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B.D. Mehra Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
Judge
Reported in(1983)3ITD20(Delhi)
AppellantB.D. Mehra
Respondentincome-tax Officer
Excerpt:
.....magistrate, copy of the order in the case of rachna (supra) made by itat and details of income returned as also assessed and penalty imposed.8. shri s.c. verma, the learned authorised representative of the assessee, reiterated the same contentions, as have been put forth for and on behalf of the assessee before the lower authorities.additionally, he contended that for the period of default as from 25-5-1972 onwards, i.e., after the date of search and seizure operation, the assessee must be held to have sufficient cause, since the account books and other documents were seized by the income-tax department. for this proposition, the learned representative of the assessee relied upon the order of the tribunal made in the case of rachna (supra) as also on the ratio of the decision.....
Judgment:
1. All the four appeals are by the assessee, the assessment years involved are 1968-69 to 1971-72. The impugned order dated 26-12-1980 was made by the Commissioner (Appeals)-X, New Delhi and is a common one in repect of all the years under appeal. The learned Commissioner (Appeals) confirmed the penalties imposed upon the assessee for all the years. The assessee is aggrieved and, hence, these appeals.

2. Since the impugned order of the Commissioner (Appeals) is a common one, more so, we having been addressed in one set by both the learned representatives of the parties and a common paper book having been filed, for and on behalf of the assessee, as of necessity and for the sake of convenience, at our level also, we are disposing of all these appeals by this common order.

3. The material facts briefly stated are, that the assessee filed the returns of income for the assessment years 1968-69, 1969-70, 1970-71 and 1971-72 on 1-12-1972, 1-12-1972, 7-2-1973 and 7-2-1973, respectively, as against the dates by which the assessee should have filed the returns which were as under: 4. Since the returns were admittedly filed late, the period of delay worked out to 50, 38, 28 and 16 months, respectively, in relation to the four assessment years under appeal, the ITO, on the above facts, issued requisite notices to the assessee vis-a-vis proceedings under Section 271(1)(a) of the Income-tax Act, 1961 ('the Act'). The notices remained uncomplied with and another opportunity was provided to the assessee vide notices dated 1-3-1979 and this time the assessee put in replies contending that the assessee was not aware and conversant with the provision of Section 139 of the Act and thus the return was not filed in time. The ITO observed that the default was quite patent and this stand was since accepted by the assessee. He imposed penalties which worked out as under : 5. The assessee being aggrieved preferred appeals before the Commissioner (Appeals). The assessee did not dispute either the dates for filing the returns or else the dates when the returns were filed, nor the period of delay. The assessee repeated the explanation offered by him at the penalty stage. He further contended : (i) that the assessee had received some money from one Mr. K.K. Jajodia of General Industrial Stores Supply & Co. (P.) Ltd. in lieu of the assessee's having done some liaison work on behalf of that company and the said amount was invested by the assessee as capital in the business and in that view of the matter, the assessee had never considered that the amount thus received was liable to tax as income since according to the assessee, it was neither salary nor business income. The assessee contended that he considered this payment as a windfall and a receipt in the nature of capital receipt ; (ii) that the assessee was not aware of the provisions of Section 139 of the Act; (in) that there has been a search and seizure operation under Section 132 of the Act, on the business as also on the residential premises of the assessee on 25-5-1972 and as a result of the said search, books of account and other relevant records of the firm in which the assessee was a partner and/or proprietor were seized by the Income-tax Department and hence the assessee could not determine his income and file the returns ; (iv) that a sum of Rs. 5,000 has been imposed upon the assessee as penalty under Section 279 of the Act by the learned judge of the Tis Hazari Court and hence no penalty could be imposed under Section 271(1)(a) of the Act ; and (v) that while imposing penalty, the ITO has not given credit for income-tax paid by the assessee on self-assessment basis, i.e., under Section 140A of the Act, which was paid before filing of the return.

The assessee placed strong reliance on the order dated 22-3-1978 made by the ITAT, Delhi Bench 'D' in the case of Rachna [IT Appeal No. 2408 (Delhi) of 1976-77] in relation to the assessment year 1971-72. The Tribunal held that the period after the date of search, i.e., 25-5-1972 in that case, should be taken as not warranting the penalty since after the date of search when the books and other documents were seized by the department, the assessee should be taken to have reasonable cause for not filing the returns.

