Income-tax---

----Reference---Question of law--Penalty---Delay in filing return---Assesses contending that delay was due to delay in finalising accounts of firms in which he was partner---Tribunal cancelling penalty but no finding recorded by it that there was sufficient cause for not finalising accounts of firms-- Whether Tribunal right in cancelling penalty is a question of law fit for reference---Indian Income Tax Act, 1961, Ss.271(1)(a) & 256(2)

For the assessment year 1983-84 the due, date for filing the return was July 31,1983, but the assesee filed the return on November 14, 1985. The assessee explained that the return could not be filed in time as there was delay in finalising the accounts of the firms in which the assessee was a partner. The Tribunal held that it was well-settled that where the accounts of the firm were not finalised the delay in filing the return by the partner would constitute reasonable cause and cancelled the penalty imposed on, the assessee under section 271(1)(a) of the Income Tax Act, 1961. However, the Tribunal did not record any finding whether there was sufficient cause for not finalising the accounts of the firms which delayed the submission of the return by the assessee. The Revenue filed an application under section 256(1) of the Act for referring a question of law, which wets rejected by the Tribunal. On an application filed under section 256(2):

Held, that a question of law, whether in the absence of a finding that there was sufficient cause for not finalising the accounts of the firms in which the assessee himself was a partner, the Tribunal was right in cancelling the penalty imposed under section 271(1)(a), arose for reference.

P. K. R. MenonandN. R. K. Nair for the Commissioner.

R. Harikrishnan and C. A. Rajeev for. the Assesses.

JUDGMENT

OM PRAKASH, C. J. ----Heard counsel for, the parties.

This application is made at the instance of the Revenue under section 256(2) of the Income Tax Act, 1961. The assessment year relevant herein is 1983-84. The due date for filing the return in the case of the assessee was July 31,1983, but the assessee filed the return on- November 14, 1985. The explanation of the assessee was that the return could not be filed in time as there was delay in finalsing the. accounts of the firms in which he is one of the partners. The Income-tax Appellate Tribunal, on appeal, held as under:

"It is well-settled that where the accounts oaf the firm .were not finalised. the delay in filing .the return by the partner will constitute reasonable cause."

This is how the Appellate Tribunal cancelled the penalty imposed under section 271(1)(a) of the Act. No finding is recorded by the Appellate Tribunal whether there was sufficient cause in not finalising the accounts of the firms which delayed the submission of the return on the part of the assesses.

Thereupon, the Revenue made an application under section 256(1) of the Act which too was rejected by the Appellate Tribunal reiterating that the order of the Appellate Tribunal does not give rise to any question of law to this behalf

Aggrieved the Revenue has come up under section 256(2) requiring us to direct the Appellate Tribunal to refer the following questions:

"(1) Whether, on the facts and in the circumstances of the case and in the absence o' an ascertainment or a finding that there was. Delay. in filing the accounts of the firm, the Tribunal is right in law and fact in proceeding so in reaching the conclusion of 'reasonable cause' solely relying on the so-called explanation' of the assesses?

(2) Whether, on the fact and the circumstances of the case, and in the absence of any extension of tune being sought for filing the return for the so-called delay for finalising the accounts of the firm, the Tribunal, solely relying on the 'explanation' is right in law and fact in finding 'reasonable cause' for the delay?"

The question that arises from the order of the Appellate Tribunal is: whether, on the facts and in the circumstances of the case, the Tribunal was right in cancelling the penalty, even though no finding was recorded that there was sufficient cause for not finalising the accounts of the firms in which the assessee was a partner himself This gives rise to a question of law and we, therefore, direct the Appellate Tribunal to draw up a statement of the cash and refer the following question reframed by us for the opinion of this Court:

"Whether, on the facts and in the circumstances of the case and in the absence of a finding that there was sufficient cause in not finalising the accounts of the firms in which the assessee himself was a partner, the Tribunal was right in cancelling the penalty imposed under section 271(1)(a) of the Income Tax Act, 1961?"

The application is, accordingly, allowed.

M.B.A./3198/FC Application allowed.