1. This is a reference under section 256(1) of the Income-tax Act, 1961. The questions referred to us for our determination are as follows :
'(1) Whether, on the facts and in the circumstances of the case, it was competent to the Appellate Assistant Commissioner to levy penalty for the assessment year 1958-59 ?
(2) Whether, on the facts and in the circumstances of the case, the Appellate Assistant Commissioner was right in law in invoking the provisions of the Income-tax Act, 1961, when the assessment was completed under the provisions of the Indian Income-tax Act, 1922, and the appeal was filed under that Act ?
(3) Whether, on the facts and in the circumstances of the case, the levy of penalty on a disrupted Hindu undivided family was justified in law ?
(4) Whether, on the facts and in the circumstances of the case, the assessee was prevented by reasonable cause from filing the return within the time prescribed by law ?
(5) Whether, on the facts and in the circumstances of the case, the Income-tax Officer must be deemed in law to have waived the levy of penalty ?'
2. The assessment in question relates to the assessment year 1958-59. The assessee was a Hindu undivided family. The assessment order was passed by the Income-tax Officer concerned on February 27, 1963, computing the total income of the assessee at Rs. 1,23,009. The said assessment order was contested in an appeal filed by the assessee before the Appellate Assistant Commissioner of Income-tax, Jalgaon, who passed a consolidated order for the relevant year and for some other years. During the hearing of the appeal, the Appellate Assistant Commissioner found that the Income-tax Officer did not commence penalty proceedings for the late submission of the return. It is common ground that there was a delay of 13 months and few days in the filing of the return for the said assessment year. The Appellate Assistant Commissioner set in motion penalty proceedings. The succeeding Appellate Assistant Commissioner issued to the assessee a fresh notice dated October 22, 1969, to show cause why penalty should not be imposed for the late filing of the return. Hearing was fixed on October 29, 1969. On October 31, 1969, extension of time for giving explanation was applied for. Thereafter the proceeding was adjourned from time to time, but the assessee did not file any explanation in answer to the said show-cause notice. The Appellate Assistant Commissioner proceeded to levy penalty on the footing that the assessee had no explanation to offer. Being aggrieved by this order, the assessee preferred an appeal to the Income-tax Appellate Tribunal. A number of contentions were raised by him before the Tribunal, including a challenge to the competence of the Appellate Assistant Commissioner to levy penalty. It was contended that the Income-tax Officer who passed the assessment order had waived the levy of penalty and, therefore, the Appellate Assistant Commissioner had no jurisdiction to levy penalty. The next contention was that the assessee was a Hindu undivided family and the family was partitioned on October 11, 1966, and hence no penalty proceeding could be initiated against or penalty levied on the disrupted family. There was a further controversy, namely, according to the assessee, that the provisions of the Indian Income-tax Act, 1922 (for brevity's sake referred to as 'the Act of 1922'), were applicable to the case and the penalty proceedings levied under the Income-tax Act, 1961 (for brevity's sake referred to as 'the Act of 1961'), were invalid in law, as the Act of 1922 did not permit the levy of any such penalty. All these contentions were rejected by the Tribunal. The Tribunal took the view that in view of the provisions of section 297(2(g) of the Act of 1961, the question of penalty was governed by the Act of 1961 and that the levy of penalty was justified. It was urged on behalf of the assessee before the Tribunal that there was a reasonable cause which prevented the assessee from filing the return in time. The Tribunal refused to entertain this contention, because it was taken at a belated stage, and hence there were no facts on record to support the contention that there was a reasonable cause for the late filing of the return. In the result, the Tribunal dismissed the appeal and the questions set out earlier have been referred from that decision of the Tribunal.
3. Although as many as five questions have been raised in the reference, the central question is whether the Appellate Assistant Commissioner was entitled to levy penalty for the late filing of the return. In this connection, it is an admitted position that there was a delay of a little over 13 months in the filing of the return. According to Mr. Khatri, learned counsel for the assessee, the question of levy of penalty has to be considered under the provisions of the Act of 1922. Although the Tribunal has taken a contrary view in this connection, we propose to proceed on the assumption that the provisions of the Act of 1922 are applicable, because, in our view, even on that assumption, Mr. Khatri cannot succeed in the reference.
4. The first submission of Mr. Khatri is that the powers of the Appellate Assistant Commissioner at the hearing of the appeal are set out in section 31 of the Act of 1922. It is pointed out by him that the only material provision in this connection is contained in clause (a) of sub-section (3) of section 31 of the Act of 1922. A perusal of this clause shows that the only power of the Appellate Assistant Commissioner, at the hearing of the appeal, is to confirm, reduce, enhance or annul the assessment, and there is no mention in section 31 of power to levy penalty. It was submitted by him that in view of this provision, the Appellate Assistant Commissioner had no power to levy penalty, as he did in the present case. In our view, there is no merit in this contention. The section which has really to be referred is not section 31 but section 28 of the Act of 1922. The relevant portion of section 28 runs as follows :
'28. (1) If the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal, in the course of any proceedings under this Act, is satisfied that any person -
(a) has without reasonable cause failed to furnish the return of his total income which he was required to furnish by notice given under sub-section (1) or sub-section (2) of section 22 or section 34 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by such notice, or......
he or it may direct that such person shall pay by way of penalty, in the case referred to in clause (a), in addition to the amount of the income-tax and super-tax, if any, payable by him a sum not exceeding one and a half times that amount, and in the cases....'
