Skip to content


Addl. Commissioner of Income-tax Vs. Chokhelal Sharda Prasad - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 221 of 1973
Judge
Reported in[1983]143ITR801(MP)
ActsIncome Tax Act, 1961 - Sections 271(1)
AppellantAddl. Commissioner of Income-tax
RespondentChokhelal Sharda Prasad
Cases ReferredHindustan Steel Ltd. v. State of Orissa
Excerpt:
.....refusing to impose penalty when there is a mere technical or venial breach of the provisions of the..........for the late filing of return, for, it is only on this implied finding that the assessee could be held liable for penalty under section 271(1)(a), the tribunal, however, further held that penalty need not be imposed in all cases because it is lawful to do so and that it has a discretion not to impose penalty when there is a mere technical or venial breach of the law and the imposition of penalty would result in great hardship to the assessee. in the instant case, the tribunal exercised the discretion in favour of the assessee by deleting the penalty on the grounds that the partners of the assessee who had no other source of income had been made liable for penalty for late filing of their respective returns and! thus stood already punished; that the assessee-firm voluntarily filed its.....
Judgment:

G.P. Singh, C.J.

1. This is a reference under Section 256(1) of the I.T. Act, 1961, referring for our answer the following questions of law :

' (1) Having come to the finding that a penalty under Section 271(1)(a) could be imposed in a case of this kind, was the Tribunal right in law in cancelling the penalty relying on the observations of the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa : [1972]83ITR26(SC) ?

(2) Whether the Tribunal was right in law in not going into the question of the existence of reasonable cause in the case of the assessee, for its failure to file the return within time and in not recording a finding whether the assessee was or was not guilty of such default which rendered it liable for a penalty under Section 271(1)(a) ?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in cancelling the penalty '

2. The facts stated are as follows. The assessee is a registered firm. For the asseesment year 1964-65, the return was due on 30th June, 1964, under Section 139(1) of the Act, but the assessee filed the return on 10thMarch, 1965. The ITO held the assessee liable for penalty under Section 271(1)(a) of the Act for late filing of the return witnout any reasonable cause. The same view was taken by the AAC. The Tribunal, however, took the view that though the assessee was technically liable for penalty, it was not a fit case for imposition of penalty. The Tribunal in holding so, gave the following reasons :

' In our view, technically penalty can be imposed in such cases. We, however, feel that since the partners stand punished for belated filing of their respective returns and since they had no other source of income although technically penalty could be imposed, the same may not have been imposed in the instant case. The firm has filed the return before the financial year had run out and that too voluntarily without the issue of notice under Section 139(2). Further, the firm had paid the advance tax as per demand made on it. As pointed out by the Supreme Court in Hindustan Steel Ltd.'s case [1972] 83 ITR 25, penalty will not be imposed merely because it is lawful to do so. Whether the penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judiciously and on a consideration of all relevant circumstances and the authority competent to impose the penalty will be justified in refusing to impose penalty when there is a mere technical or venial breach of the provisions of the Act. In our view, since the partners of the assessee did not have any other substantial income of their own and they stand punished already, ends of justice are served by resting view of all the facts and circumstances of the case (sic); we accordingly delete the penalty. '

3. A reading of the order of the Tribunal will go to show that the Tribunal held that the assessee was technically liable for penalty under Section 271(1)(a) for not filing its return within time. The Tribunal must be deemed to have impliedly held that there was no reasonable cause for the late filing of return, for, it is only on this implied finding that the assessee could be held liable for penalty under Section 271(1)(a), The Tribunal, however, further held that penalty need not be imposed in all cases because it is lawful to do so and that it has a discretion not to impose penalty when there is a mere technical or venial breach of the law and the imposition of penalty would result in great hardship to the assessee. In the instant case, the Tribunal exercised the discretion in favour of the assessee by deleting the penalty on the grounds that the partners of the assessee who had no other source of income had been made liable for penalty for late filing of their respective returns and! thus stood already punished; that the assessee-firm voluntarily filed its return before the close of the financial year without the issue of a notice under Section 139(2); that the assessee had paid the advance tax as per demand made and thathaving regard to all the facts and circumstances ends of justice demanded that the penalty on the assessee be not imposed. Now it is not seriously disputed before us that imposition of penalty under Section 271(1)(a) is not obligatory in every case and that the Tribunal has some discretion in the matter. The words ' may direct that such person shall pay by way of penalty ' as used in the section leave a certain amount of discretion in imposition of penalty which need not be imposed when there is a mere minor breach of the law and, when having regard to the facts, ends of justice require that the assessee should not be penalised. The Tribunal having regard to the facts and circumstances of the case, exercised its discretion by deleting the penalty and, in our opinion, in doing so it did not commit any illegality.

4. The learned counsel for the Department submitted that an assessee is liable for payment of penalty under Section 271(1)(a) if he fails to file the return within time without any reasonable cause and that no further mens rea is necessary to make him liable. This is no doubt the correct legal position as held by this court in Nemichand Ganeshmal v. C1T : [1980]124ITR438(MP) and the Supreme Court case of Hindustan Steel Ltd. v. State of Orissa : [1972]83ITR26(SC) , cannot be relied upon in the context of Section 271(1)(a) for the proposition that it should be shown that the assessee acted deliberately in defiance of law or was guilty of contumacious conduct before he can be held liable under Section 271(1)(a). But this does not militate against the view that penalty need not be imposed in all cases where it is lawful to do so. In our opinion, the Tribunal acted within its lawful discretion in deleting the penalty.

5. We answer the questions as follows :

Questions Nos. (1) & (3): The Tribunal acted within its lawful discretion in cancelling the penalty.

Question No. (2): The Tribunal though impliedly held that there was no reasonable cause for not filing the return within time, yet it acted lawfully in cancelling the penalty.

6. The parties shall bear their own costs of this reference.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //