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Commissioner of Income-tax Vs. Co-operative Cane Development Union Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 45 of 1971
Judge
Reported in[1975]101ITR368(All)
ActsIncome Tax Act, 1961 - Sections 273
AppellantCommissioner of Income-tax
RespondentCo-operative Cane Development Union Ltd.
Appellant AdvocateR.R. Misra, Adv.
Respondent AdvocateS.H. Husain, Adv.
Excerpt:
- - it also earns interest on bank deposits as well as interest from government securities. as its income was above the taxable limit and as it had failed to make payment of advance tax for all these years within the prescribed time, the income-tax officer started penalty proceedings under section 273(b) of the income-tax act for nonpayment of advance tax and levied penalties of varying amounts. the assessee appealed against the penalty orders and the appellate assistant commissioner of income-tax accepted the contention of the assessee that it had not paid advance tax under the bona fide belief that its income was exempt from tax and held that there was reasonable cause for failure of the assessee to pay the advance tax......contention of the assessee that it had not paid advance tax under the bona fide belief that its income was exempt from tax and held that there was reasonable cause for failure of the assessee to pay the advance tax. accordingly, it remitted the penalty. the income-tax department went up in second appeal before the income-tax appellate tribunal. the appeals were dismissed by the tribunal. at the instance of the commissioner of income-tax, however, the tribunal has referred the following question of law for the opinion of this court: 'whether, on the facts and in the circumstances of the case, the cancellation of penalty levied under section 273(b) of the income-tax act, 1961, on the assessee is justified ?' 3. the tribunal has accepted the assessee's plea that the advance tax had not.....
Judgment:

R.L. Gulati, J.

1. This is a reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the Commissioner of Income-tax, Kanpur. It is a consolidated reference relating to assessment years 1956-57, 1961-62, 1962-63, 1963-64 and 1964-65.

2. The assessee is a co-operative society registered under the U. P. Co-operative Societies Act, 1912, and its main business includes, inter alia, the sale of sugarcane to the sugar factories on behalf of its members and to earn commission. It also earns interest on bank deposits as well as interest from Government securities. The assessee was not assessed to income-tax prior to the year under reference. As its income was above the taxable limit and as it had failed to make payment of advance tax for all these years within the prescribed time, the Income-tax Officer started penalty proceedings under Section 273(b) of the Income-tax Act for nonpayment of advance tax and levied penalties of varying amounts. The assessee appealed against the penalty orders and the Appellate Assistant Commissioner of Income-tax accepted the contention of the assessee that it had not paid advance tax under the bona fide belief that its income was exempt from tax and held that there was reasonable cause for failure of the assessee to pay the advance tax. Accordingly, it remitted the penalty. The income-tax department went up in second appeal before the Income-tax Appellate Tribunal. The appeals were dismissed by the Tribunal. At the instance of the Commissioner of Income-tax, however, the Tribunal has referred the following question of law for the opinion of this court:

'Whether, on the facts and in the circumstances of the case, the cancellation of penalty levied under Section 273(b) of the Income-tax Act, 1961, on the assessee is justified ?'

3. The Tribunal has accepted the assessee's plea that the advance tax had not been paid because it was under a bona fide belief that its income was exempt from tax. This was a sufficient cause for not depositing the advance tax. A penalty under Section 273(b) is leviable only if an assessee fails to pay advance tax without reasonable cause. The Tribunal has found that there was sufficient cause for the default attributed to the assessee. This is a finding of fact and has not been questioned.

4. We, accordingly, answer the question in the affirmative, in favour of the assessee and against the department. The assessee is entitled to costs, which we assess at Rs. 200.


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