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TMI Blog1988 (12) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... 76 The IAC (Asst) had granted time upto 30th Sept., 1982. No reply had been sent to other applications. The return was filed on 20th May, 1983. The IAC (Asst) issued show cause notice. In reply to said notice, the assessee, by letter dt. 4th Sept., 1986, stated as follows: "The sickness of the directors attending to the finalisation of accounts and resignation of the experienced Accountant delayed the job of finalisation of the accounts of the company. Thus the assessee company was prevented by sufficient cause from furnishing its return of income within time." The IAC (Asst) did not accept the explanation furnished by the assessee. He observed that he had granted extension upto 30th Sept., 1982, and that was sufficient time for finalisation of accounts and filing of returns. He agreed that the accountant had resigned. However, according to him one member of the staff had been promoted as accountant and as such return could have been filed within the above mentioned time. He, accordingly, levied penalty under s. 271(1)(a) of the Act. The assessee went in appeal before the CIT(A). It was submitted before the CIT(A) that the audit of the accounts was completed on 21st Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to grant the assessee's application for extension of time, it is the duty of the Department to inform the assessee, accordingly, well in advance, so that the assessee is put on his guard that unless he files his return within the prescribed period, penal consequences are liable to follow. If the Department chooses not to reply to the assessee's application within the time applied for by the assessee, time is deemed to be extended as prayed for by the assessee, and he would be justified in assuming that his application has been granted by the Department. It would not be unreasonable to expect an assessee who engages a chartered accountant to assist him in tax matters to be advised and guided by him. If the assessee acts under the advice and guidance of the chartered accountant and does not file a return, it cannot be said that the failure to furnish his return within the prescribed time is without reasonable cause." 5. Similar view has been taken by the Gujarat High Court in CIT vs. Gordhanbhai Jethabhai (1982) 31 CTR (Guj) 244 : (1983) 142 ITR 84 (Guj), wherein it has been observed as follows: "If a statute invests a public officer with authority to do an act in a specified s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in CIT vs. Ramdas Sons. It is now well settled that penalty cannot be imposed automatically wherever there is delay in filing the return. All the facts and circumstances are to be considered judicially and then it should be decided whether the circumstances justified imposing of penalty. The discretion to impose penalty is a judicial one and when the facts and circumstances do not justify imposition of penalty, the penalty should not be imposed. We may mention here that a certificate of a hospital at Hospet (Karnataka) was filed to indicate that one of the directors was under treatment for slipped disc. from 11th May, 1982, to 24th Feb., 1983, and that during the first two months of the treatment traction treatment was given and that he was advised complete bed rest and abstinence from undertaking any strenuous work for six months. This also furnish a sufficient cause for delay in finalising the audit and not filing the return. Considering all the circumstances of the present case, we are satisfied that there was no valid justification for imposing penalty for delay in filing the return. Consequently, the penalty imposed by the IAC(Asst) is liable to be set aside. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of IT Act and were confirmed by the CIT(A). He placed reliance on the decision of the Supreme Court in the case of McDowell Co. Ltd. vs. CTO (1985) 47 CTR (SC) 126: (1985) 154 ITR 148 (SC) and observed that it had been held in said decision that tax planning could be considered legitimate only when it was done within the framework of law. He then concluded that estimate filed by the assessee was incorrect and the assessee knew or had reason to believe that it was untrue. On these findings, he levied penalty under s. 273(2)(b) of the Act. 8. The assessee went in appeal before the CIT(A). As far as the item of development incentives was concerned, he accepted the contention of the assessee that the assessee could not have anticipated that the said amount would be included in the total income at the time of filing the estimate. However, as far as the other items were concerned, according to him the claim of the assessee was unsustainable and as such, the assessee could not have genuinely believed at the time of estimate that he would get deduction in respect of those three items. Consequently, according to him the penalty was rightly levied. The assessee is now in further appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same to be untrue. The submission of the assessee is that at the time when he filed the estimate in question he genuinely believed that Rs. 6,18,060 received as development incentive would be treated as capital receipt and not revenue receipt and that investment allowance of Rs. 2,31,900 and depreciation of Rs. 5,86,072 in respect of new machinery which were to be installed in the current year would be allowed and that land restoration charges to be incurred under the agreement amounting to Rs. 3,39,070 would be allowed as Deduction and that if the assessee's plea in respect of these four items had been accepted, the assessee income would not have been such as to attract penal provisions under s. 273(2)(a). The above mentioned four items have been mentioned by us in para-7 of this order. 13. As far as the first item viz. development incentive of Rs. 6,18,060 was concerned, the CIT(A) has accepted that the assessee would have reasonably believed at the time of filing the estimate that the said amount would be treated as capital receipt and would not be treated as revenue receipt. Even otherwise, the submission of the assessee that the assessee had reasonable belief at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee could have entertained reasonable belief that the tippers would be available for use during the relevant accounting year and as such, the assessee had valid justification for taking into account the depreciation and in allowance at the time of filing the estimate. We have to see the position as it existed on the date of estimate. If on the date of estimate the assessee entertained reasonable belief which was based on the circumstances existing on that day that particular allowance would be allowable, the fact that subsequently the said allowance was not allowed would not mean that the assessee knew or had reason to believe that the estimate which he was making was untrue. After all what the assessee was doing was making an estimate on the basis of the circumstances as existed on the date when the estimate was made. The error which creeps in for no fault of the assessee would not render the estimates one which the assessee knew or had reason to believe to be untrue. It is not the existence of wrong estimate which attracts the penal provision in cl. (a) of s. 273 (2). It is the knowledge of the assessee that the estimate was untrue at the time of making the estimate that attracts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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