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Commissioner of Income-tax Vs. Marfatia and Co. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMisc. Civil Case No. 52 of 1980
Judge
Reported in[1982]136ITR159(MP)
ActsIncome Tax Act, 1961 - Sections 139, 143, 148 and 271(1)
AppellantCommissioner of Income-tax
RespondentMarfatia and Co.
Appellant AdvocateR.C. Mukati, Adv.
Respondent AdvocateG.K. Puranik, Adv.
Excerpt:
.....in the aforesaid manner by the ito and at best it ought to have been held that there was a delay of 10 months only after service of notices under section 148 of the act. 4. against the aforesaid order of the aac, the assessee as well as the department went up 'in appeal before the income-tax appellate tribunal. now, section 271(1)(a) of the act reads as under :271. (1) if the income-tax officer or the appellate assistant commissioner 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 total income which he was required to furnish under sub-section (1) of section 139 or by notice given under sub-section (2) of section 139 or section 148 or has without reasonable cause failed to furnish it..........on the part of the assessee in filing the returns of income for the aforesaid years. accordingly, penalty notices were issued to the assessee. however, no penalty was actually levied on the assessee in the course of the original assessment proceedings. later on the ito issued notices under section 148 of the act in respect of the aforesaid assessment years and directed the assessee to file returns of their income in respect of the aforesaid assessment years on or before october 20, 1970. the assessee, however, filed returns of income for the aforesaid years on august 30, 1971, and, hence, there was a delay of 10 complete months in filing the returns of income in pursuance of the aforesaid notices under section 148 of the act. accordingly, the ito initiated penalty proceedings under.....
Judgment:

Mishra, J.

1. This is a reference under Section 256(1) of the I.T. Act, 1961, made by the Income-tax Appellate Tribunal, at the instance of the department, whereby the following question has been referred for our opinion :

'Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in holding that penalty under Section 271(1)(a) of the I.T. Act, 1961, for the A.Ys. 1965-66, 1968-69 and 1969-70 is leviable for the delay of only 10 months relating to the default of notices under Section 148 and that no penalty is leviable for the default committed under Section 139 in the course of the original assessment proceedings, nor suchpenalty proceedings could be initiated at the time of reassessments for the above years ?'

2. The reference has been made to us in the following circumstances: Originally, assessments of the assessee, M/s. Marfatia & Co., for the assessment years (for short A.Ys) 1965-66, 1968-69 and 1969-70 were completed by the ITO under Section 143(3) of the I.T. Act, 1961 (for short, 'the Act'), on January 13, 1970, January 21, 1970, and January 21, 1970, respectively. There was some delay on the part of the assessee in filing the returns of income for the aforesaid years. Accordingly, penalty notices were issued to the assessee. However, no penalty was actually levied on the assessee in the course of the original assessment proceedings. Later on the ITO issued notices under Section 148 of the Act in respect of the aforesaid assessment years and directed the assessee to file returns of their income in respect of the aforesaid assessment years on or before October 20, 1970. The assessee, however, filed returns of income for the aforesaid years on August 30, 1971, and, hence, there was a delay of 10 complete months in filing the returns of income in pursuance of the aforesaid notices under Section 148 of the Act. Accordingly, the ITO initiated penalty proceedings under Section 271(1)(a) of the Act, but while levying penalty for the assessment year 1965-66, he treated the period of delay as 31 months. Similarly, for the A.Y. 1968-69, the period of delay was taken as 21 months. For the A.Y. 1969-70, however; the period of delay was taken as 10, months only. It appears that while levying the penalty for the A.Ys. 1965-66 and 1968-69, the ITO also took into consideration the delay on the part of the assessee in submitting the returns of income as required under Section 139(1) of the Act during the course of the original assessment proceedings. Thus, he imposed the penalties of Rs. 15,131, Rs. 2,827 and Rs. 4,001 in respect of the A.Ys. 1965-66, 1968-69 and 1969-70, respectively.

