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Commissioner of Income-tax Vs. Pratap Chand Maheshwari - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Reference Nos. 15 of 1979, 38, 39, 40 and 46 of 1978 and 2, 10 to 14 and 16 and 17 of 197
Judge
Reported in(1980)14CTR(P& H)410; [1980]124ITR653(P& H)
ActsIncome Tax Act, 1961 - Sections 212 and 273
AppellantCommissioner of Income-tax
RespondentPratap Chand Maheshwari
Appellant Advocate D.N. Awasthy and; B.K. Jhingan, Advs.
Respondent Advocate V.S. Desai,; K.D. Singh and; D.N. Mishra, Advs.
Excerpt:
.....the explanation offered by the assessee was not acceptable and that the failure to furnish the estimate of advance tax was without reasonable cause. 6. in order to determine the question it will be essential to refer to the relevant part of section 273 of the 1961 act, which runs as under :if the income-tax officer, in the course of any proceedings in connection with the regular assessment for the assessment year commencing on the 1st day of april, 1970, or any subsequnet year, is satisfied that any assessee- (a) has furnished under section 212 an estimate of the advance tax payable by him which he knew or had reason to believe to be untrue, or. ..(e) has without reasonable cause failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of..........whether, on the facts and in the circumstances of the case, the tribunal is right in deleting the penalty imposed under section 273(1)(a) of the income-tax act ' 3. arising out of lt. ref. nos. 10, 11, 12 and 13 of 1979) assessment year 1970-71 ' (i) whether, on the facts and in the circumstances of the case, the tribunal was correct in holding that non-filing of an estimate under section 212(3a) of the income-tax act, 1961, by the firm would constitute a sufficient cause within the meaning of section 273(1)(c) of the income-tax act, 1961, for not filing an estimate under section 212(3a) of the act by the partners ? (ii) whether, on the facts and in the circumstances of the case, the tribunal was correct in holding that when a firm has been penalised under section 273(1)(a) of the.....
Judgment:

S.S. Dewan, J.

1. This judgment will decide I.T. Reference Nos. 2, 10 to 17 of 1979 and 38, 39, 40 and 46 of 1978 which contain similar questions of law. The facts are being given in the judgment from I.T. Ref. No. 15/1979. The Income-tax Appellate Tribunal, Amritsar, referred to us the following questions for the opinion of this court under Section 256(1) of the I.T. Act, 1961 (hereinafter called the ' 1961 Act'):

1. (Arising out of I.T. Ref. Nos. 14, 15, 16 and 17 of 1979) Assessment year 1972-73

' (i) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the assessee cannot be said to have filed an estimate of his income under Section 212 of the Income-tax Act, 1961, which he knew or had reason to believe to be untrue?

(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that when a firm has been penalised under Section 273(1)(a) of the Income-tax Act, 1961, no penalty can be imposed under the said section on its partners '

2. (Arising out of I.T. Ref. No. 2 of 1979)Assessment year 1973-74

' (i) Whether a wrong estimate of income filed by a firm under Section 212 would constitute a reasonable cause ;in the case of the partnerfor the purpose of levy of penalty under Section 273(1)(a) of the Income-tax Act, 1961 ?

(ii) Whether, on the facts and in the circumstances of the case, the Tribunal is right in deleting the penalty imposed under Section 273(1)(a) of the Income-tax Act '

3. Arising out of LT. Ref. Nos. 10, 11, 12 and 13 of 1979) Assessment year 1970-71

' (i) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that non-filing of an estimate under Section 212(3A) of the Income-tax Act, 1961, by the firm would constitute a sufficient cause within the meaning of Section 273(1)(c) of the Income-tax Act, 1961, for not filing an estimate under Section 212(3A) of the Act by the partners ?

