JUDGEMENT
T.V. Rajagopala Rao, Judicial Member -
(1.)THIS is a departmental appeal relating to asst. year 1981-82. It is directed against cancellation of penalty order by the CIT(A) by her impugned orders. The assessee appears to be a firm and its Managing Partner is one Shri Balram Hemdev. The asst. year with which we are concerned is 1981-82. The previous year ends with 31-3-81. The due date for filing the return was 31-7-81. However, form No. 6 was filed by the assessee requesting time till 31-12-81 and the time was granted. Notice under Section 139(2) was served on the assessee-firm on 27-12-82. The income-tax return for this asst. year was filed actually on 26-8-83. While completing the assessment, the Income-tax Officer validly initiated penalty proceedings under Section 271(1)(a) read with Section 274. In the explanation offered by the assessee-firm, it had taken the stand that the firm's premises was searched on 14-7-80 whereas within two days of the search i.e. on 16-7-80 the Managing Partner of the assessee-firm Shri Balram Hemdev died. Shri Balram Hemdev, during his lifetime used to look after everything concerning the firm and he did not train the other partners in this regard. Further, the books and records of the assessee-firm were with the Income-tax department and with much difficulty, the assessee-firm was able to file its return on 26-8-83. The Income-tax Officer, while passing the penalty order on 15-7-85, held that the assessee had reasonable cause in not filing the return only up to 31-7-82 and subsequently there was no sufficient cause for delay. Therefore he found the period of penalty from 1-8-82 and imposed a penalty of Rs. 4,572.
(2.)In appeal, the learned CIT(A) in her orders dt. 14-5-86 held that she was convinced that the demise of the Managing Partner took place on 16-7-80 and it constitutes a satisfactory reason for delay in filing the assessee's return and on that sole ground she deleted the penalty. The department is in second appeal.
We have heard Shri N. Jayakar, learned D. R. for the department and Shri K. Ranganathachary, learned advocate for the assessee-respondent. Shri Ranganathachary, learned advocate for the assessee submitted before us that the assessee-firm is an old firm doing its business from a pretty long time over a decade or more. It had approached the Settlement Commission for asst. years 72-73 to 80-81. It had prepared balance sheets as well as profit and loss accounts of those years and submitted them along with statement of facts for each of those years before the Settlement Commission on 29-4-83. By the time the return was filed for the impugned asst. year 81-82 on 26-8-83, the matter was still pending with the Settlement Commission for earlier years and the Settlement Commission did not determine the income of the assessee-firm for those years. Further, the Managing Partner who acted as the whole and sole for the assessee-firm suddenly died on 16-7-80 leaving the other partners helpless as they were never trained to look after the accounts or other things concerning the business of the assessee-firm. According to Shri Ranganathachary the above facts constitute sufficient cause for excusing the delay, if any, caused in filing the return. He cited before us, the following decisions: -
CIT v. Dilsukhraj Ranglal [1976] 104 ITR 60 (Ori), CIT v. Kanhayalal Mukundlal [1987] 166 ITR 274 (Cal.) and Collector, Land Acquisition v. Mst. Katiji [1987] 167 ITR 471 (SC) and CIT' v. Assam Co. (India) Ltd. [1988] 174 ITR 544/41 Taxman 145 (Cal.).
Shri Ranganathachary mainly argued that when the partners are contemplating to approach the Settlement Commission or make a voluntary disclosure of its income, and when in fact they made such a disclosure, while computing the delay if any caused for filing the return relating to the subsequent years, the time taken till the disclosure was made should be excluded. In the facts of the case before us, he states that unless and until the Settlement Commission determines the income of the assessee-firm for asst. years 72-73 to 80-81, the assessee-firm has no scope to file a correct return, for asst. year 81-82 and therefore there is no delay at all in filing the return in this case. On the other hand, the learned D.R. contended that the present explanation is merely invented only at the second appeal stage and it was never raised before any of the Lower authorities and it was also not processed before any of them and therefore the learned advocate for the assessee should not be allowed to take up the said plea.
(3.)AFTER hearing both sides we are of the opinion that the objection raised by the learned D.R. for a new argument to be raised before us on behalf of the assessee is not tenable. The revenue did not dispute that he approached the Settlement Commission to determine its income for asst. years 72-73 to 80-81. So also it did not dispute the submission that the balance-sheets, as well as, profit and loss accounts, together with the statement of facts, for each of those years were submitted, before the Settlement Commission, on 29-4-83. Thus, when the above are the admitted facts, the question is whether a legal argument based on undisputed facts can be allowed to be raised comes up for consideration. In our opinion, the argument is only a pure legal argument based on undisputed facts. According to us a pure legal argument or an argument of a mixed fact and law which depends upon undisputed facts, can be raised even at the second appeal stage. Therefore the preliminary objection of the learned D.R. is hereby overruled.
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