Skip to content


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

LegalCrystal Citation
SubjectDirect Taxation
CourtOrissa High Court
Decided On
Case NumberS.J.C. No. 219 of 1972
Judge
Reported in[1974]97ITR133(Orissa)
ActsIncome Tax Act, 1922 - Sections 22(1) and 22(3); Income Tax Act, 1961 - Sections 139, 139(1), 139(4) and 271(1)
AppellantCommissioner of Income-tax
RespondentAlimohamad and Co.
Appellant AdvocateStanding Counsel
Respondent AdvocateA. Pasayat, Adv.
Cases ReferredAll India Sewing Machine Co. v. Commissioner of Income
Excerpt:
.....that once the assessee failed to show cause when called upon as to why he may not be visited with penalty under section 271(1)(a) of the act, it must be assumed that he had no explanation to offer and the income-tax officer was justified in proceeding on the footing that the default was without reasonable cause. the notice was issued after the return had been filed and merely because the assessee failed to comply with the requirement of the notice, the burden that lay on the revenue to establish absence of reasonable cause on the part of the assessee as a condition precedent to visiting him with penalty cannot be taken to have been discharged. in the facts of the case we are satisfied that the tribunal took a reasonable view of the matter......co. p. ltd., [1970] 77 i.t.r. 518 (s.c.) it was held by the supreme court that a voluntary return filed any time before the assessment, under section 22(3) of the indian income-tax act, 1922, would be a return submitted within the time allowed by section 22(1) of the indian income-tax act, 1922. the provisions of sections 139(1) and 139(4) of the income-tax act, 1961, are analogous to corresponding provisions of section 22(1) and 22(3) of the indian income-tax act, 1922, and on a parity of reasoning it may be heldthat the voluntary return submitted in this case by the assessee under section 139(4) of the income-tax act, 1961, would be one filed within the time allowed under section 139(1) of the income-tax act, 1961, in which case the penalty imposed cannot stand. apart from.....
Judgment:

R.N. Misra, J.

1. This reference at the instance of the revenue under Section 256(1) of the Income-tax Act of 1961 (hereafter referred to as 'the Act') made by the Appellate Tribunal asks us to decide the following question of law :

'Whether, in the facts and in the circumstances of the case, the cancellation of penalty by the Appellate Tribunal was justified in law ?'

2. The assesses is a firm and the year of assessment is 1963-64. The accounting period ended on March 31, 1963, and the return under Section 139(1) of the Act was due by 30th of September, 1963. The return was, however, filed on June 26, 1965. The Income-tax Officer issued a notice under Section 271(1)(a) of the Act to the assessee which it received on 30th June, 1965, to show cause why penalty may not be levied. The assessee made no compliance. A sum of Rs. 5,625 was imposed by way of penalty under Section 271(1)(a) of the Act.

3. The Appellate Assistant Commissioner in a cryptic order sustained the levy of penalty. Upon the assessee's appeal to the Tribunal, after taking note of the facts the Tribunal held :

'We consider, however, that having regard t6 the facts penalty is not called for in this case. The assessee had filed the return voluntarily, and since evidently there has been no individual notice issued to it under Section 139(2), the return must be treated as having been filed under Section 139(4) of the Act. In the case of Commissioner of Income-tax v. Kulu Valley Transport Co. P. Ltd., [1970] 77 I.T.R. 518 (S.C.) it was held by the Supreme Court that a voluntary return filed any time before the assessment, under Section 22(3) of the Indian Income-tax Act, 1922, would be a return submitted within the time allowed by Section 22(1) of the Indian Income-tax Act, 1922. The provisions of sections 139(1) and 139(4) of the Income-tax Act, 1961, are analogous to corresponding provisions of Section 22(1) and 22(3) of the Indian Income-tax Act, 1922, and on a parity of reasoning it may be heldthat the voluntary return submitted in this case by the assessee under Section 139(4) of the Income-tax Act, 1961, would be one filed within the time allowed under Section 139(1) of the Income-tax Act, 1961, in which case the penalty imposed cannot stand. Apart from this, even if it be held that there is default on the part of the assessee in not having filed the return within the time allowed under Section 139(1) of the Income-tax Act, 1961, the default is only technical and this is the first instance of such a default. Penalty need not be imposed in every case of default merely because it is lawful to do so. Having regard to the circumstances stated above, we think that the assessee should be excused from the levy of penalty. We accordingly cancel the order of penalty....'

4. The Tribunal has clearly gone wrong in relying upon the decision in the case of Kulu Valley Transport Company. The provisions under the 1961 Act are very different from those contained in the earlier law. Unlike the corresponding provision in the earlier Act, Section 139 of the Act of 1961 imposes a liability upon every taxpayer whose total income exceeds the maximum amount which is not chargeable to income-tax to suo motu submit a return of his income for each assessment year as it comes along, within the time specified. The decision of the Supreme Court was with reference to the law as it existed under the 1922 Act. Therefore, the Tribunal was not correct in equating the position under the two Acts. The decision of the Supreme Court has, therefore, no application to the facts of this case and we agree with the learned standing counsel in his submission in that behalf.

5. The Tribunal has, however, given an alternative basis for cancellation of the penalty. Section 271(1)(a) of the Act provides :

'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 the total income which he was required to furnish under Sub-section (1) of Section 139..... he may direct that such person shall pay by way of penalty,--... .. '

6. In order that penalty may be levied under this clause, the revenuehas to show that the assessee has failed to furnish the return withoutreasonable cause. Dealing with this provision, a Bench of the Kerala HighCourt in the case of P.V. Devassy v. Commissioner of Income-tax, [1972] 84 I.T.R. 502 (Ker.) held thatmere failure to file the return within the time allowed would not make theassessee liable to penalty. The department must prove that the assesseehad no reasonable cause for not filing it within the time. The orderimposing a penalty for failure to carry out a statutory obligation is theresult of a quasi-criminal proceeding and that penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or is guilty of conscious disregard of its obligation. They were relying upon the observation of the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa, [1972] 83 I.T.R. 26; [1970] 25 S.T.C. 211 (SC.). The same view has been reiterated by the said court in the case of Dawn & Co. v. Commissioner of Income-tax, [1973] 87 I.T.R. 71 (Ker.). A Bench of the Mysore High Court in the case of All India Sewing Machine Co. v. Commissioner of Income-tax, [1974] 96 I.T.R. 206 (Mys.) has also taken the same view.

7. The Tribunal in the present case has come to hold that it was the assessee's first default, the change of law had just come about and, therefore, the default was more technical than the outcome of positive disregard of statutory liability. The Tribunal was of the view that the conduct of the assessee was not contumacious.

8. Learned standing counsel has contended that once the assessee failed to show cause when called upon as to why he may not be visited with penalty under Section 271(1)(a) of the Act, it must be assumed that he had no explanation to offer and the Income-tax Officer was justified in proceeding on the footing that the default was without reasonable cause. We find it difficult to accept such a contention. The notice was issued after the return had been filed and merely because the assessee failed to comply with the requirement of the notice, the burden that lay on the revenue to establish absence of reasonable cause on the part of the assessee as a condition precedent to visiting him with penalty cannot be taken to have been discharged. In the facts of the case we are satisfied that the Tribunal took a reasonable view of the matter.

9. Our answer to the question referred to us shall, therefore, be:

'In the facts and in the circumstances of the case, the cancellation of penalty by the Appellate Tribunal was justified in law.'

10. We make no direction as to costs,

B.K. Ray, J.

11. I agree.


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