Law:

Section:

Section 271(1)(a) of the Income-tax Act, 1961 - Penalty - For late filing of return - Assessment year 1970-71 - Assessee-company failed to file return of income within extended time granted by ITO-ITO levied interest under section 139(1) and initiated penalty proceedings under section 271(1)(a) - ITO rejected assessee's explanation that it was prevented by reasonable cause from not filing return within extended time - Whether ITO should be deemed to have extended time for filing return, and as such, question of imposing penalty under section 271(1)(a) did not arise - Held, yes FACTS The assessee was a company. Its previous year ended on 30-6-1969. Return for the year was due to be filed on or before 30-6-1970. By an application dated 29-6-1970, the assessee applied for extension of time up to September 1970 for filing the return which was granted. The assessee filed another application on 29-9-1970 for further extension of time by one month but extension was granted up to 19-10-1970 only. Return was filed on 24-12-1970. While completing assessment, the ITO charged interest under proviso (iii) to section 139(1) for the period 1-10-1970 to 23-12-1970. He also initiated penalty proceedings under section 271(1)(a) and issued show-cause notice. The assessee's explanation that it was prevented by reasonable cause from not filing the return within the extended time was rejected by the ITO who levied penalty under section 271(1)(a) for two months at statutory rate. On appeal, both the AAC and the Tribunal upheld the ITO's order. On reference: HELD In the case of CIT v. M. Chandra Sekhar [1985] 151 ITR 433, the Supreme Court has held that the time should be deemed to have been extended by the ITO for filing the return and once the time for filing the return is deemed to have been extended, there is no question of imposition of penalty under section 271(1)(a) on the ground that the return was not filed within time. Following the said decision the Tribunal erred in holding that levy of interest under section 139 had nothing to do with levy of penalty under section 271(1)(a). The penalty levied was accordingly set aside. CASE REVIEW Dr. Shamlal Narula v. CIT[1964] 53 ITR…

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