Income-tax--

----Reference---Penalty---Failure to file returns in time---Finding by Tribunal that assessee believed that he was under no statutory obligation to file return-- Finding of fact---Penalty cannot be levied.

The assessee was previously doing business in India but in 1961 he went to England. He obtained citizenship of that country. However, towards the end of 1966 or the beginning of 1967, he came to India. During the previous years relevant to assessment years 1967-68 to 1969-70, he was in India. Penalty was levied on him under section 271(1)(a) of the Income-tax Act, 1961, for delay in filing returns but it was cancelled by the Tribunal. On a reference:

Held, that the Tribunal had found that the delay in filing returns was due to the assessee's belief that he was under no statutory duty to file a return. This was a finding of fact and it was not perverse or based on no evidence. The levy of penalty was, therefore, not valid.

JUDGMENT

B.P. JEEVAN REDDY, C.J.---Under section 256(2) of the Income- tax Act, 1961, the Tribunal has stated the following question for our opinion:

"Whether, on the facts and in the circumstances of the case, there was any material to support the finding that the assessee believed that he was under no statutory obligation to file a return and whether, under all the facts and circumstances of the case, the explanation of the assessee constituted, in law, `reasonable cause'?"

The assessee is an individual. The assessment years concerned are 1967-68, 1968-69 and 1969-70. The assessee was previously doing business in India but in 1961 he went to England. He obtained the citizenship of that country. However, towards the end of 1966 or the beginning of 1967, he came to India. During the previous years relevant to the aforesaid assessment years, he was in India. A raid was conducted at his premises and certain cash deposits standing in his name in certain banks were discovered. The assessee's explanation was that they belonged to his son. His son also gave a letter of commotion in that behalf. However, the Income-tax Officer did not accept the assessee's explanation and treated those deposits as the assessee's income and brought them to tax.

Proceedings were taken both under clause (c) of subsection (1) of section 271 as well as under clause (a) of subsection (1) of section 271 against the assessee. It appears that the proceedings under section 271(1)(c) were concluded earlier. It was found in those proceedings that the assessee had not concealed any income nor had he furnished any inaccurate particulars. Of course, it appears that the decision in those proceedings turned on the question of burden of proof which was said to lying on the Department. Be that as it may, in the proceedings concerned herein, i.e., under section 271(1)(a), penalty was levied by the Income-tax Officer and confirmed in appeal by the Appellate Assistant Commissioner. On further appeal, however, the Tribunal deleted the penalty following and applying the findings recorded in proceedings under section 271 (1)(c). The Tribunal was of the opinion that though the assessee's explanation was rejected, yet it cannot be said, in the circumstances of the case, that the assessee was not under a belief that he was under no statutory obligation to file a return. It is a finding of fact and, on the facts on record, it cannot be said to be perverse or based on no evidence. The proceedings are of penalty and levying of penalty is not automatic.

For the above reasons, the question referred is answered in the affirmative, i.e., in favour of the assessee and against the Revenue. We hold that there was material before the Tribunal to support its findings. No costs.

M.B.A./1251/TQuestion answered in affirmative.