1979 (12) TMI 48 - HC - Income Tax

High Court Upholds Tribunal Decision on Tax Penalty, Emphasizes Burden of Proof

The High Court upheld the Tribunal's decision to delete the penalty under section 271(1) of the Income-tax Act for delayed filing of returns by the ... State Electricity Board Issues:- Whether the Tribunal was justified in upholding the order of the Appellate Assistant Commissioner in the matter of deletion of penalty under section 271(1)(a) of the Income-tax Act.Analysis:The judgment by the High Court of Orissa involved a case where the assessee, a firm, had filed returns for the assessment years 1968-69 and 1969-70 after the due dates. The Income Tax Officer (ITO) initiated penalty proceedings under section 271(1)(a) of the Income-tax Act due to the delayed filing of returns. The Appellate Assistant Commissioner (AAC) accepted the assessee's explanation for the delay, citing precedents such as Hindustan Steel Ltd. v. State of Orissa and Alimohamad & Co. The AAC emphasized that penalties should not be imposed for technical breaches and that the burden of proof lies on the ITO to show a conscious disregard of legal obligations.In a second appeal, the Tribunal found that the assessee voluntarily filed the returns under section 139(1) of the Act, indicating good faith. The Tribunal concluded that there was no evidence of contumacious conduct or deliberate disregard of statutory duties by the assessee, leading to the deletion of the penalty. The Tribunal also highlighted the distinction between 'without reasonable cause' and 'wilfully' failing to file returns under section 271(1)(c) of the Act.The Full Bench of the High Court referred to the case of Alimohamad and Co. and held that the burden of proof lies on the assessee to establish reasonable cause for delayed filing of returns. The Court noted that while other High Courts had accepted the ratio in Alimohamad's case, the larger Bench's decision overruled that aspect of the ratio. However, in the present case, the Court upheld the Tribunal's decision to delete the penalty, emphasizing that the assessee had shown sufficient cause for the delay in filing returns, despite the reliance on the now-overruled Alimohamad's case.In conclusion, the High Court answered the issue by stating that the Tribunal was justified in upholding the AAC's order to delete the penalty under section 271(1) of the Act, even though there was an error in relying on the ratio in Alimohamad's case, which had been overruled. The Court did not award costs due to the assessee's absence during the hearing. Both judges, N. K. Das and R. N. Mishra, concurred with the judgment.