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Commissioner of Income-tax, Andhra Pradesh Vs. Anantharam Veerasingaiah and Co. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberCase referred No. 106 of 1977
Judge
Reported in[1983]142ITR755(AP)
ActsIncome Tax Act, 1922 - Sections 18A(3); Income Tax Act, 1961 - Sections 27, 34, 139, 139(1), 139(2), 256(2), 271(1), 273 and 273(1)
AppellantCommissioner of Income-tax, Andhra Pradesh
RespondentAnantharam Veerasingaiah and Co.
Appellant AdvocateM. Suryanarayana Murthy, Adv.
Respondent AdvocateSrirama Rao, Adv.
Excerpt:
.....of the explanation, to determine, whether there was in fact reasonable causes for not filing the return or estimate within the prescribed time and if not satisfied about the explanation, then consider the facts and circumstances of the case whether to levy penalty and if so, in what measure. [1975]101itr368(all) ,furnished an example of the situation, where no penalty was held leviable, notwithstanding the failure to file an estimate under s. 273(1)(a). it was not a case of failure to file an estimate governed by s. (a) and (b) of the clause if there is failure to furnish the return before the extended date. cit [1982]134itr609(cal) .in that case, it was held by the calcutta high court on a consideration of the facts and circumstances of that case that it could be reasonably said that..........under s. 28(1)(c) that mere disparity between the estimate submitted by the assessee and the income returned by him or determined by the ito does not give rise to an inference of dishonesty. this decision also, it must be pointed out, was rendered with reference to s. 28(1)(c) and not with reference to s. 28(1)(a) which is the provision corresponding to the provision with which we are concerned herein. we need only reiterate that the existence or absence the ito is satisfied that there was no reasonable causes, he is entitled to levy penalty, of course, taking into consideration the conduct and attitude of the assessee. as pointed out by the supreme court in hindustan steel ltd. v. state of orissa : [1972]83itr26(sc) . 15. now, coming to the facts of this case, the tribunal held on.....
Judgment:

Jeevan Reddy, J.

1. Two questions are referred to us in pursuance of a direction by this court under s. 256(2) of the I.T. Act. They are :

'1. Whether the order of the Appellate Tribunal holding that reasonable cause is made out for not furnishing the estimate of advance tax is devoid of basis and material, particularly in view of the incorrect and unreliable accounts maintained by the assessee

2. Whether, on the facts and in the circumstances of the case, the order of the Appellate Tribunal canceling the penalties under section 273(b) of the Act for the assessment years 1957-58 and 1959-60 is sound in law ?'

2. The assessee was a firm carrying on business as excise contractors during the accounting years relevant to the assessment years 1957-58 and 1959-60. For the accounting year relevant to the assessment year 1957-58 the assessee was granted licenses in respect of a large number of shops, about 100 in number, spread over Telengana and Karnataka areas of the former Hyderabad State. For this assessment year, the assessee filed a return, voluntarily, on April 3, 1958, showing a loss of Rs. 20,005. No action was taken upon this return until April 19, 1961, when a notice under s. 34 was issued. In response to the notice under s. 34, the assessee filed a return, again showing loss in the same amount. The ITO, however, assessed the income at Rs. 4,81,974, which was appealed against. Ultimately, the Tribunal reduced the amount to Rs. 1,79,995.

3. For the assessment year 1959-60, the assessee filed a return showing an income of Rs. 7,704. The ITO determined the income at Rs. 5,10,916, which on appeal to the Tribunal came to be reduced to Rs. 1,37,704.

4. Having made the assessments, the ITO, issued notices under s. 273(b) of the I.T. Act, 1961 (meanwhile, the new Act had come into force), calling upon the assessee to show cause why penalty should not be levied for failure to furnish the estimate of advance tax as required under s. 18A(3) of the 1922 Act. The assessee filed an explanation stating that since its income, according to its books of account, was less than Rs. 40,000 and was thus below the limit attracting advance tax liability, it did not file the estimates of advance tax. In this explanation, the assessee made a request that until his assessment appeals are disposed of, penalty proceedings should be kept pending. The ITO did not accede to this request, and disagreeing with the explanation offered, levied penalties for both the years. On appeal, the AAC reduced the penalties to Rs. 25,000 and Rs. 7,500, respectively. On further appeal, the Tribunal held that no penalty whatsoever is leviable in the facts and circumstances of the case inasmuch as the explanation offered by the assessee for not filing the estimate of advance tax was acceptable. Thereupon, the Revenue asked for and obtained this reference to this court.

5. We mat mention at this stage that at an earlier stage of penalty proceedings, a controversy had arisen whether penalty proceedings under s. 273 of the 1961 Act can be taken in respect of the assessment years in question. That was concluded by this court on a reference. It was held that proceedings under s. 273 of the 1961 Act are competent. The Tribunal was directed to examine the question of the assessee's liability to penalty, keeping in mind the relevant facts and circumstances of the case. In pursuance of the said order. The Tribunal heard the appeals again and allowed the same holding that no penalty is leviable.

6. Section 273(1), in so far as it is relevant, read as follows on the date the notices thereunder were issued :

'(1) If the Income-tax Officer, in the course of any proceedings in connection with the Income-tax Officer, in the course of any proceedings in connection with the regular assessment, is satisfied that any assessee - ...

(b) has without reasonable cause failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of subsection (3) of section 212, he may direct that such person shall, in addition to the amount of tax, if any, payable by him, pay by way of penalty a sum - ....

(ii) which, in the case referred to in clause (b). shall not be less than ten per cent. but shall not exceed one and a half times the amount on which interest is payable under section 217.'

7. It is evident that the language of s. 273(1)(b) is similar to s. 271(1)(a), which language is totally different and distinct from the language employed in clause (a) of s. 273(1) and clause (c) if s. 27(1). Under s. 273(1)(b), penalty is leviable if the assessee fails to furnish a statement of the advance tax payable by him, without reasonable cause. The burden of proving reasonable cause lies upon the assessee. If the reasonable cause assigned by the assessee is accepted, no further question arises, but if the reasonable cause assigned by the assessee is not accepted, then it becomes course, mere rejection of the explanation is not enough, the ITO must record a finding that there was no reasonable cause for not filing the estimate. Then alone, he gets the power to impose penalty. Even there, the ITO has to exercise his discretion and determine, having regard to the facts and circumstances of the case, including the conduct of the assessee, whether penalty should be levied and if so, in what measure. In such a case, there is no question of any other or further burden of proof lying upon the Department. The decisions rendered under s. 271(1)(c) which speak of initial burden and ultimate burden have no application to a situation under s. 273(1)(b) or s. 271(1)(a).

8. Dealing with a similar obligation cast by the Orissa Sales Tax Act, the Supreme Court held in Hindustan Steel Ltd. v. State of Orissa : [1972]83ITR26(SC) , that penalty proceedings being quasi-criminal in mature, penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonest, or acted in conscious disregard of its obligation. The Supreme Court further observed that penalty will not also be imposed merely because it is lawful to do so and that levy of penalty is a matter of discretion to be exercised judicially and on a consideration of all the relevant circumstances. These observation can be treated as equally relevant under ss. 273(1)(b) and 271(1)(a).

9. Reliance was placed upon the decision of the Supreme Court in CIT v. Anwar Ali : [1970]76ITR696(SC) , by the counsel for the assessee. In our opinion however, this decision has no relevance to cases arising under s. 273(1)(b) or for that matter, s. 271(1)(a), since it is a case decided with reference to the language of s. 28(1)(c) of 1992 Act which spoke at the relevant time, of concealment of income or deliberately furnishing inaccurate particulars of income. In such a case, it was held, the burden lies upon the Department to establish that receipt of the amount in dispute constituted income of the assessee. This decision has not be understood with reference to the language of s. 28(1)(c) and cannot be extended to a case under s. 271(1)(a) or s. 273(1)(b). (The word 'deliberately' in clause (c) of s. 271(1) has been deleted by the Finance Act, 1964). We may in this connection refer to the decision of the Punjab and Hariyana High Court in Addl. CIT v. Roshan Lal Kuthiala , where it is held that whether there is a reasonable cause for not filing the return or estimate within the prescribed time, is a pure question of fact. In other words, the ITO - and for the same reason, the appellate authorities have to examine the explanation and the material, if any, placed by the assessee in support of the explanation, to determine, whether there was in fact reasonable causes for not filing the return or estimate within the prescribed time and if not satisfied about the explanation, then consider the facts and circumstances of the case whether to levy penalty and if so, in what measure. No other enquiry or investigation is called for nor is the Department under an obligation to prove any further facts in such a case. The decision of the Allahabad High Court in CIT v. Co-operative Cane Development Union Ltd. : [1975]101ITR368(All) , furnished an example of the situation, where no penalty was held leviable, notwithstanding the failure to file an estimate under s. 273(1)(b) of its income by the co-operative society because it was held as a fact in that case that the co-operative society was under a bona fide belief that its income was exempt from tax.

