Penalty for belated filing of return of income under Section 271(1)(a) of the Income-tax Act, 1961 can be imposed even if no tax is payable on the date of imposition of penalty.

AJIT K. SENGUPTA, J.

( 1 ) THIS reference under Section 256 (2) of the I. T. Act, 1961, for the assessment year 1963-64 relates to the imposition of penalty of Rs. 52,148 under Section 271 (1) (a) of the said Act.

( 2 ) THE assessee should have filed the return of income on or before June 30, 1963. The return was, however, filed on January 2, 1965. The assessee was, therefore, asked to explain as to why the return was filed belatedly and as to why penalty should not be imposed on the ground of failure to file the return of income within time under s, 139 (1) and 139 (2 ). The assessee replied that the books of account were not under the control of the company and that the auditing was completed on September 10, 1964, and the same was placed before the general body meeting on October 23, 1964. The ITO refused to believe that the books of account for the calendar year 1962 (i. e. , for the relevant assessment year), were also taken away by the official receiver. The ITO observed that the books of account were returned on September 19, 1963, to the assessee while the areturn was filed on January 2, 1965. The first ground was rejected by the ITO. The second ground was also rejected as the assessee filed the return four months after the auditing was completed. The ITO also took note of the fact that no application for extension of time had been made by the assessee for filing the return belatedly. Therefore, the ITO imposed a penalty of Rs. 52,148 under Section 271 (1) (a) for failure to furnish the return under Sections 139 (1) and 139 (2) of the I. T. Act, 1961.

( 3 ) THE assessee went on appeal before the A AC. He held that there was sufficient cause for the belated filing of the return for the reasons mentioned by the assessee except for a period of three months. It was further held by the AAC that as there was no outstanding as on the date of imposition of penalty, penalty under Section 271 (1) (a) was not leviable in view of the decision of the Calcutta High Court in the case of Vegetable Products Ltd. [197j] 80 ITR 14.

( 4 ) THE Department went on appeal before the Tribunal. Following the said judgment of the Calcutta High Court in the case of Vegetable Products Ltd. the Tribunal held that since on the date of imposition of penalty no tax was payable, no penalty could be imposed and, as such, the AAC was right in cancelling the penalty. He also found that the assessee had reasonable cause for not filing the return of income up to September 19, 1964. The Tribunal found that the account books of the assessee for the immediately preceding year, i. e. , the assessment year 1962-63, were taken into custody by the official receiver appointed by the Calcutta High Court in connection with a suit for winding-up of the company and the books were released only on September 15, 1963, when the audit for the said year was taken up. Audit was completed some time in February, 1964. It was only thereafter that the audit of the account books for the year under consideration could be taken up and the audit report was received only on September 10, 1964. The Tribunal, therefore, held that since the audit of the account books for the year under appeal was completed only in September, 1964, the delay in the filing of the return up to September, 1964, was not without reasonable cause. Thus, on this point also, the departmental appeal failed.

( 5 ) ON the aforesaid facts, the following questions of law have been referred to this court;" 1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that no penalty is imposable under Section 271 (1) (a) of the Income-tax Act, 1961, on the ground that no tax was payable by the assessee on the date of imposition of penalty ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the assessee had reasonable cause in not filing the return of income within fthe time allowed by Section 139 (1) of the Income-tax Act, 1961?"

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