COMMISSIONER OF INCOME TAX Vs. RAMANLAL KAMDAR

JUDGEMENT

(1.) THIS reference under the Income -tax Act, 1961, relates to the levy of penalty on the assessee for the assessment year 1961 -62 under section 271(1) (a) of the Act. The question is as follows :

(2.) THE provisions of section 271(1) (a) provide for the levy of penalty where an assessee has without reasonable cause failed to furnish his return of income or has without reasonable cause failed to furnish it within the time limited by the Act or by a statutory notice. The quantum of penalty leviable in respect of delayed submission of return is to be measured in terms of a percentage of the assessed tax on a time basis. The precise provision is to the following effect. The penalty levied would be a sum equal to 2% of the assessed tax for every month during which the default continues. The quantification of the penalty on the basis of every month's default is an echo of the very basis for the levy itself, namely non -submission of a return or delayed submission of a return, the laches of the assessee in both cases being without reasonable cause. In other words, only in respect of months of default, in which default can be said to be unreasonable, can there be a quantification of penalty at the rate of 2% of the assessed tax.

(3.) THE question, therefore, is easily answered in favour of the assessee on the basis of the factual finding of the Tribunal. No attempt was made either at the stage of applying for a stated case or at the time of finalising the question of law to challenge the factual finding of the Tribunal as respects the reasonable cause for the delay in the filing of the return for the period other than the three months of the year 1962. In the absence of any appropriate question challenging that factual finding, this question will have to be answered on the basis of the clear conclusion of the Tribunal that the default must be limited, on the facts and on the explanation by the assessee, only to three months. It follows, therefore, that the quantification of the penalty was made by the Tribunal on very correct lines. The reference is accordingly answered against the Department. The assessee will be entitled to is cost. Counsel's fee Rs. 500.