6. Since the assessee failed before the Commissioner (Appeals), we are seized of the matter.

7. We have heard the learned authorised representatives of the parties at length. We have also perused very carefully the orders of the lower authorities, as also the paper book since placed on our file, for and on behalf of the assessee which contains statement showing dates of filing of income-tax return, copies of the replies filed by the assessee to the ITO in response to show-cause notices issued under Section 271(1)(a), copies of the letter written to the Commissioner (Appeals), copies of penalty order under Section 271(1)(a) of the Act, copies of computation of total income, copies of the income-tax assessment orders, copies of the order passed by Shri Gopal Krishna, Metropolitan Magistrate, copy of the order in the case of Rachna (supra) made by ITAT and details of income returned as also assessed and penalty imposed.

8. Shri S.C. Verma, the learned authorised representative of the assessee, reiterated the same contentions, as have been put forth for and on behalf of the assessee before the lower authorities.

Additionally, he contended that for the period of default as from 25-5-1972 onwards, i.e., after the date of search and seizure operation, the assessee must be held to have sufficient cause, since the account books and other documents were seized by the Income-tax Department. For this proposition, the learned representative of the assessee relied upon the order of the Tribunal made in the case of Rachna (supra) as also on the ratio of the decision of the Orissa High Court in the case of CIT v. Dilsukhrai Ranglal [1976] 104 ITR 60. The learned authorised representative also further contended that since the firms in which the assessee was a partner have filed the returns belatedly vis-a-vis the assessee, this fact should be taken to constitute a reasonable cause for having filed the return belatedly and for this proposition, he has placed strong reliance on the ratio of the decision of the Mysore High Court in the case of Venkateswara Power Rolling Mills v. CIT [1974] 97 ITR 168, as also on the ratio of the decision of the Orissa High Court in the case of CIT v. Baijnath Chopolia [1976] 102 ITR 551. For the assessee, his learned authorised representative raised another contention regarding the bona fide belief of the assessee that the amount received by the assessee from Mr.

Jajodia was in the nature of capital receipt and was not taxable as income and this contention of the assessee was raised in respect of the assessment years 1968-69 and 1969-70.

9. For the revenue, Shri M.K. Chakraborty, the learned departmental representative, while supporting the impugned order of the Commissioner (Appeals), contended that the assessee was also having income from sole proprietary business and for each of the assessment years under appeal, this source of income accounted for taxable income and the assessee was under statutory duty to have filed the returns of income ; that the assessee had huge incomes for all the assessment years under appeal, since apart from the income from Jajodia, the assessee was having more than one source of income and in that view of the matter, the non-filing of the returns in time was intentional and was with a view to evade tax. Shri Chakraborty further contended that the assessee had also shown income from betting and while rebutting the contentions raised on behalf of the assessee, he relied upon the judgment order dated 11-1-1977 made in the case of the assessee in a complaint filed by the revenue under Section 276C of the Act, by Metropolitan Magistrate, Delhi, as also the order dated 11-1-1977 made by the same Metropolitan Magistrate which order is termed as an order of sentence.

Further, strong reliance was placed on the ratio of the decision of the Punjab and Haryana High Court-a Full Bench decision-in the case of CIT v. Patram Dass Raja Ram Ben [1981] 132 ITR 671 and that of the Madhya Pradesh High Court in the case of H.H. Maharani Sharmishthabai Holkar v. Addl. CIT [1981] 129 ITR 13.

10. The learned authorised representative of the assessee exercised his right of reply and further contended that as the records of all the six firms in which the assessee was a partner as also the records of the sole proprietary business of the assessee along with connected documents and papers were seized by the Income-tax Department on 25-5-1972, he could not file the returns. He further made a categorical assertion that the belated returns filed by the assessee were filed only after having an inspection of the documents and books of accounts, since, as yet, all the records were in the possession of the Income-tax Department.

