R.N. Misra, J.
1. The Income-tax Appellate Tribunal has stated a case and referred the following question for opinion of the court in terms of a direction given by the court on November 15, 1973, on an application of the revenue made under Section 256(2) of the Income-tax Act of 1961 (hereinafter referred to as 'the Act').
'In the facts and circumstances of the case, was the Tribunal justified in deleting levy of penalty under Section 271(1)(a) of the Income-tax Act of 1961 ?'
2. The assessee is a firm. The relevant years of assessment are 1963-64, 1964-65 and 1965-66. The assessee was required to file its return of Income under Section 139(1) of the Act for these assessment years by June 30, 1963, June 30, 1964, and June 30, 1965, respectively. As a fact, however, the assessee filed returns for all the three years on December 27, 1966. The Income-tax Officer found that there had been default in filing of the returns and accordingly initiated penalty proceedings under Section 271(1)(a) of the Act and imposed penalties of varying amounts for these years.
3. The explanation given by the assessee before the Income-tax Officer was that its books of account were seized by the sales tax authorities on November 12, 1961, and the same had been retained by the said authorities till October 6, 1964, when they were returned to the assessee. The assessee's accounts for four years, i.e., 1962-63, 1963-64, 1964-65 and 1965-66 had to be finalised after return of the records, profit and loss account and balance-sheets were to be drawn up and then only the returns could be filed. The assessee took reasonable and expeditious steps for the purpose and as soon as the accounts were ready returns were filed.
4. The Appellate Assistant Commissioner did not accept the explanation as sufficient for excusing the delay in making Of the returns for the three years. The first appellate authority observed :
'I am unable to accept the appellant's reasons. It is an admitted fact that books of account for the years under present consideration were never seized by the sales tax authorities. Therefore, when all the books of account for the relevant years were available with the appellant, I do not see any practical difficulty in preparing the trading and profit and loss account for the years under present consideration. Sales, purchases, closing stock and all expenses incurred daring the three years under consideration were available to the appellant. The opening stock figures could have been obtained either from the assessment records, from the income-tax authorities or from the sales tax authorities. There may be some difficulty in preparing the balance-sheets but I visualise no difficulty in preparation of the trading account, profit and loss account, etc., for the three years under present consideration merely because the books of account for the earlier years were seized by the sales tax department. Secondly, when according to the appellant's own submission, the returns of income were getting delayed, the appellant should have requested the concerned sales tax authorities as well as the Income-tax Officer and should have brought to their notice that for no fault of the assessee the returns of income were getting delayed. By making such request the appellant could have had access to his own books of account when they remained in the custody of the sales tax authorities. There is, however, no evidence to show that any such request was made to the sales tax or income-tax authorities. At the third place, no petition seeking extension of time was ever furnished before the Income-fax Officer stating the facts which prevented the appellant-firm from submitting the returns. In view of all these facts and circumstances, I am unable to agree with the appellant that there were sufficient reasons preventing him from furnishing the returns in time......'
5. The Tribunal found that: the Income-tax Officer had accepted the delay up to October 6, 1964, and was of the view that, as the. accounts were released, the return should have been filed. The Appellate Tribunal as a fact found :
' ......The books of account were seized by the sales tax authorities and, therefore, the assessee could not keep track of all the accounts contained in the books of account of these years. It is facile to say that on the release of the books of account authentic balance-sheet, profit and loss account and trial balance were to be drawn up when complying with the mercantile system of accounting which required adjustment of all the accounts of the preceding years including those of the expenses for which adequate provision was made in the preceding years. It cannot be also denied that in drawing up the trial balance enormous labour was required and cross verification to rule out any omission or mistake was a tremendous job.'
6. The Tribunal, as we find from its order, looked at the matter both as a question of fact, that is, as to whether there was a reasonable explanation before the taxing authorities and as a proposition of law as to whether penalty could be levied. On both the scores, it found in favour of the assesses and accordingly directed deletion of the penalties.
7. We have little, doubt, in view of the legal position indicated by a Full Bench of this court in the case of Commissioner of Income-tax v. Gangaram Chapolia : 103ITR613(Orissa) , that the view taken by the Appellate Tribunal on the legal aspect is erroneous. Undoubtedly, it was for the assessee to show reasonable cause for the delay in complying with the statutory requirement of making a return of the income within the time specified. What the extent of that burden is need not be considered here, but the Tribunal was certainly wrong in holding that the onus lay on the revenue to establish absence of reasonable cause.
8. The Tribunal, however, found as a fact that accounts had been seized on November 12, 1961, and were returned to the assessee only on October 6, 1964. The volume of business of the assessee seems to be quite extensive and taking the overall picture of the matter, the Tribunal has taken the view that the assessee could not have filed the returns on the day the account books were returned to it. It had to do a lot of accounting, verifications, etc., before the returns could be made. In a given case what would be the time requisite for settling accounts for making of the return would normally be one of fact. Undoubtedly, the statute has given either three or four months from the end of the year depending on the nature of the income for settling the accounts and making of the return. That is the position where the accounts are with the assessee and three or four months time has been considered sufficient for finalising a year's accounts. In the instant case, as found by the Appellate Tribunal, accounts of four years had to be settled. In a given case of the type as before us what would be the reasonable time for settling the accounts would indeed be one of fact. It is true that the scheme under the Act of allowing three or four months' time from the end of a year for making of the return cannot be lost sight of while deciding a question of fact like this. But whether in a given case considering the peculiar facts thereof including seizure of accounts and return thereof after three years, a longer period would be reasonable would ultimately depend upon its own facts and if the Appellate Tribunal--the final forum of fact--holds that two years is a reasonable period, the same cannot be assailed in a reference by saying that the view of the Tribunal is wholly untenable in law.
9. While making it expressly clear that we do not agree with the view of the Tribunal on the legal aspect, we have come to the conclusion that the Tribunal as a fact has found that the delay in making of the returns has been explained by the assessee and the cause shown is a reasonable one. The answer to the question referred, therefore, is :
In the facts and circumstances of the case, the Tribunal was justified in deleting levy of penalty under Section 271(1)(a) of the Income-tax Act of 1961, on the facts found by it and not in law as indicated.
10. We direct the parties to bear their own costs.
N.K. Das, J.
11. I agree.