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Judgment
J.S. Verma, Actg. C.J.
This is a reference u/s 256(1) of the Income Tax Act, 1961, at the instance of the Revenue to decide the following questions of law :
" (1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in setting aside the penalty imposed u/s 271(1)(a) of the Income Tax Act for an apparent mistake of calculation in working out the penalty ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal should have directed the Income Tax Officer to recalculate the penalty according to law ?"
The material facts are these : The assessee is a co-operative society. The relevant assessment year is 1973-74 for which the previous year ended on June 30, 1972. For that assessment year, the voluntary return of income was to be filed on or before August 15, 1973. The return was filed actually on October 8, 1975. The Income Tax Officer imposed a penalty of Rs. 11,570 u/s 271(1)(a) which was confirmed by the Appellate Assistant Commissioner. The assessee''s further appeal to the Tribunal however, succeeded. It was urged by the assessee before the Tribunal that there was sufficient cause to explain the delay in filing the return on account of the fact that the assessee entertained a bona fide impression that no return was required to be filed because it had suffered losses in the earlier two years which had to be carried forward during the relevant assessment year. It was also contended by the assessee that the Income Tax Officer''s calculation of the period of delay was incorrect. The Tribunal did not consider the contention based on existence of sufficient cause to explain the delay in filing the return and merely on the ground that the delay was actually of 23 months instead of 25 months calculated by the Income Tax Officer, the Tribunal set aside the entire penalty. Aggrieved by the view taken by the Tribunal, the Revenue has sought this reference for decision of the above questions of law.
There can be no doubt that merely because the delay was only of 23 months instead of 25 months as calculated by the Income Tax Officer in filing the return, that alone was insufficient to set aside the entire penalty as has been done by the Tribunal. This being the only reason for setting aside the entire penalty, the action of the Tribunal is clearly not justified. The question now is of the course to be adopted by us while disposing of this reference.
It is clear that the assessee''s contention of existence of sufficient cause to explain the delay in filing the return is also required to be considered and decided by the Tribunal on merits before deciding the question of penalty finally in appeal before it. This not having been done by the Tribunal so far, this is required to be done by it for the purpose of disposing of the second appeal before it on merits. This shall be done now as a result of the decision of this reference.
Consequently, the reference is answered in the Revenue''s favour and against the assessee as under :
" The Tribunal was not justified in setting aside the entire penalty imposed u/s 271(1)(a) of the Income Tax Act, 1961, merely on the ground of a mistake made by the Income Tax Officer in calculating the period of delay, without also deciding the question relating to existence of sufficient cause raised by the assessee."
There shall be no order as to costs.