3. Against the levy of penalties by the ITO under Section 271(1)(a) of the Act, the assessee preferred an appeal before the AAC and contended that the assessee was under an honest impression that notices under Section 148 were invalid and that the period of delay could not be reckoned in the aforesaid manner by the ITO and at best it ought to have been held that there was a delay of 10 months only after service of notices under Section 148 of the Act. The AAC did not accept the assessee's contention that he was under an honest impression that notices under Section 148 were invalid. As regards the period of delay the AAC found that the total delay on the part of the assessee for the A.Ys. 1965-66, 1968-69 and 1969-70 was 43 months, i.e., 33 months in respect of the original assessment proceedings and a further period of 10 months after issue of notices under Section 148 of the Act. He, therefore, upheld the levy of penalty in respect of A.Y. 1965-66. As regards A.Y. 1968-69, the AAC found that the delay on the part of the assessee in the submission of the return of income was only of 10 months. Accordingly, he reduced the amount of penalty from Rs. 2,827 to Rs. 1,360. As regards the A.Y. 1969-70, he upheld the period of delay taken by the ITO at 10 months.

4. Against the aforesaid order of the AAC, the assessee as well as the department went up 'in appeal before the Income-tax Appellate Tribunal. The Tribunal has by the consolidated order dated January 30, 1979, partly allowed the appeals preferred by the assessee and dismissed the appeal preferred by the department by holding that for the purposes of calculating penalty under Section 271(1)(a) of the Act only the period of delay in filing returns of income in response to the notices under Section 148 should be taken into account and this period of delay was found to be only 10 months for each of the assessment years in dispute. Thereafter, at the instance of the department, this reference has been made by the Tribunal.

5. From the aforesaid facts, which are not in dispute, it is clear that originally assessments for the A.Ys. 1965-66, 1968-69 and 1969-70 were completed by the ITO under Section 143 on the dates stated above and in spite of the fact that there was some delay in filing the returns of income in respect of the aforesaid assessment years and in spite of the fact that penalty notices were issued to the assessee, no penalty was actually imposed on the assessee in the course of the original assessment proceedings. Having thus not imposed any penalty on account of the delayed submission of returns and having passed the assessment orders, it was not open to the ITO to have taken into account the period of default for purposes of imposition of penalty envisaged by Section 271(1)(a) of the Act. Now, Section 271(1)(a) of the Act reads as under :

'271. (1) If the Income-tax Officer or the Appellate Assistant Commissioner 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 total income which he was required to furnish under Sub-section (1) of Section 139 or by notice given under Sub-section (2) of Section 139 or Section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by Sub-section (1) of Section 139 or by such notice, as the case may be, or--'

6. The provisions occurring in the aforesaid clause, which are relevant to the situation, confer power on the ITO on being satisfied that any person has without any reasonable cause failed to furnish the return of his total income, which he was required to furnish under Section 148, to direct that such person shall pay the penalty specified in Sub-clause (1)(a) or (b), as the case may be, of Section 271 of the Act. Accordingly, the ITO had no jurisdiction to take into account the delay anterior to the service of the notices under Section 148 on the assesses for the present purposes.

7. In order to resist the aforesaid conclusion Shri R.C. Mukati, learned counsel for the department, placed reliance on the ratio of the decision in CIT v. Dehati Co-operative Marketing-cum-Processing Society . However, the ratio of the aforesaid case appears to have a different field to play, inasmuch as in that case there was failure to furnish the returns in accordance with the requirement of Section 139 of the Act and there was also failure to furnish a return after the notice under Section 148 of the Act.

8. In view of the discussion aforesaid, we answer the question referred to us thus :

'On the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in holding that the penalty under Section 271(1)(a) of the Income-tax Act, 1961, for the A.Ys. 1965-66, 1968-69 and 1969-70 was leviable for the delay of only 10 months relating to the default on notices under Section 148 and that no penalty is leviable for the default committed under Section 139 in the course of the original proceedings, nor such penalty proceedings could be initiated at the time of reassessment for the aforesaid years.'

9. Having regard to the facts and circumstances of the case, we make no order as to costs of this reference.


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