11. Admittedly, the assessee filed the returns for all the years under appeal belatedly, but has pleaded primarily ignorance of law, but as has been held by their Lordships of the Madras High Court in the case of Swaminathan Aiyar [1948] 1 STC 101 that every person is supposed to know what the law is and if he fails to act in accordance therewith, he has to suffer the consequences. Whatever be the nature of proceedings, ignorance of law is no excuse.

12. The assessee has returned the income at Rs. 1,46,370, Rs. 2,14,870, Rs. 1,12,280 and Rs. 92,040 as per the returns, respectively, in relation to the assessment years 1968-69 to 1971-72 and he has, at the same time, pleaded that he was a partner in six firms, apart from having a sole proprietary business and in that view of the matter, a person having income from seven businesses as also claiming certain income, viz., income from betting, etc., as exempt, being casual income, cannot be said to be a person who can be said to ba ignorant of law, apart from the reasoning that the ignorance of law is no excuse.

Before us as also before the lower authorities, the assessee has raised specific plea that the fact that the returns of the firms in which he was a partner, had been filed belatedly, be taken due notice of and he be allowed, benefit thereof and hence the plea of the assessee about the ignorance of the provisions of the Act, is devoid of any force and stands rejected.

13. As regards the contention that the amounts received from Mr. K.K.Jajodia, in lieu of services rendered for doing liaison work, was neither a salary nor a business income and hence was in the nature of capital receipt, the very fact that the assessee raised this contention speaks of the mind of the assessee that the assessee was conversant with law and knows enough about law to raise this contention that the above amount was not taxable as income but was a capital receipt. The assessee, on the stated facts, can be said to know the provisions of law and the difference between revenue and capital receipt. The assessee has also claimed income from the source betting as casual and exempt income. The assessee who can understand what is casual and exempt income can certainly also understand what is income and a revenue receipt and such an assessee cannot be held to be ignorant of law and in that view of the matter, the contention of the assessee that the amount received by the assessee from Shri Jajodia was in the nature of capital receipt, although the assessee has been doing liaison work, does not stand to reason. This contention of the asses-see also stands rejected.

14. As regards the contention of the assessee that since he has been penalised a sum of Rs. 5,000 by the learned Metropolitan Magistrate, Delhi, penalty under Section 271(1)(a) was not imposable, suffice it to say that the proceedings for penalty taken against the assessee under the Income-tax Act are distinct from the criminal complaint, if filed against him even on the same facts. The two proceedings can, therefore, continue simultaneously and by this, the accused is not exposed to any 'double jeopardy' as has been held by their Lordships of the Delhi High Court in the case of Gulab Chand Sharma v. H.P. Sharma CIT [1974] 95 ITR 117.

15. In view of the above ratio laid down by their Lordships of the Delhi High Court, the contention raised on behalf of the assessee, that since the assessee has been penalised in the sum of Rs. 5,000 by the learned Metropolitan Magistrate, Delhi, an amount which, in fact, was a fine imposed upon the assessee on a criminal complaint filed under Section 276C by the ITO, District VIII(3), New Delhi, this contention of the assessee also fails and stands rejected (sic).

16. Another contention was that there was a search and seizure operation as on 25-5-1972, as a result of which the books of account and other relevant records of the firms and the sole proprietory business of the assessee were seized and the period from 25-5-1972 onward be taken as constituting sufficient cause for not levying of penalty, under Section 271(1)(a). This contention cannot be accepted for the following reasons : 1. The dates for filing the returns in respect of all the assessment years under appeal being 30-9-1968, 30-9-1969, 30-9-1970 and 30-9-1971, the defaults occurred on these dates, when the assessee failed to file the returns and subsequent event cannot be taken as mitigating circumstances.

2. The assessee has filed the returns after having an inspection of the records and the books of account since it has been claimed before us that, as yet, the records were in the custody of the Income-tax Department and in that view of the matter, if the assessee could file the returns belatedly and after 25-5-1972 by taking inspection of the books of account and the connected records, there is no reason much less any cogent material on record, for us to draw inference and to hold, that the assessee was prevented by sufficient cause in filing the returns on 1-12-1972, 1-12-1972, 7-2-1973 and 7-2-1973. The assessee could have filed the returns earlier also since an inspection of the books of account and other connected documents could also be had earlier.

