1979 (12) TMI 7 - HC - Income Tax

High Court reverses ITAT decision cancelling late filing penalty, emphasizes burden of proof on assessee

The High Court of Andhra Pradesh overturned the decision of the Income-tax Appellate Tribunal to cancel the penalty imposed on the assessee for filing the ... Delay In Filing Return, Penalty Issues:1. Contumacious conduct of the assessee in filing the return of income.2. Justification of canceling the penalty levied under section 271(1)(a).3. Exigibility of penalty based on the view taken by the Appellate Tribunal.Analysis:The High Court of Andhra Pradesh addressed a reference from the Commissioner of Income-tax regarding the contumacious conduct of the assessee in filing the return of income and the cancellation of the penalty imposed under section 271(1)(a) of the Income Tax Act, 1961. The respondent-assessee, an individual, filed the return for the assessment year 1964-65 after the prescribed time limit, leading to a penalty of Rs. 4,940. The Income Tax Officer (ITO) and the Appellate Authority Commission (AAC) rejected the assessee's explanation for the delay, resulting in the penalty. However, the Income-tax Appellate Tribunal canceled the penalty, shifting the burden of proof to the Revenue to establish the contumacious conduct of the assessee in failing to file the return on time. The Tribunal's decision was based on the legal position that the Revenue needed to prove the assessee's failure without reasonable cause, citing relevant case laws from the Kerala High Court.The High Court disagreed with the Tribunal's reasoning, emphasizing that the burden of proof lies with the assessee to satisfactorily explain the delay in filing the return within the prescribed time limit. The Court referred to a Full Bench decision that clarified the assessee's responsibility to provide a valid explanation for the delay. The Court highlighted that the Tribunal's acceptance of the assessee's explanation was not conclusive, as the legal aspect of proving contumacious conduct was crucial. The Court criticized the Tribunal for misinterpreting the Department's stance on the explanation provided by the assessee, leading to an erroneous decision to cancel the penalty.The Court concluded that the Tribunal's reasoning was flawed and contrary to established legal principles, indicating that the order to cancel the penalty was incorrect. While refraining from commenting on the adequacy of the assessee's explanation for the delay, the Court directed the Income-tax Appellate Tribunal to reconsider the matter, providing both parties with a fair opportunity to present their case. The Court ruled in favor of the Department, highlighting the importance of adhering to the burden of proof in such cases.