Commissioner of Income Tax vs Ratanchand Mehta

A.K. Mathur, C.J.—This is a reference u/s 256(1) of the Income Tax Act, 1961, at the instance of the Revenue and the following question of law has been referred by the Tribunal for answer of this court ;

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in cancelling penalties imposed on the assessee u/s 271(1)(a) of the Income Tax Act, 1961, for the assessment years 1972-73 to 1975-76 ?"

The brief facts giving rise to this reference are these : The matter relates to imposition of penalty u/s 271(1)(a) of the Income Tax Act. Returns for various years were filed belatedly. The following chart would show the delay in filing the returns and the penalties imposed by the Assessing Officer therefore :

Assessment year

Return due on

Return filed on

Delay in months

Penalty imposed

Rs.

1971-72

30-6-1971

25-11-1976

70

1,440.00

1972-73

30-6-1972

25-11-1976

58

6,754.00

1973-74

30-6-1973

25-11-1976

46

7,650.00

1974-75

30-6-1974

30-6-1978

47

9,880.00

1975-76

30-6-1975

30-6-1978

35

4,625.00

An appeal was preferred by the assessee and, ultimately, the order was upheld by the Appellate Assistant Commissioner. The matter then reached the Tribunal. The Tribunal, after examining the matter, came to the conclusion that the returns being invalid, no penalty could be levied for the delay in filing the returns and, therefore, the penalties levied for all the invalid returns had to be cancelled. Hence, the present reference has been made by the Tribunal for answer of this court.

It is an admitted position that the returns were filed by the assessee belatedly and, therefore, the penalties were levied, but in fact the assessment was made after giving notice u/s 148 to the party, but the party did not file the returns and the Assessing Officer made assessment on the basis of those invalid returns. The returns were filed beyond the period prescribed and, therefore, the Tribunal held that they were not returns in the eye of law and, therefore, they were invalid returns. Since the returns were found to be invalid, the Tribunal came to the conclusion that levying of penalty on that basis was also invalid as the returns could not be used for assessing the tax liability.

The view taken by the Tribunal appears to be justified and there is no reason to interfere.

In the result, the reference is answered against the Revenue and in favour of the assessee.