Law:

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Section 271(1)(a) of the Income-tax Act, 1961 - Penalty - For late filing of return - Assessment year 1962-63 - Whether fixing precisely starting point (commencement) of default is basic to imposition of penalty - Held, yes - Whether where Tribunal found that starting point of default could not be fixed definitely and penalty imposed was less than what had to be legally imposed, it was justified in cancelling penalty imposed under section 271(1)(a) - Held, yes FACTS The assessee was a registered firm. For the assessment year in question return was filed on 11-12-1963 but was returned by the ITO for re-submission along with the profit and loss account and the balance-sheet; it was again filed on 10-4-1964. A notice had been served under section 139(2) on 21-2-1963; on this footing the return had to be filed within 30 days of the service of the said notice. A penalty was levied by the ITO by order dated 16-3-1969 under section 271(1)(a). The Tribunal pointed out that it could not be said definitely as to when the default started. It observed that if the due date for return under section 139(1) was taken, the default would commence from 1-12-1962 while if the default was taken from the date of service of notice under section 139(2) then the default would commence from 20-3-1963; that the ITO had not mentioned a word in his order whether he was taking the default from 1-12-1962, or from 20-3-1963 and that the return was originally filed on 11-12-1963, and after removing all the defects it was, subsequently, filed on 10-4-1964. Since the ITO had not mentioned as to which date he was taking for the submission of the return there was vagueness in the order of the ITO which could not be said to be a legal and speaking order. The Tribunal also pointed out that the penalty imposed was, lesser than what was legally leviable. The Tribunal, therefore, cancelled the penalty order. On reference : HELD Fixing precisely the starting point (commencement) of the default is basic to the imposition of penalty; in other words, no valid penalty could be levied unless a definite starting point is found. In the instant case, not only had the ITO not mentioned the date of commencement…

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