ADDITIONAL COMMISSIONER OF INCOME TAX Vs. LALIT BROS

JUDGEMENT

(1.) IN this reference under S. 256(1) of the IT Act 1961, made by the Tribunal, Bombay Bench 'D', both at the instance of the Revenue and the assessee, the following question has been referred to us for our opinion: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the penalty leviable on the assessee for the asst. year 1962 63 under cl. (i) of S. 271(1)(a) of the IT Act, 1961, was properly levied and that the same should be on the net amount of tax payable by the assessee after deducting from the gross advance tax as well as provisional assessment tax, if any, paid by the assessee in relation to the said assessment year ?"

(2.) THE Revenue in its reference application had asked the Tribunal to refer to this Court for its opinion two questions of which the Tribunal while refusing to refer the first question had agreed to refer the second question for this Court's opinion. The assessee in its reference application had asked the Tribunal to refer to this Court's opinion six questions. The Tribunal while refusing to refer the last two questions, they being questions of fact, and the fourth question not being argued by the assessee, agreed to refer the first three questions to the Court for its opinion. However, ultimately, the Tribunal appears to have rolled the said four questions, one by the Revenue and three by the assessee, into one question stated above and has referred the same to this Court. We, however, feel that if the Tribunal had retained the said four questions as they were framed by the parties and accepted by the Tribunal for being referred to this Court instead of rolling them into one, the controversy between the parties could have been brought out more clearly and plainly than done by the said single question. We, therefore, have reframed the said one question referred to us into four questions as they originally stood. The said questions are:

(3.) THE ITO thereafter initiated penalty proceedings against the assessee under S. 271(1)(a)(i) of the said Act, as, according to him, the assessee, had committed default under S. 139(1) by not filing the return in time as required under the said section. The assessee sought to explain the delay on the ground that as its accountant had left for his native place and was required to stay there for a long time due to his father's illness and death, the return could not be filed in time. The ITO did not accept the said explanation for delay as being reasonable to exonerate the assessee from default in filing a return and from consequent levy of penalty for such default. The ITO, therefore, imposed a penalty of Rs. 6,295 at the rate of 2per cent per month of the tax determined, by treating the assessee as an unregistered firm. Against the said order of the ITO imposing penalty, the assessee appealed to the AAC. Before the AAC the main contention of the assessee was that since in pursuance of the notice dated 12th October, 1963, issued by the ITO under S. 139(2) or S. 148 it had filed the return within the period of one month prescribed under the notice, the ITO could not adopt penalty proceedings under s. 271(1)(a) of the IT Act, 1961, for default under S. 139(1) of the said Act and such proceedings being invalid, the order of the ITO could not be sustained. The AAC accepted the said contention of the assessee by observing that as there was no provision for presuming that the return submitted in response to a notice under S. 139(2) or S. 148 can be presumed to have been submitted under s. 139(1), default under S. 139(1) never ceased but still continued and so no penalty could be levied for a default under that section. He accordingly cancelled the penalty levied by the ITO. The AAC, however, did not accept the explanation for the delay given by the assessee as being reasonable.