A. Kalyanasundaram, Accountant Member - (1.)THE Revenue has come up in appeal against the cancellation of penalty imposed for late filing of the return of the trust by invoking the provisions of Section 271(1)(i).
(2.)The brief facts of the case are that the return which was due on June 30, 1980, was filed on May 26, 1981, indicating therein that it is a provisional return subject to audit. A revised return was filed on November 23, 1982, showing a deficit of Rs. 32,480. The Income-tax Officer had concluded that the return that was filed on November 23, 1982, was the first return meaning thereby that the return was delayed by 29 months. In response to the explanation sought for delay, the assessee had submitted before the Income-tax Officer that it had sought for approval under Section 35CCA, which was received only on October 18, 1979, and, as per the order, it was allowed from October 18, 1979, up to March 31, 1982. This, therefore, required the assessee to prepare two separate accounts --one up to October 11, 1978, and the second from October 12, 1978, to March 31, 1980. Such preparation of accounts took a long time and that compilation was ready some time in February, 1982. This, combined with the delay in audit and getting the auditor's certificate was the reason for revising the return on November 23, 1982. It was also explained that the provisional return was prepared on the basis of books of account which were not subjected to audit. The explanation so provided by the assessee was found to be unsatisfactory and since the assessee did not file any explanation in Form No. 6, it was concluded that there was no reasonable cause and, accordingly, penalty came to be imposed for the delay of 29 months.
Aggrieved, the assessee preferred an appeal to the Appellate Assistant Commissioner, who deleted the penalty on the ground that as per the assessment, the assessee-trust was not liable for any tax and since the limit of penalty was in relation to the tax sought to be avoided or evaded, there being no tax at all, penalty could not have been levied.

(3.)AGGRIEVED by this finding of the Appellate Assistant Commissioner, the Revenue has come up in appeal. The argument of the learned Departmental Representative was that since the Act requires consideration of the trust to be not a charitable trust, meaning thereby that the incomes which are normally treated as applied for charitable purposes, are not to be treated as so applied and thereby there would be income on which tax needs to be calculated. It is on this basis that the Income-tax Officer had levied the penalty and, therefore, the penalty so imposed was proper. The plea of the assessee, on the other hand, was that since the tax avoided being zero, relating penalty to such zero factor, tax has to be zero.