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Issues Involved:
1. Imposition of penalty under Section 271(1)(a) of the Income-tax Act, 1961. 2. Validity of the penalty order due to a mistake in the calculation of the penalty. Issue-wise Detailed Analysis: 1. Imposition of Penalty under Section 271(1)(a) of the Income-tax Act, 1961: The primary issue was the imposition of a penalty on the assessee for the delayed filing of the income return for the assessment year 1966-67. The return was due on 30th June 1966 but was filed only on 3rd April 1970. The Income-tax Officer (ITO) found that the delay beyond 31st December 1968 was without reasonable cause and imposed a penalty of Rs. 3,680. The assessee contended that the delay was due to a change in the accounting period and other technical issues. However, the Appellate Assistant Commissioner (AAC) confirmed the ITO's finding that the delay of fifteen months was without reasonable cause but directed the ITO to recompute the penalty due to a mistake in the computation. Upon appeal, it was argued that the authorities had no material to hold that the delay beyond 31st December 1968 was without reasonable cause. The assessee claimed that additional time was needed to finalize the accounts due to the nature of the business and staffing difficulties. The revenue countered that the return for the subsequent assessment year 1967-68 was filed on 22nd June 1970 with audited accounts dated 31st July 1968, indicating that the accounts for the subsequent year were ready in 1968. The Tribunal found that the actual filing of the preceding year's return on 5th August 1968 should be considered. It was unreasonable to penalize the assessee for the same period in two assessment years. The Tribunal concluded that the delay beyond 5th August 1968 required explanation. Considering the nature of the business and possible difficulties, the Tribunal deemed a delay of one year from 5th August 1968 as reasonable, leaving an unexplained delay of eight months, inviting the imposition of a penalty. 2. Validity of the Penalty Order Due to a Mistake in Calculation: The alternative issue was the validity of the penalty order due to a mistake in its calculation. The assessee argued that the AAC should have canceled the penalty order as invalid due to the mistake. The penalty was calculated treating the assessee as an unregistered firm without deducting the advance tax paid, resulting in an erroneous penalty amount. The AAC directed the ITO to recompute the penalty, which the assessee contended was beyond the AAC's power. The Tribunal examined whether the AAC could adjudicate the quantum of penalty and vary it when not in accordance with law. Section 251(1)(b) of the Act provides that the AAC may confirm, cancel, or vary the penalty. The Tribunal found that the power to vary the penalty extends to its computation. The Tribunal emphasized that the AAC's competence ranges over the whole assessment, allowing correction of errors, including clerical or arithmetical mistakes in penalty computation. The Tribunal noted that the computation of penalty under Section 271(1)(a) involves the period of default and the assessed tax. If the assessed tax varies on appeal, the quantum of penalty would change accordingly. The Tribunal rejected the assessee's contention that the AAC could not vary the penalty due to a calculation error, as this would lead to unjust results and allow defaults to escape penalty due to minor errors. The Tribunal concluded that the AAC's direction to recompute the penalty was within his powers. The original order would merge with the Tribunal's order, rendering the original order non-existent for rectification or cancellation. The Tribunal found support in the Orissa High Court's decision in Linga Raj Panda & Co., which favored the revenue. Conclusion: The Tribunal directed the ITO to recompute the penalty for the unexplained delay of eight months and refund any excess penalty paid by the assessee. The appeal was partly allowed.
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