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Judgment
Balasubrahmanyan, J.—This reference by the Income Tax Appellate Tribunal, Madras, relates to the cancellation by that body of a penalty
levied by the ITO on the assessee. The assessee is a registered partnership firm. The penalty was levied under s. 271(1)(a) of the I.T. Act, 1961,
for delay in the submission of the return. The return was due for 1966-67, the year under consideration, on June 30, 1966, if it had been filed
under s. 139(1) of the Act or at the latest it must have been filed on August 6, 1966, if it had to be considered as a return filed or to be filed under
s. 139(2) of the Act. The actual date on which the assessee filed the return was January 9, 1967. The ITO initiated proceedings for a levy of
penalty under s. 271(1)(a) of the Act. He issued a notice to the assessee calling upon it to show cause why penalty should not be levied. The
assessee did not file any reply in response to that notice. The ITO thereupon proceeded to levy a penalty in the sum of Rs. 7,614. The assessee
appealed before the AAC. Apparently, even before that authority the assessee did not explain as to what prevented it from filing the return within
the time allowed by s. 139 of the Act. For this reason, the AAC dismissed the appeal and confirmed the penalty.
On further appeal before the Tribunal, an explanation was offered on behalf of the assessee to the effect that the return for the year could not be
filed in time because the managing partner of the assessee-firm was fully preoccupied with the celebration of the marriage of his daughter and,
closely following the wedding, the managing partner had to go abroad in connection with securing export orders. It was explained that the
preoccupation of the managing partner with his daughter''s marriage and his subsequent absence from India were the reasons why the firm could
not file the return in time. The Tribunal accepted this explanation as plausible as well as reasonable and on that basis recorded a finding that the
assessee was prevented by reasonable cause from filing the return in time. On the basis of this finding, the Tribunal cancelled the penalty levied by
the ITO.
In this reference, at the instance of the department, the following two questions were raised:
(1) Whether, on the facts and in the circumstances of the case, and having regard to the fact that the assessee had not furnished any explanation
before the Income Tax Officer or the Appellate Assistant Commissioner, the Appellate Tribunal''s finding that the assessee was prevented by
sufficient cause from filing the return within the prescribed time and, accordingly, cancelling the penalty of Rs. 7,614 levied u/s 271(1)(a), is right in
law ?
(2) Whether the Appellate Tribunal''s finding that the assessee was prevented by reasonable cause from filing the return within the time prescribed
by law is supported by material on record and the view taken by the Tribunal is a reasonable one on the materials available ?
We shall advert to the first question, after we deal with the second one, which is the more substantial question for decision in this reference. The
penalty in question in this case is one under s. 271(1)(a) of the Act. The penalty, however, cannot be levied merely because the assessee has filed
its return out of time. It can be levied only on a proper finding come to by the ITO to the effect that the delay in the submission of the return was
without a reasonable cause. The Tribunal had rendered a finding that there was reasonable cause which prevented the assessee in this case from
filing the return in time. What is more, this finding is based on the acceptance by the Tribunal of the fact which was stated before it that the
managing partner was not in a position to attend to the filing of the return by reason of his other preoccupations. The Tribunal apparently accepted
the position that the managing partner was all in all in this partnership firm or, at any rate, it was he who could prepare and file a correct and
complete return. In these circumstances, the Tribunal, in our judgment, was perfectly justified in holding that when the managing partner was, for
some valid reason, not in a position to attend to the preparation of the return, that would properly serve as a reasonable cause for the firm itself for
not filing the return in time. We may also observe that the Tribunal after having looked into the assessment figures, pointed out, with some
relevance, that whereas on the basis of the figures of income returned by the assessee, the tax worked out to Rs. 24,240, which was actually paid
by way of advance tax, the ultimate tax determined on the completion of the assessment was only Rs. 24,557, registering but a small difference.
This fact was relied on by the Tribunal for drawing the inference that the assessee would not have had any real motive for purposely delaying the
filing of the return. We cannot say that this last consideration is of a kind which could not have been taken into account by any Tribunal, which is
required under the law to enter into the question of a reasonable cause behind the delay in filing a return in any assessee''s case.
All things considered, we do not find anything unreasonable in the conclusion arrived at by the Tribunal. After all, a finding as to a reasonable
cause is, in the main, a finding as to a question of fact and this court will not ordinarily interfere with that conclusion in a reference, unless it could be
said, with confidence, that there was absolutely no material in support of the finding or that the finding had been arrived at on a totally unreasonable
view of the facts on record. Such, in our opinion, is not the case with the decision under reference.
Of the two questions which are before us for consideration, therefore, the second and the more substantial question must be answered against
the department and in favour of the assessee. We do so accordingly.
The other question, in the light of our answer to the second question, loses much of its importance. That question raises a point of technicality of
procedure. Although the learned standing counsel for the department did not urge any argument before us purely as a matter of procedure, the
contention put forward by him was that if a finding was to be given as to the presence or absence of a reasonable cause for the delayed filing of a
return, that could be only on the basis of the materials furnished to a certain extent, at least by the assessee. He, accordingly, urged that it would be
proper for the assessee to put forward his explanation at the earliest opportunity, which is afforded to him, when the notice calling for his objection
to penalty is issued to him by the officer who proposes to take proceedings under s. 271(1)(a) of the Act. Learned counsel pointed out that in the
present case the assessee did not stir at all to the notice issued to it, and did not place before the assessing officer any explanation as to what
caused the delay in the filing of the return. Nor did the assessee put forward any grounds, which it was to later present before the Tribunal, when
the matter was being heard by the AAC in appeal. In these circumstances, it was urged by the learned standing counsel that it would have been
proper for the Tribunal, before whom the explanation was offered for the first time by the assessee, to reject such explanation, for the excellent
reason that it was not offered at the earlier stages of the proceedings. At any rate, it was submitted, the Tribunal might have remitted the matter for
a proper investigation, by the authorities below, of the explanation newly trotted out.
We do realise the inconvenience that may be caused in the process of ascertaining and evaluating facts, where contentions of fact are raised for
the first time at the stage of second appeal. But the veracity of facts can be tested by any competent fact-finding body at any point of time when
they are presented and if the Tribunal, as in this case, had preferred to examine the facts placed before it, all by itself and for the first time, then that
is a matter which was entirely within the discretion of the Tribunal. Any other Tribunal in that place might well have thought the case a fit one for a
remand, or for a further investigation and report either by the AAC or by the assessing officer. But merely because the Tribunal did not take either
of such courses, it could not be said that the finding of the Tribunal, which they actually rendered on a consideration of the contentions put forward
before it, was in any sense, vitiated.
Out answer to the first question, therefore, is also in the negative and against the department.
In the peculiar circumstances of the case, there will be no order as to costs.