Madras High Court
Commissioner Of Income-Tax vs A.R.K. Perumal Chettiar on 8 February, 1989
JUDGMENT Ratnam, J.
1. At the instance of the Revenue, under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), the following two questions have been referred for the opinion of this court :
"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in cancelling, and had valid material to cancel the penalty of Rs. 34,435 imposed under section 261(1)(a) for the assessment year 1965-66 ?
(2) Whether, in the absence of the assessee's explanation or cause for the delay, the Appellate Tribunal's finding that the assessee's default was not willful, was valid and proper ?"
2. The assessee is a registered firm engaged in the business of export of textile goods. We are concerned with the assessment year 1965-66 in the reference. The Income-tax Officer issued a notice to the assessee under section 139(2) of the Act on August 13, 1965, and it, therefore, became necessary for the assessee to file its return within one month thereafter i.e. on or before September 13, 1965. However, the assessee filed its return only on February 1, 1966, and as there was delay in the filing of the return a notice under section 274 read with section 271 of the Act was issued in reply to that notice, the assessee maintained that no penalty proceedings were initiated in the course of the assessment proceedings, that it had applied for extension of time for filing the return, that as interest had been levied, it had to be presumed that time had been allowed up to the date on which the return was filed and that, in any event, no penalty could be levied. The Income-tax Officer found that on October 6, 1965, the assessee had applied for extension of time for filing the return and time was thus delay only for December 1, 1965, to January 31, 1966, for two months. Overruling an objections raised by the assessee, the Income-tax Officer imposed a penalty of Rs. 34,435 under section 271(1)(a) of the Act. On appeal by the assessee, the Appellate Assistant Commissioner also confirmed the levy of penalty Aggrieved by that, the assessee preferred an appeal to the Appellate Tribunal. The Tribunal found that the assessee had failed to addition any reasonable cause for the delay in the filing of the return, but that from the grant of time by the Income-tax Officer to the assessee for and filing of the return up to November 30, 1965, it would be reasonable to infer that there was no wanton disregard by the assessee in meeting its statutory obligation. In that view, the Tribunal cancelled the penalty imposed on the assessee. That is how the matter has come up before this court on the questions of law referred to at the outset.
3. Learned counsel for the Revenue contended, drawing attention to the finding recorded by the Tribunal in para 3 of its order to the effect, that the assessee had failed to adduce any reasonable cause for the delay of two months, that there is absolutely no material whatever by way of any explanation or cause for the delay and that the Tribunal had, without any material, proceeded to cancel the penalty levied and the conclusion of the Tribunal cannot be supported or sustained.
4. On the other hand, learned counsel for the assessee submitted that having regard to the earlier extension of time for the filing of the return on the ground that the accounts had not been finalised by the assessee, it would not be unreasonable to hold that the same difficulty, viz., non-finalisation of the accounts, continued even during the period of delay and therefore, the Tribunal was justified in cancelling the penalty imposed on the assessee.
5. Consequent upon the issue of a notice under section 139(2) of the Act on August 13, 1965, it was incumbent on the assessee to have filed its return on or before September 13, 1965. However, the assessee filed an application for extension of time or October 6, 1965, and extension was also granted by the Income-tax Officer up to November 30, 1965. It is common ground that thereafter there was no application for further extension of time or any other communication sent by the assessee getting out its inability to file the return or the reasons therefor. In para 3 of its order, the Tribunal has clearly and categorically rendered a finding that the assessee had failed to adduce any reasonable cause for the delay. Having recorded this finding, the Tribunal has proceeded to state that from the granting of time by the Income-tax Officer up to November 30, 1965, it will be reasonable to draw an inference that there was no wanton disregard by the assessee. How the Tribunal was the assessee, setting but the non-finalisation of its accounts as the reason, the Income-tax Officer extended the time for filing the return up to November 30, 1965, and thereafter there was no reason at all given by the assessee for its inability to file the return. The Tribunal has also found that there was no reasonable cause. If, even according to the Tribunal that after November 30, 1965, the assessee had failed to adduce reasonable cause for the delay of two months, it is difficult to accept the view of the Tribunal that there was no wanton disregard by the assessee. The reason given by the assessee for its inability to file the return but seek an extension of time for that purpose up to November 30, 1965, was that the accounts had not been finalised. It has not been established that state of affairs continued to be even after November 30, 1965. Even when the assessee had not made any attempt to establish any reasonable cause for the delay, it is not for the Tribunal, under the guise of drawing a reasonable inference, to hold that there was no wanton disregard by the assessee. On the available material it is difficult to hold that because of the extension of time for filing the return by the assessee at its request up to November 30, 1965, the same state of affairs continued even thereafter and that would justify the delayed filing of the return by the assessee. On the finding rendered by the Tribunal in para 3 of its order that the assessee had failed to adduce any reason able cause for the delay, the conclusion arrived at by the Tribunal that penalty imposed cannot be sustained, is, to say the least, totally prevent and unsupported by the materials on record. Further, it is seen that there was total absence of any explanation whatever for the delay that had occurred after November 30, 1965, and, in such a situation, the Tribunal fell into an error in holding that the assessee is not guilty of any default warranting the levy of penalty. On a careful consideration of the facts and the circumstances, we answer the questions referred to us in the negative and in favour of the Revenue. There will be, however, no order as to costs.