10. Counsel for the assessee relied upon certain to which a brief reference would be in order.

11. The first decision is Addl CIT v. Bipan Lal Kuthiala , a decision of the Punjab High Court. But that was a case of filing of false estimate which would fall under s. 273(1)(a). It was not a case of failure to file an estimate governed by s. 273(1)(b). Because it was a case failing under s. 273(1)(a), the principle of the decision of the Supreme Court in CIT v. Anwar Ali : [1970]76ITR696(SC) , was applied and it was held that the burden of proving that the estimate of advance tax submitted by the assessee was false to knowledge or was believed by him to be inaccurate, is upon the Department. The next decision relied upon is CIT v. Ramjibhai Hirjibhai & Sons : [1977]110ITR411(Guj) . That was a case were a notice under s. 139(2) of the Act was served upon the assessee to file a return within a particular time which was subsequently extended. The assessee, however, filed the return only after the expiry of the prescribed date. The ITO completed the assessment, but did not charge interest under s. 139 for the last submission of the return, but later rectified his order under s. 154 and levied penal interest. On appeal, the AAC accepted the contention of the assessee that the ITO must be deemed to have exercised his discretion in favour of the assessee in not charging penal interest and accordingly allowed the appeal. The Tribunal dismissed the Department's appeal-no doubt on a deferent reason. How ever, on a reference, the Gujarat High Court held that on a plain reading of clause (iii) of the proviso to s. 139(1)(b), it was clear that there was an obligation on the ITO to levy penal interest in the manner stated in sub-cls. (a) and (b) of the clause if there is failure to furnish the return before the extended date. Inasmuch as in that case, the assessee had filed the return beyond the extended date, it was held that the ITO had power to levy penal interest. We are unable to see how this decision rendered under s. 139 is of any help to the assessee, in this case.

12. The next decision relied upon is Ramnagar Cane & Sugar Co. Ltd. v. CIT : [1982]134ITR609(Cal) . In that case, it was held by the Calcutta High Court on a consideration of the facts and circumstances of that case that it could be reasonably said that the assessee had no idea as to the actual profits at the time when it had paid advance tax on the basis of the profits earned in the immediately preceding year, and accordingly there was no failure on the part of the assessee to file the estimate of such tax in terms of s. 212(3A). It was further held that failure, if any, could not be said to have occurred without reasonable cause. This case really emphasizes that the question whether reasonable cause exists or not, is a question of facts. Indeed, the learned judges refused to go into the question of onus or the initial onus. The learned judges observed that because in that case both parties had adduced evidence, the question of onus loses its importance. Instead of going into the question on whom the initial onus lay, they examined the facts of the case and held that there was reasonable cause. This decision cannot be held to be an authority for the proposition that even in a case where the assessee's explanation is rejected, the Department must go further and prove that failure to furnish the estimate or return is deliberate or wilful.

13. It is unnecessary to refer to the decision cited by the learned counsel under s. 271(1)(c) for the reasons pointed out by us hereinbefore.

14. Lastly, however, we may refer to P. V. Kurian v. ITO : [1961]43ITR432(Ker) a decision of the Kerala High Court relied upon by the Tribunal and also by the counsel for the assessee before us. In this decision, a learned single judge of the Kerala High Court held. Considering a case arising under s. 28(1)(c) that mere disparity between the estimate submitted by the assessee and the income returned by him or determined by the ITO does not give rise to an inference of dishonesty. This decision also, it must be pointed out, was rendered with reference to s. 28(1)(c) and not with reference to s. 28(1)(a) which is the provision corresponding to the provision with which we are concerned herein. We need only reiterate that the existence or absence the ITO is satisfied that there was no reasonable causes, he is entitled to levy penalty, of course, taking into consideration the conduct and attitude of the assessee. As pointed out by the Supreme Court in Hindustan Steel Ltd. v. State of Orissa : [1972]83ITR26(SC) .

15. Now, coming to the facts of this case, the Tribunal held on a consideration of facts and circumstances of the case that the assessee had reasonable cause for not furnishing the estimate of advance tax. In this connection, it has referred to the relevant facts and circumstances including the fact that for the assessment year 1958-59, the assessee's income was assessed at Rs. 30,019 only. Though it may be that if we were sitting in appeal, we may have come to a different conclusion, yet in a reference under s. 256, we cannot interfere with the finding of fact of the Tribunal unless it is shown that it is perverse or that there is no evidence to sustain it. In this case, it is not possible for us to say either that the finding of the Tribunal is perverse or that there is no evidence to support it. If so, no interference is possible in this case.

16. For these reasons, we answer the question referred to us in the negative, that is, in favour of the assessee and against the Department. No costs.


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