Law:

Section:

Section 271(1)(a) of the Income-tax Act, 1961 - Penalty - For late filing of return - Assessment years 1976-77 to 1979-80 - Whether where ITO levied penalty upon assessee under section 271(1)(a) without waiting for reply to show cause notices issued by him, order of Tribunal deleting penalty was justified - Held, yes - Whether Tribunal was justified in holding that merely because on completion of assessment of assessee in status of registered firm a refund was due to assessee, no penalty was leviable - Held, no FACTS The assessee was a registered firm. For the assessment years in question, it filed returns belatedly. The ITO levied penalties for all the assessment years under section 271(1)(a). On appeal, the AAC found that the ITO had not waited for the reply from the assessee, because admittedly at least for the first two years, the notices calling for replies had been received by the assessee on the date on which the penalty orders had been framed; that the assessee had applied for extension of time and the said period had not been taken into consideration while computing the period of default and that as the entire tax had been paid by way of tax deducted at source from contract payments, the assessee became entitled to refunds for all the years and that fact was verifiable from the assessment orders. In view of these circumstances, the AAC deleted the penalties imposed by the ITO. The Tribunal upheld the order of the AAC. On reference : HELD The Tribunal's order as could be seen from the statement of case, fell in two parts. In the first part, the Tribunal had found on the facts after appreciating the evidence on record that (i) the ITO had completed the penalty proceedings without waiting for the reply to the show cause notices issued by him and he was not justified in doing so; (ii) the main stay of the department's case was that in the light of considerable delay in filing the return, it was open to the revenue to assume the default and further infer that the assessee had failed to discharge its statutory obligation - that approach was not approved by the Tribunal. The reasons which weighted with the Tribunal were that the assessee as a registered firm…

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