Pritam Singh Pattar, J.
1. This order will dispose of Income-tax Cases Nos. 15 and 16 of 1972.
2. The Additional Commissioner of Income-tax, Haryana, Himachal Pradesh and Delhi (hereinafter called ' the petitioner '), has made this application under Section 256(2) of the Income-tax Act, 1961, to direct the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh, to refer the following question of law for the opinion of this court:
' Whether, on the' facts and in the circumstances of the case, the Tribunal was justified in condoning the delay and in deleting the penalty levied under Section 271(l)(a) of the Income-tax Act, 1961 '
3. Both these cases relate to the same assessee, Roshan Lal Kuthiala. The assessee died during the pendency of these cases and by order dated March 12, 1973, his sons, Rajinder Lal Kuthiala and Ravinder Lal Kuthiala, and widow, Smt. Lila Devi, were brought on the record as legal representatives in both these cases. The Income-tax Case No. 15 of 1972 relates to the assessment 'year 1959-60 and the Income-tax Case No. 16 of 1972 relates to the assessment year 1960-61.
4. The facts of Income-tax Case No. 15 of 1972 are that for the assessment year 1959-60, the assessee did not file the return of income as required by Sub-section (1) of Section 22 of the Indian Income-tax Act, 1922, which under the law had to be filed by 1st July, 1959. A notice under Section 22(2) of the said Act was issued on September 5, 1959, but it came back unserved with the report by the postal authorities that the assessee had refused to receive it. No application for extention of time was filed by the assessee. On January 10, 1961, the Income-tax Officer addressed a letter to the assessee pointing out that he had failed to file the return under Section 22(1) of the said Act and if no return was filed by him within two days, he will be compelled to proceed to complete the assessment for the assessment year in question under Section 23(4) of the Act. The assessee was also called upon to show cause why penalty proceedings under Section 28 of the Act be not taken against him for his failure to file the return in time. The assessee did not send any reply to this letter, which was admittedly received by him while he was at Bangalore. Ultimately, the assessee filed his return on May 21, 1962, declaring his income as Rs. 3,21,752 subject to adjustment of loss in another partnership. Thus, this return was delayed by 34 months.
5. On June 18, 1962, a provisional assessment was made and the tax was assessed at Rs. 2,11,881, which was later on reduced to Rs. 1,62,378 after the loss figure from the partnership firm was known. The final assessment under Section 23(3) was completed by the Income-tax Officer onNovember 30, 1963, and after giving credit for the tax paid under the provisional assessment, a demand of Rs. 19,717 including penal interest was made. On appeal, the amount of tax was reduced to Rs. 87,444, which was less than the amount already paid by the assessee under the demand made in pursuance of the provisional assessment and the net result was that the assessee became entitled to the refund of Rs. 4,600.
6. In the meantime, by a notice issued under Section 271(l)(a), dated November 30, 1963, under the Income-tax Act, 1961, which was served on the assessee on December 9, 1963, the Income-tax Officer started penalty proceedings against the assessee for his failure to file the return within the prescribed time. The Income-tax Officer, Central Circle, Ambala, imposed a penalty of Rs. 43,722, vide his order dated November 23, 19.65, and this was 50 per cent. of the gross tax payable by the assessee in respect of his total income as finally computed for the assessment year. The assessee filed an appeal against this order before the Appellate Assistant Commissioner of Income-tax, 'B' Range, Amritsar, who by his order, dated November 15, 1967, reduced the amount of penalty to Rs. 42,625 only. The assessee then filed a further appeal before the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh, and the Tribunal by its order, dated August 14, 1970, condoned the delay in filing the income-tax return by the assessee and deleted the entire penalty under Section 271(l)(a) of the Income-tax Act. The Tribunal held that the revenue was competent to impose a penalty when the notice was issued, but the quantum of penalty should not have been determined in proportion to the gross tax, but in proportion to the tax as finally determined to be payable under the demand notice. Finally, it was determined that no tax was payable and the assessee was entitled to a refund of Rs. 4,600 and, therefore, no penalty could be imposed. Feeling dissatisfied, the Commissioner of Income-tax, Delhi III, New Delhi, made an application under Section 256(1) of the Income-tax Act, requiring the Income-tax Appellate Tribunal to refer the above-mentioned question of law for the opinion of this court. The Tribunal held by its order dated February 19, 1972, that the findings of the Tribunal were pure findings of fact and that question of law did not arise and the application of the revenue was declined. Thereafter, the present petition was filed by the revenue under Section 256(2) of the Income-tax Act, 1961.