(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that when a firm has been penalised under Section 273(1)(a) of the Income-tax Act, 1961, no penalty can be imposed under the said section on its partners '

4. (Arising out of I.T. Ref. Nos. 38, 39 and 40 of 1978) Assessment year 1973-74

' Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that non-filing of an estimate under Section 212(3A) of the Income-tax Act, 1961, by the firm would constitute a reasonable cause within the meaning of Section 273(c) of the Income-tax Act, 1961, for not filing an estimate under Section 212(3A) of the Act by the assessee-partner and in cancelling the penalty of Rs. 9,550 (Rs. 6,780 in I.T. Ref. Nos. 39 and 40) imposed under Section 273(c)? '

5. (Arising out of LT. Ref. No. 46 of 1978) Assessment year 1973-74

' Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that non-filing of an estimate under Section 212(3A) of the Income-tax Act, 1961, by the firm would constitute a reasonable cause within the meaning of Section 273(c) of the Income-tax Act, 1961, for not filing an estimate under Section 212(3A) of the Act by the assessee-partner?'

2. The facts in the context of which the aforesaid questions are to be considered are not in dispute and can be stated thus :

3. The firm, M/s. Pratap Steel Rolling Mills, Amritsar, consisted of four partners one of whom was Pratap Chand Maheshwari. The assessment year involved was 1972-73. The ITO issued a notice under Section 210 of the 1961 Act on August 19, 1971, requiring the assessee to deposit advance tax of Rs. 2,96,285. The assessee filed an estimate on September 15, 1971, declaring his income at Rs. 1,10,000 and accordingly paid Rs. 53,037. The tax on regular assessment was determined at Rs. 1,32,774. As the estimateof the advance tax filed by the assessee on September 15, 1971, was found to be incorrect, proceedings were taken under Section 273(1)(a) of the 1961 Act and the ITO imposed a penalty of Rs. 4,654 on the assessee. The contention of the assessee before the ITO as also before the AAC of Income-tax was that the only source of income of the assessee was the share out of the estimated income from the firm and, therefore, he had reasons to believe that the estimate filed by the firm was true and correct and hence his estimate was also true and correct. It was also submitted that the ITO did not prove that the assessee had consciously underestimated his advance tax liability and in these circumstances no penalty should be imposed. The ITO as also the AAC rejected the contention of the assessee and they held that the explanation offered by the assessee was not acceptable and that the failure to furnish the estimate of advance tax was without reasonable cause. Feeling aggrieved, the assessee went up in second appeal. The Income-tax Appellate Tribunal placed reliance on the decision in Venkateswara Power Rolling Mills v. CIT : [1974]97ITR168(KAR) and Addl. CIT v. Smt. Triveni Devi : [1974]97ITR390(All) and accepted the appeal. The Tribunal while accepting the assessee's pleas observed as under:

' In our opinion, the contention of the learned counsel for the assessee has considerable force. Since the assessee's main source of income was share from the firm, M/s. Pratap Steel Rolling Mills and the assessee filed his own estimate of advance on the basis of the estimate filed by the firm on 15-9-1971, it cannot be said that the assessee under Section 212 of the Income-tax Act, 1961, furnished an estimate of advance tax which he knew or had reasons to believe to be untrue. On the other hand, on 15-9-1971 when the assessee filed his own estimate of advance tax he depended on the estimate filed by the firm and in these circumstances it cannot be said that the assessee was actuated by any dishonest intention to underestimate the advance, tax payable by him. This apart, we find that in the case of the firm, M/s. Pratap Steel Rolling Mills, a penalty under Section 273(1)(a) has already been imposed by the Income-tax Officer for default of the provisions of Section 212 of the Income-tax Act, 1961, and in these circumstances we are of the opinion that no penalty can be imposed on the partner for the same offence as it would amount to double punishment.'

4. This is how the matter is before us.

5. Coming now to the first question in I.T.R. No. 15 of 1979, Mr. D. N. Awasthy, learned counsel for the department, has submitted that the accounting period of the firm had ended on July 31, 1971, and as such on September 15, 1971, the assessee should have known his share of profits in the firm and since he did not file his estimate correctly on September 15, 1971, the provisions of Section 273(1)(a) have been rightly attracted in this case. To fortify his argument, he has cited a decision of the Gujarat High Courtin Mulji Laxmidas v. CIT [1976] 43 Tax 26, wherein penalty imposed under Section 271(1)(a) of the 1961 Act was justified. We have gone through this decision and find that it has no applicability to the facts and circumstances of the present case.

