed surprise at the penalization of the assessee, noting contributory negligence by both parties. The Tribunal found that the assessee had filed the return in good faith, believing it to be true and correct, as evidenced by providing all necessary documents. The ITO and appellate authorities had also proceeded on the assumption of the return's validity. The Tribunal highlighted that the delay in verification was not intentional but an oversight, as all parties treated the return as accurate.

The Tribunal criticized the ITO's handling of the situation post-reassessment, where he declared the original return invalid without addressing the previous assessment and appellate proceedings that confirmed the total income. The Tribunal deemed the penalty unjustified, as there was no default during the reassessment proceedings. The assessee argued that any delay was due to a reasonable cause, given the belief in the return's validity. Consequently, the Tribunal concluded that the penalty lacked justification and was canceled, allowing the appeal.

In conclusion, the Tribunal found no default by the assessee during the reassessment proceedings, leading to the cancellation of the penalty imposed by the ITO. The decision was based on the lack of justification for the penalty, the belief in the return's accuracy, and the absence of intentional wrongdoing by the assessee.