7. Similar are the facts of Income-tax Case No. 16 of 1972. In that case, the Income-tax return was to be filed on or before November 23, 1960, but it was filed by the assessee on May 30, 1962, and thus there was a delay of 17 months in filing the return. As for the year 1959-60, in the final assessment for this year, i.e., 1960-61, the final assessment had resulted in a refund to the assessee, who had already paid the tax demand. As regardsthe reasonable cause for not filing the return up to the due date, the Tribunal relied on their order in Income-tax Appeal No. 19571 of 1967-68 and held that there was a reasonable cause for the assessee in not filing the return within the meaning of Section 271(l)(a) of the Act and the delay was condoned and the penalty imposed by the Income-tax Officer, which was upheld by the Appellate Assistant Commissioner, was deleted. The petition of the department under Section 256(1) of the Act to refer the above-mentioned point of law involved for the opinion of this court was declined and, thereafter, this petition under Section 256(2) of the Act was filed.
8. Section 271(l)(a)(i) of the Income-tax Act, 1961, reads as follows :
'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......
tie may direct that such person shall pay by way of penalty,-- (i) in the cases referred to in Clause (a), in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent. of the tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent. of the tax.'
9. In Income-tax Case No. 15 of 1972, no notice under Section 22(2) of the Indian Income-tax Act, 1922, was issued to the assessee. The Tribunal in its order dated August 14, 1970, whose copy is annexure 'E', observed in paragraph No. 3 as follows :
' We need not go to the reasonableness of the cause for the delay in filing of the return because we have already held in I.T.A. No, 19571 of 1967-68 for the assessment year 1958-59 that the assessee had reasonable cause up to February 15, 1962, and the facts are the same in the instant case as they were in that case. For the sake of satisfaction, we hold that the assessee had its reasonable cause for not filing the return up to the period the return remained unfiled because when the assessee asked for time and there was no reply from the Income-tax Officer, the assessee could be taken to be under a reasonable belief that its request had been conceded to. We need not go to the other grounds as they cease to be of any consequence in view of our order above.'
10. The Tribunal, in paragraph No. 2 of that order dated August 14, 19.70, also observed as follows:
' The learned counsel urged that as there was no tax payable because there was ultimately a refund due to the assessee, the penalty could not be imposed or, at the most, the penalty should be related to the tax payable as per the demand notice which was Rs. 19,717. If we take into consideration the penal interest of Rs. 12,723, which is included in the total demand of Rs. 19,717, the tax payable comes to Rs. 7,390. The learned counsel urged that the penalty is relatable only to the tax payable, if any. When the tax payable is, at the worst for the assessee, Rs. 19,717, at the point of time when the penalty was imposed, the penalty as sustained by the Appellate Assistant Commissioner is far too excessive. He urged that, in the ultimate, the tax payable, i.e., Rs. 19,717, as per the demand notice, has resulted in a refund of Rs. 4,600 and, therefore, the penalty could not be imposed. In support of this contention, the learned counsel urged that, after all, the appeal proceedings are for the determination of the proper income and the proper tax payable thereon and after the appeal had been heard and disposed of both the proper income and the proper tax had been determined. The result of the appeal is that there is no tax payable but there is a refund due to the assessee. There is considerable force in what the learned counsel urges. Undoubtedly, the revenue was competent to impose a penalty when the notice was issued; but the quantum of penalty should not have been determined in proportion to the gross tax but in the ratio of the tax as finally determined to be payable under the demand notice. But even that, the tax payable, has been converted into a refund due to theassessee and, therefore, before us there is no tax payable; hence no penalty could be imposed on a refund. We, therefore, delete the penalty.'
11. For similar reasons, the delay in filing the return in Income-tax Case No. 16 of 1972 was condoned and the penalty imposed was deleted.
12. Section 256(2) of the Income-tax Act, 1961, lays down that if the Appellate Tribunal refuses to state the case on the application made under Sub-section (1) of that section on the ground that no question of law arises, the assessee or the Commissioner, as the case may be, may within six months from the date on which he is served with a notice of such refusal, apply to the High Court and if the High Court is not satisfied with the correctness of the decision of the Appellate Tribunal, it may require the Tribunal to state the case and refer the question of law for its decision. Thus, under this section, a direction can be issued to the Appellate Tribunal to refer a question of law only. No direction can be issued to the Tribunal to make a reference under Section 256(2) of any question of fact.
