JUDGMENT
B.P. Jeevan Reddy, C.J.
1. Under Section 256(2) of the Income-tax Act, 1961, the Tribunal has stated the following two questions :
“1. Whether, on the facts and in the circumstances of the case, was the Tribunal justified in casting the burden on the Department to prove that the assessee had no reasonable cause for the delay in furnishing the return ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in cancelling the penalty ?
2. The assessment year concerned was 1971-72. The assessee is a registered firm. The return for the said assessment year had to be filed on or before June 30, 1971. The assessee filed two applications dated June 28, 1971 and September 2, 1971, for extension of time for filing the return. Time was finally extended up to September 30, 1971, but no return was filed. Thereupon, the Income-tax Officer issued a notice under Section 139(2) of the Act on November 25, 1971, which was served on the assessee on November 30, 1971. About fourteen months later, the assessee filed the return on December 5, 1972. On the above facts, a notice under Section 271(1)(a) of the Act was issued. It appears from the order of the Tribunal
that no one appeared on behalf of the assessee in response to the said notice. Accordingly, the Income-tax Officer imposed a penalty of Rs. 5,460.
3. The assessee filed an appeal and it was urged before the Appellate Assistant Commissioner that the return could not be filed in time because the munim had fallen ill. This plea was rejected by the Appellate Assistant Commissioner holding that no such plea was taken before the Income-tax Officer nor was any evidence produced in support of the said allegation either before the Income-tax Officer or before him (the Appellate Assistant Commissioner).
4. The assessee filed a further appeal to the Tribunal. The Tribunal noted the relevant facts and observed thus :
“. . .It means that the assessee did give an explanation before the learned Appellate Assistant Commissioner explaining as to why the return could not be filed in time. After rejecting the explanation of the assessee the learned Appellate Assistant Commissioner failed to bring on record any material from which it could be established that the assessee has without any reasonable cause failed to file the return in time. Looking to the aforesaid facts and entire circumstances, it is clear that the assessee gave an explanation for the delay in filing the return. After rejecting the explanation, on behalf of the Department no positive material was brought on record to show that the assessee has, without any reasonable cause failed to file the return in time. The authorities below also pointed out no circumstances from which it could be inferred or established that the conduct of the assessee has been contumacious and is in conscious disregard of its obligation. ..”
5. Thereupon, the Revenue obtained this reference.
6. From the material placed before us, it is not clear whether any affidavit has been filed before the Appellate Assistant Commissioner alleging the said fact or was it merely urged by way of arguments addressed. We must, however, say that such an explanation cannot have the effect of shifting the burden on to the Department, nor can the Department be called upon to produce material to show that the assessee has, without any reasonable cause, failed to file the return in time. There was absolutely no material in this case (except the mere ipsi dixit of the assessee) which could serve to shift the burden on to the Department The Tribunal, therefore, was in error in casting the burden entirely on the Department to establish the wilful failure on the part of the assessee. Reference in this context may be had to the decision of the Supreme Court in Gujarat Travancore Agency v. CIT [ 1989] 177 ITR 455 where a similar approach of the Tribunal was disapproved by the Kerala High Court which disapproval was confirmed by the Supreme Court in appeal. The proper course in the
circumstances is for the Tribunal to reconsider the question whether any
penalty is leviable in the facts and circumstances of the case on account of
the assessee’s failure to file the return within the time prescribed. We must
say that the finding of the Tribunal already recorded is vitiated by the wrong
placing of the burden of proof and cannot be sustained.
7. For the above reasons, question No. 1 is answered in the negative. The second question is also answered in the negative. The Tribunal may reconsider the appeal in accordance with law and pass orders in the light of the observations made above.
8. The reference is answered accordingly.