ITAT affirms deletion of penalties for not considering extensions, upholds AAC decision.

The ITAT upheld the AAC's decision to delete penalties under Section 271(1)(a) for the assessment years 1977-78 and 1978-79. The penalties were canceled based on the grounds that the assessee had sought extensions of time for filing returns, which were not considered by the ITO. The ITAT affirmed that since the extensions were not refused, they should be presumed as granted, leading to the deletion of penalties. The departmental appeals were dismissed, confirming the cancellation of penalties imposed by the ITO.

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Issues:
- Penalty under section 271(1)(a) for the assessment years 1977-78 and 1978-79.
- Consideration of extension of time for filing returns.
- Applicability of section 139(4) regarding filing of returns.
- Legal implications of non-reply to extension applications.
- Interpretation of relevant case laws on time extensions and penalty levies.

Analysis:

1. Penalty under Section 271(1)(a):
- The appeals were against the order of the AAC where penalties of Rs. 4,330 for 1977-78 and Rs. 8,100 for 1978-79 were deleted.
- The ITO levied penalties due to delays in filing returns, but the AAC found that extensions of time were sought by the assessee, which were not considered by the ITO. The penalties were canceled based on this ground.

2. Consideration of Extension of Time:
- The AAC noted that for both years, the assessee had filed applications seeking extensions of time, which were not rejected by the department.
- The AAC concluded that since the time asked for was not refused, it should be presumed that the extensions were granted, leading to the deletion of penalties.

3. Applicability of Section 139(4):
- The department argued that returns were filed under section 139(4), precluding the assessee from applying for extensions. However, the assessee contended that applications for extensions were filed in Form no. 6 before the due dates, indicating an intent to file under section 139(1).

4. Non-Reply to Extension Applications:
- The assessee pointed out that the ITO did not consider the replies to show cause notices, where details of extension applications were provided. The ITO's failure to reply was argued to imply the granting of extensions.

5. Interpretation of Case Laws:
- The assessee relied on legal precedents such as the Gauhati High Court and Bombay High Court decisions, emphasizing that non-replies to extension applications should be deemed as granting extensions.
- Reference was also made to a Supreme Court decision where interest levied was deemed as an extension of time for filing returns, leading to the cancellation of penalties under section 271(1)(a).

6. Final Decision:
- After considering all submissions and relevant authorities, the ITAT upheld the AAC's orders for both assessment years, confirming the deletion of penalties.
- Consequently, the departmental appeals were dismissed, affirming the decision to cancel the penalties imposed by the ITO.

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