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TMI Blog1976 (10) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... the custody of the Sales tax Department since 18th March, 1970 and the returns without the availability of the account books could not be filed. It was also stated that as an abundant caution, the assessee had filed its return on 30th March, 1972 on estimated sales and estimated gross profit and that after the return of account books, a second return was filed on the basis of account books maintained. 2. The explanation of Shri Nathulal Osanji was also similar to the explanation of the firm M/s. Sahoo Brothers. It was stated by him that the books of the firm were in the possession of the Sales-tax Department and that the share income from the firm was not informed to him by the firm. 3. The ITO passed the penalty orders by filling in entries in the prepared proforma for preparing orders under s. 271 (1) (a) of the Act. Under column No. 2, meant for giving the assessee's contention, the ITO in the case of the firm M/s. Sahoo Brothers stated the contention of the assessee as that the account books of the assessee were in the custody of Sales-tax Department. In the case of Shri Nathulal Osanji, the ITO gave the contention of that assessee that account books were under the possessio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he duty of the ITO to have considered them in the proper perspective and if the ITO was not prima facie satisfied by the explanations afforded by the assessee, he should have opened up his mind in the penalty proceedings to the assessee as to the points on which he wanted to be satisfied and should have probed the matter, if he was not satisfied of the assessee's explanation. The learned counsel went on to say that the ITO did not do nothing of the kind and has summarily rejected the explanations of the two assessees in his penalty orders without any discussions. The learned counsel submitted that the reason for rejecting the explanations of the assessees as the explanations being untenable was not a valid reason as explanations were reasonable and plausible and could not be said to be untenable on the fact of it. Shri Sachdeva contended that the penalty orders passed by the ITO in the manner in which they have been done by filling up the entries in the prepared proformas and without any discussion for holding, as to how the respective explanation of the two assessees was untenable, were bad in law and deserved to be quashed. 6. Shri Sachdeva next submitted that as it was known to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Dilsukhrai Ranglal.(1). For a similar proposition in the case of Shri Nathoolal Osanji, the learned counsel relied on another divisions of the Orissa High Court in CIT, Orissa vs. Baijnath Chopolia.(2). 8. Shri Sachdeva lastly submitted that in case it be held that penalty was exigible to the cases of the assessees, the delay in filing the returns was that of 17 months in the cases of both the assessee as the returns had been filed on 30th March, 1972 and the due date for filing the returns was up 30th Sept., 1970 and not up to 20th September, 1970 as held by the A.A.C. In support of this contention, Shri Sachdeva relied on a decision of this Bench of the Tribunal in the case of Sh. Gopaldas Mittal of Indore.(3). The learned counsel also stated that penalties would be liable to be reduced to Rs. 16,598 and Rs. 9.569 in the cases of Messrs. Sahoo Brothers and Shri Nathulal Osanji respectively in view of the appeal effect of the Order of the Tribunal in quantum appeal of the firm. 9. On behalf of the Department, reliance was placed on the impugned orders of the ITO and the A.A.C. In particular it was stated by the learned Departmental Representative that the two assessees were a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the only other income which was computed in the assessment finally made on this assessee was the property income at Rs. 4,935, which was below the maximum exempted tax limit. Now it is undisputed that he firm M/s. Sahoo Brothers filed its revised return of income for the assessment year in question on 28th September, 1972 soon after the books of account were returned to it by the Sales-tax authorities. It is also un-disputed that the income was computed by the firm in its first return filed on 30th March, 1972 on estimate basis and in the revised return, the firm computed its income on the basis of the books. The assessment order of the firm an extract of which is attached at pages 3 and 4 of its paper book shows that the firm had computed its income in the first return on estimate at Rs. 43,000 but in the revised return filed on the basis of the books, the firm gave its income at Rs. 22,000. These facts go to show that the firm was not able to prepare its return properly as according to the information contained in his books as per which it was bound and wanted to file its return. From the above facts is clear that the explanations offered by the two assessees were not only pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the Tribunal observed whether in a given case considering the peculiar facts thereof including seizure of account books and their returns after three years a longer period than the statutory period given for preparing that he statutory period given for preparing returns after the close of the accounting year would be reasonable, ultimately depend upon its own facts. It held that the finding of the Tribunal holding that two years period for preparing the returns after the account books of the assessee were returned to it was a reasonable period, could not be assailed in a reference by saying that the view of the Tribunal was wholly untenable in Law, and the relevant answer referred to ti was below:-- In the facts & circumstances of the case, the Tribunal was justified in deleting penalty u/s. 271 (1) (a) of the I.T. Act, 1961, on the facts by it" 11. Now reverting to these cases, we have already observed above that the explanations of the assessee were reasonable and could not be rejected without showing as to how they were un-tenable or that they otherwise deserved to be rejected on merits. It was, thus, the duty of the ITO to have opened up his mind to the assessees and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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