1990 (6) TMI 114 - AT - Income Tax

Summary

Issues:
1. Validity of the return filed by the assessee for A.Y. 1981-82 and the subsequent penalty imposed under section 271(1)(a) of the Income-tax Act, 1961.
2. Compliance with the notice regarding defects in the return and the opportunity given to rectify the same.
3. Interpretation of the computation of the 15-day period for rectification of defects in the return.

Detailed Analysis:
1. The assessee-firm filed its income tax return for the assessment year 1981-82 after the due date, leading the Income Tax Officer (ITO) to consider the return defective under section 139(9) of the Income-tax Act, 1961. The ITO issued a letter to the assessee highlighting the deficiencies in the return, including the absence of necessary documents related to accounts. Despite multiple notices and opportunities given to rectify the defects, the assessee failed to comply, resulting in an ex parte assessment and the initiation of penalty proceedings under section 271(1)(a). The penalty was levied for the delay in filing the return, totaling 31 months, amounting to Rs. 10,965. The assessee contested the penalty in appeal, arguing that there was no defect in the return as the firm did not maintain account books, and the notice did not provide a proper opportunity to rectify the alleged defects.

2. The contention raised by the assessee's counsel was that the defects pointed out in the return were unwarranted, as the firm did not maintain account books, a fact known to the ITO. The counsel argued that the notice did not allow the assessee a reasonable opportunity to rectify the alleged defects within the prescribed 15-day period. Additionally, it was highlighted that one of the partners of the firm had passed away, leaving no active partners to manage the affairs, which affected the response to the notices. On the other hand, the Departmental representative relied on specific clauses of the Explanation to section 139(9) to justify the defects pointed out and the subsequent penalty imposed by the ITO. The representative argued that the ITO rightfully treated the return as invalid and imposed the penalty under section 271(1)(a).

3. The Tribunal analyzed the computation of the 15-day period for rectification of defects in the return by referring to legal precedents and the General Clauses Act, 1897. The Tribunal highlighted the importance of excluding the day of intimation while calculating the 15-day period, as per established legal principles. It was concluded that the assessee was not given a fair opportunity to rectify the defects within the stipulated time frame. Consequently, the Tribunal held that the ITO was unjustified in treating the return as invalid and imposing the penalty for the alleged delay. As a result, the penalty of Rs. 10,965 was revoked, and the appeal of the assessee was allowed.