R.N. Misra, J. - (1.)REVENUE moved this court under Section 256(2) of the Income-tax Act, 1961, for a direction to the Income-tax Appellate Tribunal, Cuttack Bench, to state a case and refer the following questions for opinion of the court:
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the levy of penalty under Section 271(1)(a) of the Act ? and

(2) Whether the finding of the Tribunal was vitiated in law ?" The relevant assessment year is 1966-67, the return for which was due to be filed by October 1, 1966. The assessee did not file any return and notice under Section 148 of the Act was served on November 28, 1968. Return was, thereafter, filed on 10th March, 1969. A proceeding under Section 271(1)(a) was initiated for the default in filing of the return in time. No explanation was furnished to the Income-tax Officer. In the circumstances, the Income-tax Officer imposed a penalty of Rs. 21,445.

(2.)BEFORE the Appellate Assistant Commissioner, in appeal, the assessee took the stand that the accounts were sent for audit and the audit was completed in 1967. Therefore, return could not be filed within the time allowed by law. The first appellate authority rejected the explanation saying that audit was not necessary under the law before return was filed. The assessee's second appeal before the Tribunal, however, succeeded. According to the Tribunal, the assessee was evidently waiting for the completion of the audit and since audit was completed in 1967, that is, after the due date, the assessee could not submit the return in time.
It is not disputed that under the provisions of Section 139 of the Act, the assessee had obligation to file the return by October 1, 1966. Mr. Pasayat also does not dispute the position that audit was not necessary as a pre-condition to filing of the return. The assessee did not offer any explanation to the Income-tax Officer and came with a belated explanation before the first appellate authority contending that accounts were being audited and audit was not over till 1967. Even if there be any basis for the contention of the assessee which appears to have prevailed with the Appellate Tribunal, namely, that the assessee reasonably believed that the accounts should be audited before return was filed, the assessee's own conduct does not support such a position. Admittedly, audit was over sometime in 1967, and there was no justification for the assessee to wait for at least two more years to file the return. It is quite possible that no return would have been filed if notice under Section 148 of the Act was not served. That negatives the bona fides of the assessee to the fullest extent and in view of his conduct and varying stands, we think it appropriate to accept the contention of the learned standing counsel that there was absolutely no material before the Income-tax Appellate Tribunal on the basis of which it deleted the penalty. This, in our view, is a case where the Tribunal has acted on the basis of no material and has, therefore, gone wrong in law in waiving the penalty.

Burden admittedly lay on the assessee to justify its stand for the delay in filing of the return. We have indicated that the assessee did not respond to the Income-tax Officer and offered a non-sustainable explanation before the first appellate authority. Unfortunately, ignoring this stand, the Tribunal chose to take an overall picture of the matter and chose to find its order on conjectures only. In these circumstances, the only conclusion which any prudent tribunal can reach is that imposition of penalty was justified and the Appellate Tribunal acted in a manner not warranted by law in vacating it. Our answers to the questions, therefore, are :

(1) On the facts and in the circumstances of the case, the Tribunal was not justified in cancelling the levy of penalty under Section 271(1)(a) of the Act ; and

(2) The finding of the Tribunal is vitiated in law. Revenue shall be entitled to costs of the proceeding. Hearing fee is assessed at Rs. 100.

N.K. Das, J.

I agree.