Gujarat H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in cancelling the order levying penalty under s. 27l(1)(c) of the Act ?

High Court Of Gujarat

CIT vs. C. Shantilal & Co.

Section 271(1)(a)

Asst. Year 1966-67

P.D. Desai & D.H. Shukla, JJ.

IT Ref. No. 215 of 1975

28th August, 1981

Counsel Appeared

B.R. Shah, with R.P. Bhatt, of M/s. R.P. Bhatt & Co.,for the Commissioner : None appeared for the Assessee

P.D. DESAI, J. :

The Tribunal has referred the following two questions of law for our opinion :

“(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in cancelling the order levying penalty under s. 27l(1)(c) of the Act ?

(2) Whether there was any material for the Tribunal to come to the conclusion that there was reasonable cause for the assessee not to file its return of income till 14th Nov., 1966 ?”

The assessment year with which we are concerned herein is asst. yr. 1966-67, the relevant previous year being S.Y. 2021.

This reference arises out of penalty proceedings taken against the assessee in respect of a default under s.271(1)(a) of the Act. The following table would furnish the relevant factual data required Application for extension of time for furnishing the return up to 30-91966 29-6-1966 Extension of time deemed to have been granted up to 30-9- 1966 Notice under s. 139(2) served on 14-10-1966 Time for furnishing the return in pursuance of the notice expired on 14-11-1966 Return furnished on 1-12-1966 Penalty levied under s. 271 (1)(a)(i) 31-1-1972

In view of the delay in furnishing the return, the ITO issued showcause notice under s. 271 r/w s. 271(1). The assessee, in response to the notice, submitted a written explanation in the following terms : (1) An application for extension of time having been made on 29th June, 1966, and the said application having not been rejected, the assessee presumed that the time for furnishing the return was extended up to 30th Dec., 1966. (2) Notice under s. 139(2) having been served upon the assessee on 14th Oct., 1966, the assessee presumed that the return could be furnished on or before 14th Nov., 1966.

In the light of the above explanation, the assessee submitted that there being less than one month’s default in furnishing the return, the assessee was not liable to be visited with any penalty. The ITO rejected the explanation to be taken into consideration for the purpose of answering the question : S. No. Particulars 1. Last date for furnishing the return Date 30-6-1966

submitted by the assessee. In appeal, the order of the ITO was confirmed by the AAC. On further appeal, however, the Tribunal quashed the order levying penalty. The view of the Tribunal was, (a) that the assessee was justified in presuming that the time to furnish the return was extended up to 30th Sept., 1966; (b) that though no return was furnished on or before 30th Sept., 1966, before the period, a notice under s. 139(2) was issued on 14th Oct., 1966; (c) that upon receipt of the notice, the assessee bona fide believed that it was entitled to furnish the return within thirty days of the service of such notice and that there was, therefore, reasonable cause for not furnishing the return up to 14th Nov., 1966; (d) that though no return was furnished on 14th Nov., 1966, before the expiry of the period of one month of the default thereafter, the assessee furnished the return on 1st Dec., 1966; (e) that, therefore, there being less than one month’s delay in furnishing the return (for which there was no reasonable cause), the assessee was not liable to any penalty under s. 271(1)(a).

In view of the decision of the Full Bench of this Court in Addl. CIT vs. 1. M. Patel and Co. (1977) 107 ITR 214 (FB), it is clear that penalty for failure to furnish the return within the time specified by law could have been imposed only if it was shown that the assessee had either acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonest, or acted in conscious disregard of his obligation to file the return in time. Failure without reasonable cause to furnish the return in time is an ingredient of the offence and the legal burden is on the Department to establish by leading some evidence that, prima facie, the assessee had without reasonable cause failed to furnish the return within the time specified. Against this background we must examine the questions.

Now, in the instant case, for the two periods, namely, 1st July, 1965, to 30th Sept., 1966, and 14th Oct., 1966, to 14th Nov., 1966, there was material before the Tribunal to come to the conclusion that there was reasonable cause for the assessee not to furnish its return of income within the time specified by law. The material consisted of the written explanation furnished by the assessee to the ITO in response to the show-cause notice issued under s. 274. The Tribunal was justified in acting upon the said material in reaching the conclusion that it did in regard to the said periods. With regard to the periods from 1st Oct., 1966, to 13th Oct., 1966, and 15th Nov., 1966, to 1st Dec., 1966, the Tribunal’s view was that each period covered a distinct and independent default and that since each default was of less than one month’s duration, the penalty could not have been imposed. It has not been urged on behalf of the Revenue that this view of the Tribunal is not justified in law or that one period of default could be tagged on with the other or that if tagged on it would be possible to levy penalty. Under the circumstances, it would appear that the Tribunal was justified in law in taking the view that the delay in furnishing the return being of a period shorter than one month, the assessee was not liable to be visited with any penalty.

In the light of the foregoing discussion, in our opinion, the Tribunal was right in law in cancelling the penalty. Under the circumstances, the questions are answered as under: Question No. 1 : In the affirmative, that is to say, in favour of the assessee and against the Revenue. Question No. 2 : In the affirmative, that is to say in favour of the assessee and against the Revenue.

There will be no order as to the costs of the reference in view of the fact that the assessee is not represented at the hearing.

[Citation : 141 ITR 476]

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