5. There are certain provisos to this section. But, admittedly, they are of no relevance in determining the controversy before us. In our view, on the assumption aforestated, the appeal pending before the Appellate Assistant Commissioner in the present case must be regarded as a proceeding under the Act of 1922. In the course of that proceeding, the Appellate Assistant Commissioner was satisfied that the assessee had failed to furnish the return of its total income required to be furnished within the prescribed time and without reasonable cause. In view of this, it is clear that the Appellate Assistant Commissioner had jurisdiction under section 28 to make an order for penalty. The reliance placed by Mr. Khatri on section 31, we are afraid, is altogether misplaced. as the relevant section is section 28.
6. The next submission of Mr. Khatri is that the statement of the case shows that on October 11, 1966, the assessee Hindu undivided family was partitioned and hence no penalty could be levied thereafter on that family as 'the person' constituted by that Hindu undivided family ceased to exist. In support of this submission, Mr. Khatri placed strong reliance on the decision of a Full Bench of the Andhra Pradesh High Court in CIT v. Tatavarthy Narayanamurthy : 83ITR58(AP) . In that case, the assessee, a Hindu undivided family, was assessed to income-tax on August 29, 1949, for the assessment year 1949-50. By an order dated November 4, 1957, the Income-tax Officer levied a penalty on the assessee under section 28(1) (c) of the Act of 1922 for the suppression of certain income. There was an appeal to the Appellate Assistant Commissioner. On November 6, 1958, the Income-tax Officer passed an order under section 25A of the Act of 1922 recognising partition of the family with effect from October 30, 1957. It was held, inter alia, by the Full Bench that in order to impose penalty under section 28, the 'person', which expression includes a Hindu undivided family, must be in existence on the date of such imposition. It held that when an order under section 25A(1) is passed recording a partition of a Hindu undivided family, that family ceases to be a Hindu undivided family and a 'person' for the purposes of section 28 with effect from the date of the actual partition as recorded in the said order. We are afraid that this decision is of little assistance to Mr. Khatri either. In that case, there was an order passed under section 25A recognising the partition of the Hindu undivided family in question and the said order recognised that the partition had taken place earlier than the date on which the order for penalty was passed. In the present case, although there is a factual recital in the statement of the case that the Hindu undivided family constituting the assessee was partitioned from October 11, 1966, there is nothing to show that there was any order passed under section 25A recording any such partition nor is there anything to show that there was any application made in that behalf. In this regard, we may point out that the provisions of section 25A clearly lay down that a particular procedure has to be followed on an application made under that section claiming that a partition had taken place among the members of a Hindu undivided family. On such an application. the Income-tax Officer had to issue notices of enquiry to all the members of the family and record the findings after an enquiry. There is nothing
7. to show that any such procedure has been followed in the present case or any order made under section 25A. The provisions of sub-section (3) of section 25A, on the other hand, clearly show that where such an order has not been passed for the purposes of the Act, a Hindu undivided family, which was assessed as such, shall be deemed for the purposes of the Act of 1922 to continue to be a Hindu undivided family. In view of the clear language of sub-section (3) of section 25A, in the present case, we must proceed on the assumption that the Hindu undivided family in question before us continued to be joint and was joint at the time when the order for penalty was passed. The contention of Mr. Khatri in this connection must also stand rejected.
8. Finally, it was submitted by Mr. Khatri that in any event there was a reasonable cause why the assessee could not furnish the return within the time prescribed by law. This submission cannot be entertained at all. As the Tribunal has pointed out, a contention to this effect was made for the first time before the Tribunal by the chartered accountant who appeared on behalf of the assessee. The Tribunal refused to entertain that contention, and in our view rightly so, because it is a contention which requires factual investigation, because the question whether there is a reasonable cause for the late filing of a return is to a large extent a question of fact and facts have to be proved to establish such a reasonable cause.
9. As far as the question pertaining to the waiver of penalty by the Income-tax Officer is concerned, no submission was made by Mr. Khatri, and rightly so. A contention of waiver, in a case like this, could be raised only where the Income-tax Officer was aware of the fact of the late filing of the return and realised that he could levy a penalty for that reason and in spite of this did not choose to levy a penalty. In the present case, there is nothing to show that the Income-tax Officer had realised that the return was not filed in time or that the question of penalty was at all present in his mind. In such a case, no question of waiver can possibly arise.
10. In the result, the questions referred to us are answered as follows :
Question No. 1 : In the affirmative.
Question No. 2 : This question is unnecessary, and we decline to answer the same, as, even on the assumption that the Indian Income-tax Act, 1922, is applicable as contended by Mr. Khatri, learned counsel for the assessee, the assessee cannot succeed.
Question No. 3; As we have pointed out, we must proceed on the assumption that the Hindu undivided family continued to be joint and hence the question does not arise. Question No. 4 : In the negative. Question No. 5 : In the negative.
The assessee to pay the costs of this reference to the Commissioner.