COMMISSIONER OF INCOME TAX vs SMT. SUMAN AGARWAL

BY THE COURT:

This is a reference under s. 256(1) of the IT Act, 1961, at the instance of the CIT, Agra. The Tribunal, Delhi Bench ''E'', has referred the following question of law for the opinion of this Court:

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee''s default not being deliberate or conscious was a relevant factor for concluding that there existed a reasonable cause which prevented the assessee from furnishing the return of total income in time?"

The dispute pertains to the asst. yr. 1974-75 and arises out of proceedings under s. 271(1)(a) of the IT Act, 1961 (for short "the AcC), for imposition of penalty for delay in filing the return of the total income. The return in the case of the assessee for the assessment year in question was due on 31st July, 1974, while it was filed on 24th Feb., 1975, after a delay of six completed months. Under the circumstances, the ITO initiated penalty proceedings for the delay in filing of the return and ultimately levied a penalty of Rs. 20,268. The penalty order was upheld in appeal by the CIT(A). On second appeal by the assessee the Tribunal let off the penalty. Hence, this reference at the instance of the Revenue.

We have heard learned counsel for the parties.

In deleting the penalty the Tribunal accepted the explanation of the assessee on account of which she was prevented from submitting the return within the prescribed time. In doing so, the Tribunal recorded its finding as under:

"...There is no material on record to show that the assessee derived any income other than share income from the aforesaid partnership firm. In the absence of completion of accounts of the firm she could not have knowledge about the extent of her share income. It was for the firm- concerned to complete its accounts, if it could do so after taking necessary extracts from the seized records in the sales-tax department as suggested by the ITO. Under the circumstances, the penalty in question cannot be sustained. The same is hereby deleted".

It would appear that the only income that the assessee end . oyez during the previous year relevant to the assessment year in question was a share income from a partnership firm in which she was a partner. The account books of two units of that firm were seized on 28th Aug., 1973 by the sales-tax department. In the absence of seized account books the assessee was not able to furnish her return of income in time. The explanation given by the assessee for not filing the return within time, was not only found reasonable but was also accepted by the Tribunal. It is not in dispute and on the contrary it is an admitted fact that the account books of the two units of the firm in which the assessee was a partner were seized by the sales-tax department and were in its custody and were not available either to the firm or to the assessee when the return for the assessment year in question fell due. The penalty was deleted because the cause for not submitting the return in time was found sufficient. It may be observed that cl. (a) of sub-s. (1) of s. 271 of the Act, as it stood at the relevant time, contemplated imposition of penalty by the relevant authority after being satisfied during the course of any proceedings that any person had failed to furnish without reasonable cause return of total income which he was required to furnish under sub-s. (1) of s. 139 or by notice given under sub-s. (2) of s. 139 or s. 148 or has failed to furnish it within the time allowed and in the manner required by sub-s. (1) of s. 139 or by such notice as the case may be. The findings recorded by the Tribunal by implication was that the delay in filing the return was not without a reasonable cause. The finding of the Tribunal are findings of fact based on appreciation of evidence. In view of the findings of the Tribunal, we have no hesitation in holding that the Tribunal, on the facts of the case, was fully justified in deleting the penalty. It was not a case where the penalty was deleted only on the ground that there was no mens lea but the cause for the delay was found sufficient.

The question referred to this Court is accordingly, answered in the affirmative, in favour of the assessee and against the Revenue.

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