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. [197J] 80 ITR 14.
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. , 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, the
Tribunal is right in holding that the assessee had reasonable cause in not
filing the return of income within fthe time allowed by Section 139(1) of
the 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 the
return beyond the time prescribed under Section 139(1) or Section 139(2). Whether
there was reasonable cause or not would undoubtedly depend on the facts
and circumstances of a particular case. The assessee is a private limited
company. Rule 12 of the I.T. Rules, 1962, provides that return of income
required to be furnished in the case of a company shall be in Form No, 1
and be verified in the manner indicated therein. If the accounts are kept
on the mercantile system of accounting, a copy of the manufacturing
account or trading account, the profit and loss account and balance-
sheet must be attached to the return. If the accounts are kept on any
other system, a description of the system should be given and a copy of
any statement which corresponds to the profit and loss account and
balance-sheet, on the mercantile accounting system must be attached to
the return. A copy of the auditor’s report under Section 227 of the Companies
Act, 1956, must also be attached to the return. Thus, unless the audit is
completed and the auditor’s report and balance-sheet are made avail;
able, a company cannot furnish the return of incomel The concurrent
findings of the AAC and the Tribunal are that for the immediately preced
ing assessment year (1962-63), the books of account were in the custody
and possession of the official receiver appointed in the suit for winding”-up
and 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 was
completed in February, 1964. It was only thereafter that the audit of
the account books for the assessment year 1963-64 was taken up and the
assessee company received the audit report on September 10, 1964. The
assessee was required to file the return on or before June 30, 1963, but the
return was filed on January 2, 1965. The AAC as well as the Tribunal
held that since the audit report was received on September 10, 1964, the
delay in filing the return up to September, 1964, was explained and such
delay was not without reasonable cause. None of the facts found by the
AAC 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.