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Commissioner of Income-tax Vs. Sulekha Works (P.) Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 1 of 1977
Judge
Reported in[1985]156ITR190(Cal)
ActsIncome Tax Act, 1961 - Sections 139(1), 139(2) and 271(1); ;Income Tax Rules, 1962 - Rule 12; ;Companies Act, 1956 - Section 227
AppellantCommissioner of Income-tax
RespondentSulekha Works (P.) Ltd.
Excerpt:
- .....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,.....
Judgment:

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. : [1971]80ITR14(Cal) .

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. : [1971]80ITR14(Cal) , 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, theTribunal is right in holding that the assessee had reasonable cause in notfiling the return of income within fthe time allowed by Section 139(1) ofthe Income-tax Act, 1961?'

6. The first question is concluded by the decision of this court in the case of CIT v. Chhortky [1976] 2 CLJ 152. Following the said decision, we answer the first question in the negative and in favour of the Revenue.

7. We now turn to the second question. Under Section 271(1)(a) of the Act,a penalty may be imposed if there is no reasonable cause in filing thereturn beyond the time prescribed under Section 139(1) or Section 139(2). Whetherthere was reasonable cause or not would undoubtedly depend on the factsand circumstances of a particular case. The assessee is a private limitedcompany. Rule 12 of the I.T. Rules, 1962, provides that return of incomerequired to be furnished in the case of a company shall be in Form No, 1and be verified in the manner indicated therein. If the accounts are kepton the mercantile system of accounting, a copy of the manufacturingaccount or trading account, the profit and loss account and balance-sheet must be attached to the return. If the accounts are kept on anyother system, a description of the system should be given and a copy ofany statement which corresponds to the profit and loss account andbalance-sheet, on the mercantile accounting system must be attached tothe return. A copy of the auditor's report under Section 227 of the CompaniesAct, 1956, must also be attached to the return. Thus, unless the audit iscompleted and the auditor's report and balance-sheet are made avail;able, a company cannot furnish the return of incomel The concurrentfindings of the AAC and the Tribunal are that for the immediately preceding assessment year (1962-63), the books of account were in the custodyand possession of the official receiver appointed in the suit for winding'-upand the said books of account were released only on September 19, 1963.The audit of the books of account for, the assessment year 1962-63 wascompleted in February, 1964. It was only thereafter that the audit ofthe account books for the assessment year 1963-64 was taken up and theassessee company received the audit report on September 10, 1964. Theassessee was required to file the return on or before June 30, 1963, but thereturn was filed on January 2, 1965. The AAC as well as the Tribunalheld that since the audit report was received on September 10, 1964, thedelay in filing the return up to September, 1964, was explained and suchdelay was not without reasonable cause. None of the facts found by theAAC and the Tribunal haave been challenged,

8. We are, therefore, of the view that, on the facts and in the circumstances of the case, the Tribunal was right in holding that there was reasonable cause for delay in filing the return up to September, 1964. We, therefore, answer the second question in the affirmative and in favour of the assessee.

9. There will be no order as to costs.

Dipak Kumar Sen, J.

I agree.


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