3. In the criminal complaint filed by the ITO, Dist. VIII(3), New Delhi, against the assessee under Section 276C, the charge against the assessee was that he knowingly or wilfully caused delay in filing the return. The said complaint related to the assessment year 1971-72. On behalf of the assessee, his learned advocate recorded a confession in terms that the assessee did not file the return in time wilfully and knowingly and in that view of the matter, the assessee was sentenced to pay a fine of Rs. 5,000 and in default of payment of fine, he was to undergo six months rigorous imprisonment.

This finding of the learned Metropolitan Magistrate, Delhi, goes a long way to prove conclusively, the fact, that the assessee filed the return for the assessment year 1971-72, belatedly, knowingly and wilfully. If the return for the assessment year 1971-72 was filed belatedly, knowingly and wilfully on the same fact, it has to be held that for the assessment years 1968-69, 1969-70 and 1970-71 also, the assessee filed the returns of his income belatedly, knowingly and wilfully, more so, when return for the assessment year 1970-71 was filed on the same date as for the assessment year 1971-72.

17. As regards reliance by the assessee on the order in the case of Rachna (supra), the Tribunal in that case was not informed of the fact that the records of that assessee as yet (i.e., as on the date of making of the order) were with the Income-tax Department and the assessee had filed the return after taking inspection of the account books and the records and this vital information having not been brought to the notice of the Tribunal, the above order was made, holding that as from 25-5-1972 onwards (i.e., from the date of search and seizure operation) the records have been seized by the Income-tax Department, there was sufficient cause for the assessee to have filed the returns belatedly. On the facts of the assessee's case, we have already held that the assessee could have filed the returns earlier since the assessee could have availed of the inspection earlier and there is no reason to hold otherwise. The order of the Tribunal relied upon by the assessee as such is distinguishable on facts.

18. As regards the ratio of the decision of the Orissa High Court in the case of Dilsukhrai Ranglal (supra), in that case the account books of the assessee have been seized by the sales tax authorities in 1961 and retained till October 1964 and the assessee-firm filed the return of income belatedly for the assessment years 1963-64, 1964-65 and 1965-66 and their Lordships held that as the volume of business of the assessee was extensive and as the assessee could not have filed the returns, the day the books were returned to it and further as it was held that the assessee had to do a lot of accounting, verification, etc., before the returns could be filed, the period of seizure of books was held to constitute sufficient cause.

19. It is pertinent to note that in that case, the books were seized by the sales tax authorities in 1961 and retained till October 1964 and the assessment years involved were 1963-64, 1964-65 and 1965-66 whereas in the case of the present assessee, the books of account and connected documents, records, etc., were seized on 25-5-1972 as against the dates for filing the returns in relation to all the assessment years under appeal which were 30th September of 1968, 1969, 1970 and 1971, i.e., the search and seizure operation was long long after the last dates for filing the returns. The facts as such are distinguishable and the ratio laid down by their Lord-ships of the Orissa High Court does not help the assessee.

20. As regards the contention that the returns of the firms in which the assessee was a partner were filed belatedly, in view of the specific confession of the assessee made before the learned Metropolitan Magistrate, Delhi, that for the assessment year 1971-72 he filed the return belatedly, knowingly and wilfully, there is no reason why this plea of the assessee should hold good. The assessee having confessed the guilt in a proceeding in criminal law, where standard of proof is more severe and exact than that of the standard of proof in penalty proceedings under the Act, we are left with no alternative but to reject this contention and in that view of the matter, reliance of the assessee on the ratio laid down by their Lordships of the Mysore and Orissa High Courts cannot come to the rescue of the assessee. We also reject this contention.

21. As regards the plea of bona fide belief in respect of the assessment years 1968-69 and 1969-70, the contention of the assessee that the assessee was under bona fide belief that the amounts received from Shri Jajodia were not taxable for these two years it stands belied by the very fact that for the assessment year 1968-69, the assessee has himself returned as per return of income filed, Rs. 16,370 as income from S.R. Traders, a sole proprietary business and Rs. 10,000 from horse racing, betting and this amount has been claimed as casual income and exempt. For the assessment year 1969-70, the income from sole proprietary business, viz., S.R. Traders, has been returned by the assessee as per return of income filed, Rs. 34,870 and Rs. 10,000 as income from racing and betting, which has again been claimed as casual income and exempt. From the above facts, it is very clear that the assessee has taxable income for the assessment years 1968-69 and 1969-70 and he ought to have filed the returns. More so, the assessee who knows what is casual income and what is exempt income, cannot be said to be not in the knowledge of the fact that the amount received from Shri Jajodia was income and was revenue in nature. In this view of the matter, the plea of the bonafide belief raised by the assessee for these two years also stands rejected.

