COMMISSIONER OF INCOME TAX Vs. GANGARAM CHAPOLIA

JUDGEMENT

(1.) BOTH the cases have been heard together as they arise out of same facts which may be stated in short. M/s. Gangaram Chapolia and Co. is a partnership firm constituted under a deed of partnership under the Indian Partnership Act, 1932 (hereinafter to be referred to as " the firm ") Shri Gangaram Chapolia, Shri Babulal Chapolia, Shri-mati Sarada Devi Chapolia and Shrimati Rukmani Devi Chapolia are the partners of the firm. They are the petitioners, and the Commissioner of Income-tax, the Income-tax Officer and the Income-tax Appellate Tribunal are the opposite parties Nos. 1 to 3 in O.J.C. No. 684 of 1974. The Commissioner of Income-tax is the applicant and the firm is the respondent in S.J.C. No. 17 of 1973.

(2.) FOR the assessment year 1964-65 the accounting year ended on the Ram Navami day (April 18, 1964). Under the provisions of the Income-tax Act, 1961 (hereinafter to be referred to as " the Act"), which came into force on and from April 1,1962, the firm was required to submit its return under Section 139(1) of Act before September 30, 1964. The return was, however, filed on August 16, 1965, after a delay of about 10 months, but this was before the assessment was made on April 28, 1967. FOR the default in not filing the return by September 30, 1964, a penalty proceeding was initiated under Section 271(1)(a) of the Act. The firm submitted an explanation on July 11, 1967, in response to the notice. The stand in the explanation for exoneration from penalty was that that was the first year of business under the name and style of M/s. Gangaram Chapolia and Co., that the firm expected a notice under Section 139(2) of the Act which on consultation with their advocate later on they came to learn that it was mandatory to submit the return voluntarily within the period prescribed under Section 139(1), and that the accounts could not be closed as the accountant, Shri Govindram Agarwalla, was absent for a long time due to illness. The Income-tax Officer did not accept the explanation as satisfactory and imposed a penalty of Rs. 5,930. In appeal by the firm, the Appellate Assistant Commissioner reduced the penalty to Rs. 5,000. The Tribunal in second appeal held that Commissioner of Income-tax v. Kulu Valley Transport Co. P. Ltd., 1970 77 ITR 518 (SC), had application to the facts of the case and as the firm had filed the return on August 16, 1965, before the assessment was made under Section 139(4), it was a valid return under Section 139(1), and no penalty under Section 271(1)(a) was exigible.

(3.) SECTION 276C, so far as material, runs thus :