6. In order to determine the question it will be essential to refer to the relevant part of Section 273 of the 1961 Act, which runs as under :

' If the Income-tax Officer, in the course of any proceedings in connection with the regular assessment for the assessment year commencing on the 1st day of April, 1970, or any subsequnet year, is satisfied that any assessee-

(a) has furnished under Section 212 an estimate of the advance tax payable by him which he knew or had reason to believe to be untrue, or......

(e) has without reasonable cause failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of Sub-section (3A) of Section 212,

he may direct that such person shall, in addition to the amount of tax, if any, payable by him, pay by way of penalty... '

7. Section 271 of the 1961 Act is a similar section authorising the imposition of penalty for filing a return in which particulars furnished of his income by the assessee are inaccurate or such particulars are concealed. The relevant part of this section is as follows !

' (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--...

(c) has concealed the particulars of his income or furnished inaccurate particulars of such income,

he may direct that such person shall pay by way of penalty...... '

8. The provisions of Sections 271 and 273 are in pari materia. The imposition of penalty under Section 271 is of penal nature, so is the penalty which is imposed under Section 273 of the Act.

9. After hearing the learned counsel for the parties we are of the considered view that the matters involved in I.T. Ref. No. 15 of 1979 are not res integra. The subject-matter of question No. 1 stands covered by an authoritative decision of the Supreme Court in CIT v. Anwar Ali : [1970]76ITR696(SC) , and we see no distinguishing features as to take the matter away from the cover of the ratio of the said decision as would be presently shown. Prior to the decision in Anwar Ali's case : [1970]76ITR696(SC) , different views were taken as to on whom lies the burden of proving that the income has been concealed or that incorrect particulars have been given. In Anwar Ali's case while making assessment for the year 1947-48. the ITO found certain undisclosed cash deposits aggregating to Rs. 87,000 as having been made by the assessee in the bank during the accounting year on 21st November, 1946. The. explanation of the assessee that he had received certain amounts from his relations and he had deposited them in the joint names of himself and his minor sons was not accepted and the taxing authority came to the conclusion that this amount of Rs. 87,000 represented the income from undisclosed sources. The amount was consequently added to the income of the assessee and he was taxed accordingly. The assessee was unsuccessful up to the Tribunal. Penalty proceedings were started and a penalty of Rs. 66,000 was imposed. The department did not lead any further evidence to show that the return was false except that a sum of Rs. 87,000 had been added to the income which was not disclosed. The Tribunal took the view that penalty proceedings were of a criminal nature and the onus lay on the department to show by adequate evidence that the amount of the cash stated to have been concealed by the assessee was of revenue nature and was assessable as income and that the assessee had concealed it or deliberately furnished false particulars in regard thereto. Then it was observed as follows (p. 699):

'This onus, in the opinion of the Tribunal, was not discharged by the income-tax authorities by showing merely that the explanation given by the assessee in the assessment proceedings was found to be unacceptable. The Income-tax Officer, according to the Tribunal, must find some material apart from the falsity of the assessee's explanation to support his finding that the receipt from undisclosed sources was income. '