13. A Division Bench of this court in Commissioner of Income-tax v. Vidya Sagar by its order dated April 3, 1974, decided three Income-tax Cases Nos. 26, 27 and 28 of 1972. The prayer in Income-tax Cases Nos. 26and 27 of 1972 was to refer for the opinion of this court the following question of law.:
' Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in reducing the quantum of penalty having been satisfied that the offence of concealment was there without any doubt '
14. In Income-tax Case No. 28 of 1972, the Commissioner wanted the following two questions of law to be referred for the opinion Of this court:
' (1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified to hold that the assessee had a reasonable cause for late filing of return in March, 1968 ?
(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified to hold that there was a delay of one month only till February, 1964, when actually under Section 139(1) the delay was from October 1, 1963, to February 18, 1964, for four months '
15. The learned judges held that the question to be referred in each of the Income-tax Cases Nos. 26 and 27 of 1972 did arise for the opinion of this court and so also question No. 2 in Income-tax Case No. 28 of 1972. However, question No. 1, in Income-tax Case No. 28 of 1972, was held to be not a question of law arising out of the Tribunal's order and, therefore, it could not be required to be referred for the opinion of this court. According to the counsel for the Commissioner of Income-tax, the above question No. 1, in Income-tax Case No. 28 of 1972, was a question of law and it did arise out of the order of the Tribunal, whereas according to the counsel for the assessee, it was a pure question of fact and being not a question of law could not be referred for the opinion of this court. The Tribunal in that case held that there was a reasonable cause for the assessee for late filing of the return and it condoned the delay and deleted the penalty. The learned judges of the Division Bench held that this question No. 1, in Income-tax Case No. 28 of 1972, is a pure question of fact and is not a question of law arising out of the Tribunal's order and, therefore, it could not be required to be referred for the opinion of this court.
16. The question whether there is a reasonable cause for filing a delayedreturn is a pure question of fact and no question of law arises therefrom.It is a well-settled rule that an Inference of fact from proved facts is aquestion of fact. Whether there is a reasonable cause or not is a questionof fact, for its determination depends on facts. In Sree Meenakshi Mills Ltd.v. Commissioner of Income-tax : 31ITR28(SC) , it was held :
'It has consistently been held that inferences from facts may themselves be inferences of fact and not of law, and that such inferences are not open to review by the court.'
17. It was further observed in this case that when the finding is one of fact, the fact that it is itself an inference from other basic facts will not alter its character as one of fact.
18. In Manindra Land and Building Corporation Ltd, v. Bhutnath Banerjee : 3SCR495 it was observed :
' The High Court fell in error in interfering with the finding of fact arrived at by the subordinate judge with respect to the appellants having sufficient cause for not making an application for bringing the respondents on record within time . . . . '
19. These observations were made in a petition for revision under Section 115 of the Code of Civil Procedure, but these clearly show that the question whether there is a sufficient cause or not is none the less a question of fact.
20. The only grounds on which a conclusion of fact can be challenged are: (a) that it is not supported by any legal evidence or material, and (b) that the conclusion of fact drawn by the Appellate Tribunal is perverse and is not rationally possible, vide Oriental Investment Co. P. Ltd. v. Commissioner of Income-tax : 72ITR408(SC) , G. Venkataswami Naidu and Co. v. Commissioner of Income-tax 0065/1958 : 35ITR594(SC) and Commissioner of Income-tax v. Rajasthan Mines Ltd. : 78ITR45(SC) . In the instant case, the Appellate Tribunal held that the assessee had reasonable cause for not filing the return up to the period the return remained unfiled because the assessee's submission asking for time to extend the period remained unreplied by the Income-tax Officer and the assessee could be taken to be under a reasonable belief that his request had been acceded to and, therefore, the assessee was under no obligation to file the return. This is a pure question of fact in view of the observations made in the above-mentioned case by the Supreme Court. In my opinion, no question of law arises in both these Income-tax Cases Nos. 15 and 16 of 1972 out of the orders of the Tribunal and, therefore, no direction is to be issued to the Tribunal to refer the question mentioned above in the earlier part of this judgment for the opinion of this court. There is no substance in both these petitions and the same are dismissed. There will be no order as to costs.
D.K. Mahajan, C.J.
21. I agree.