1976 (4) TMI 70 - AT - Income Tax

Appeal Allowed: Penalty Cancelled for Assessee's Delay in Filing Return

QUALITY BAMBOO TRADERS. Versus THE INCOME TAX OFFICER.

The Tribunal allowed the appeal by the assessee, canceling the penalty imposed under section 271(1)(a) of the Income Tax Act for delay in filing the ... - Issues:- Imposition of penalty under section 271(1)(a) of the Income Tax Act for delay in filing the return.- Contention regarding the obligation to file the return under section 139(1) of the Act.- Dispute over whether the penalty for default under section 139(1) could be imposed.- Assessment of the circumstances justifying the delay in filing the return.Analysis:The case involved an appeal by the assessee against the penalty imposed by the ITO under section 271(1)(a) of the Income Tax Act for delay in filing the return. The assessee, a registered firm, had filed the return after a delay of 25 months. The ITO initiated penalty proceedings under section 271(1)(a) due to the delay in filing the return. The assessee contended that as its income was below the taxable limit, it was not obligated to file the return under section 139(1) of the Act. However, the ITO imposed a penalty of Rs. 7,953 for the default under section 139(1) of the Act.Before the appellate authorities, the assessee reiterated its argument that it was not required to file the return under section 139(1) as its income was below the taxable limit. The assessee also highlighted that it had filed the return after receiving a notice under section 139(2) of the Act. The Departmental Representative argued that the assessee should have established reasonable causes for the delay in filing the return, which the assessee failed to do. The AAC upheld the penalty imposed by the ITO.Upon further appeal, the Tribunal analyzed the circumstances and legal provisions. It noted that the assessee had maintained regular books of accounts and filed the return as a registered firm with an income below the taxable limit. The Tribunal observed that the penalty could be imposed for defaults under both sections 139(1) and 139(2) of the Act. However, since the ITO did not mention any default under section 139(2) or initiate penalty proceedings for it, the Tribunal focused on the default under section 139(1).The Tribunal found that the assessee had a bonafide belief that its income was below the taxable limit and therefore did not file the return under section 139(1) until after receiving the notice under section 139(2). It concluded that there were reasonable causes for the delay in filing the return and that the conduct of the assessee was not contumacious. Therefore, the Tribunal held that in this case, the penalty was not warranted, and the appeal was allowed, canceling the penalty.In a concurring opinion, another member of the Tribunal agreed that the penalty for the default under section 139(1) was not applicable in this case. However, the member refrained from commenting on the conduct of the assessee under section 139(2) since the penalty was not imposed for that default.This detailed analysis of the circumstances and legal provisions led to the conclusion that the penalty for the delay in filing the return was not justified in this case, resulting in the cancellation of the penalty.