1989 (3) TMI 175 - AT - Income Tax

Summary

Issues:
1. Imposition of penalty under s. 17(1)(a) of the GT Act, 1958 for delay in filing the return.
2. Whether the delay in filing the return was without reasonable cause.
3. Whether the assessee had an honest belief that the transaction was not a gift.

Analysis:
1. The appeal challenged the penalty imposed under s. 17(1)(a) of the GT Act for a delay in filing the return, showing a taxable gift of Rs. 50,000 in the previous year relevant to the assessment year 1976-77.
2. The assessee contended that the delay was due to the ITO's advice to file the return as a gift, even though it was initially considered a loan to his son. The GTO imposed the penalty due to the delay, which the AAC confirmed after considering the GTO's comments.
3. The assessee argued that the transaction was a loan, supported by entries in the account maintained with a firm. The Revenue sought time to verify the claim but failed to provide concrete evidence. The AAC's order already contained all relevant facts, making an adjournment unnecessary.
4. The assessee maintained that the delay was due to following the ITO's advice, which the GTO did not deny. The GTO's initiation of gift-tax proceedings based on the ITO's order supported the assessee's claim of filing the return on the ITO's insistence.
5. Referring to a CBDT Circular, it was highlighted that officers should assist taxpayers and guide them on their rights. The imposition of a penalty for a delay caused by following the ITO's advice was deemed unjustifiable.
6. The Tribunal found that the assessee had an honest belief that the transaction was not a gift, supported by the account entries. Even if the belief was mistaken, it constituted a reasonable cause for the delay, warranting the cancellation of the penalty.

Summary:
The judgment dealt with the imposition of a penalty under s. 17(1)(a) of the GT Act for a delay in filing a return showing a taxable gift. The assessee argued that the delay was due to following the ITO's advice to classify a loan as a gift, supported by account entries. The Tribunal found that the assessee had an honest belief in the transaction not being a gift, justifying the delay. Referring to a CBDT Circular emphasizing assistance to taxpayers, the Tribunal deemed the penalty imposition unjustified and canceled it, allowing the appeal.