22. So far so good. For the assessment year 1971-72, the Income-tax Department filed a criminal complaint under Section 276C and the said section as it stood at the relevant time and in relation to the assessment year 1971-72 reads as under : Failure to furnish returns of income-If a person wilfully fails to furnish in due time the return of income which he is required to furnish under Sub-section (1) of Section 139 or by notice given under Sub-section (2) of Section 139 or Section 148 he shall be punishable with rigorous imprisonment for a term which may extend to one year or with fine equal to a sum calculated at a rate which shall not be less than four rupees or more than ten rupees for every day during which the default continues, or with both : Provided that a person shall not be proceeded against under this section for failure to furnish in due time the return of income under Sub-section (1) of Section 139- (i) for any assessment year commencing prior to the 1st day of April, 1971 ; or (ii) for any assessment year commencing on or after the 1st day of April, 1971, if- (a) the return is furnished by him before the expiry of the assessment year ; or (b) the tax payable by him on the total income determined on regular assessment, as reduced by the advance tax, if any, paid and any tax deducted at source, does not exceed three thousand rupees.

23. The above Section 276C did not exist for the assessment years 1962-63 to 1970-71 and, hence, the ITO filed the complaint under the above section, only for the assessment year 1971-72. Before the learned Metropolitan Magistrate, the assessee-accused through his authorised advocate admitted that the return for the assessment year 1971-72 was not filed wilfully or knowingly. The learned Metropolitan Magistrate after recording evidence and examining witnesses on behalf of the ITO coupled with the admission-confession made on behalf of the accused, held that the assessee-accused had admitted an offence under Section 276C and he convicted the assessee-accused under the above section vide order of sentence dated 11-1-1977 made in the case of criminal complaint titled as, 'ITO v. Shri B.D. Mehra'. The learned Metropolitan Magistrate, Delhi, sentenced the accused-assessee to pay a fine of Rs. 5,000 and in default of payment of fine, the learned Metropolitan Magistrate ordered that the accused will undergo six months rigorous imprisonment.

24. For the assessment year 1971-72, the assessee has filed the return belatedly on 7-2-1973 whereas for the assessment year 1970-71 also the return was filed on the same date and in that view of the matter, if the assessee has filed his return of income belatedly for the assessment year 1971-72 knowingly and wilfully, there is no reason why it should not be held that for the assessment year 1970-71 also the assessee has filed the return of income belatedly on 7-2-1973, knowingly and willingly. We hold so, with the result that we do hold that the assessee filed the returns for all the assessment years under appeal belatedly but without any sufficient cause or reason.

25. In view of our discussions as above, the impugned order of the Commissioner (Appeals), which is a common one in respect of all the assessment years under appeal, is upheld, since penalties have been levied and sustained on proper appreciation of facts and law.

26. As regards the ratio of the decision of the Madhya Pradesh High Court in Sharmishthabai case (supra) their Lordships have held that it was for the assessee to show reasonable cause and the onus was on the assessee since the element of mens rea or guilty intent was not required to be taken into consideration while imposing the penalty either under Section 273(c) or under Section 271(1)(a). As regards the ratio of the Full Bench decision of the Punjab and Haryana High Court in Patram Dass case (supra), their Lordships have laid down the ratio that the only requirement for imposition of penalty under Section 271(1)(d) is the absence of reasonable cause for the tax delinquency.

Their Lordships have further held that the onus is on the assessee to prove that there was reasonable cause for having filed the return belatedly. The ratio of both these decisions favour the revenue and we do respectfully follow the same and since there is no material on behalf of the assessee to prove any reasonable cause for the delay in filing the returns of income, the penalties since imposed and sustained on the assessee stand confirmed.

27. In the result, all the four appeals by the fail and stand dismissed.


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