1984 (3) TMI 184 - AT - Income Tax

Summary

Issues:
1. Penalty imposed for default under section 271(1)(a) for belated filing of return for the assessment year 1976-77.
2. Whether the assessee was prevented by a reasonable cause in not filing the return in time.
3. Compliance with the requirement of proof of tax deducted at source with the return under section 139(9).
4. Validity of penalty imposition under section 139(1) due to the application of a higher gross profit rate.

Analysis:

1. The appeal before the Appellate Tribunal ITAT Jaipur was against the penalty of Rs. 3,160 imposed by the Income Tax Officer (ITO) for default under section 271(1)(a) for the assessment year 1976-77, which was confirmed by the Additional Commissioner of Income Tax (AAC). The assessee contended that the penalty was unjustified, leading to the appeal.

2. The assessee argued that the delay in filing the return was due to a reasonable cause, as he believed his income was below the taxable limit, and the necessary Tax Deducted at Source (TDS) certificates were received late due to disruptions caused by heavy floods in July 1981. The Tribunal found merit in this argument, emphasizing that the requirement under section 139(9) for proof of tax deducted at source with the return could only be fulfilled after receiving the TDS certificates.

3. The Income Tax Officer's observation that the assessee could have filed the return using details from certificates dated July 27, 1976, was deemed erroneous by the Tribunal. It was clarified that the crucial aspect was the submission of proof of tax deducted at source with the return, which was only possible after receiving the TDS certificates. The Tribunal noted that there was no evidence to suggest that the assessee did not make efforts to obtain the certificates earlier, as the Revenue failed to demonstrate any such requirement from the ITO.

4. The Tribunal also considered the argument related to the application of a higher gross profit rate, leading to the income becoming taxable. The assessee's lack of experience in contract work and the unforeseen impact of the higher profit rate were deemed valid reasons for the delay in realizing the taxable income. Consequently, the penalty imposed under section 139(1) was canceled by the Tribunal based on these grounds, allowing the appeal in favor of the assessee.