10. The Mulji Laxmidas's case [1976] 43 Tax 26, relied on by Mr. Awasthy, is clearly distinguishable and the facts therein are not applicable to this case. In that case, the explanation given by the assessee which was offered even at the stage of the second appeal before 'the Income-tax Appellate Tribunal was that the default was on account of the failure on the part of the three partnership firms to make up their accounts in time and no material was produced even before the Tribunal to show that the assessee was vigilant and diligent. The Tribunal relied upon these and other grounds set out in support of its conclusion that the failure to furnish return within time was without reasonable cause. Their Lordships of the Supreme Court, while accepting the plea of the revenue, observed that on an overall view of all the circumstances of the case, the Tribunal's finding that the default in the case was without reasonable cause was unassailable. To the case in hand, the decisions of this court in Addl. CIT v. Bipan Lal Kuthiala and that of Addl. CIT v. Smt. Triveni Devi : [1974]97ITR390(All) aptly apply. The ratio of these decisions is clearly attracted and has been rightly followed by the Tribunal. The question whether or not the assessee failed without reasonable cause to furnish estimate of advance tax within time is primarily and essentially a question of fact to be decided in each case on a consideration of all the relevant circumstances. In the present case, there is nothing on the record to show if the assessee had deliberately furnished inaccurate particulars. The books of accounts of the firm had not been finalised by September 15, 1971, and in fact, the return of income was filed by the firm only on July 29, 1971. Since the firm's accounts were not closed and the assessee was not in a position to know his share of income from the firm by September 15, 1971, he had to depend upon the estimate of advance tax filed in the case of the firm and it was on this basis that he filed his own estimate of advance tax on the same date on which the firm filed its estimate. There is no mens rea and as such the Tribunal was right in holding that the burden was on the department to show that the estimate was false to the knowledge of the assessee or was believed to be inaccurate by the assessee. The answer to this question would obviously be in the affirmative in view of the decision of the Supreme Court in Anwar Ali's case : [1970]76ITR96(All) , that is, in favour of the assessee and against the department.

11. Now, we advert to question No. (ii) in I.T. Ref. No. 15 of 1979. The ratio of the decision in the case of Addl. CIT v. Smt. Triveni Devi : [1974]97ITR390(All) is clearly attracted and this has rightly been followed by the Tribunal. ' In fact, as pointed out by the Supreme Court in C.A. Abraham v. ITO : [1961]41ITR425(SC) , a penalty is nothing but an additional tax and the principle contained in Clause (iii) of Section 86 would apply as much to penalty as to tax. Even if penalty is regarded as punishment, a person cannot be punished more than once in respect of the same offence.'

12. In Dulichand Laxminarayan v. CIT : [1956]29ITR535(SC) , it was observed that a firm even though it is an assessable unit for the purposes of income-tax is riot a legal person or a juridical entity.

13.Mr. Awasthy relied on a case of the Madhya Pradesh High Court, Amritlal Somabhai v. CIT : [1979]116ITR833(MP) . The case referred to by Mr. Awasthy does not help in resolving the controversy because in that case the question of double penalty was not considered at all and, moreover, Dulichand Laxminarayan's case : [1956]29ITR535(SC) was not referred. On the other hand, Mr. Desai, learned counsel for the assessee, has contended that when a firm has been penalised no penalty can be imposed on its partners. He has placed reliance on the decision in the case of Addl. CIT v. Smt. Triveni Devi : [1974]97ITR390(All) , wherein it was observed as follows (headnote) :

' A firm, even though it is an assessable unit for purposes of income-tax, is not a legal person or a juridical entity. Thus, any tax imposed upon a firm is, in fact, a tax upon the partners. Penalty is nothing but an additional tax and the principle contained in Section 86(iii) of the Income-taxAct, 1961, would apply as much to penalty as to tax. Even if penalty isregarded as punishment, a person cannot be punished more than once inrespect of the same offence. Hence, penalty for concealment of incomecannot be levied once in the hands of the firm and again in the hands of itspartners.

14. Similar view was adopted in the decision of this court in Pearl Woollen Mills v. CIT . With respect, we entirely concur in the view aforesaid. Once that is so, the case of the assessee is clearly within the ratio of the cases upon which reliance has been rightly placed by Mr. Desai.

15. In view of our answer to questions Nos. (i) and (ii) in I.T. Ref. No. 15 of 1979, we answer the questions referred for opinion in I.T. Refs. Nos. 2, 10 to 14, 16, 17 of 1979 and 38, 39, 40 and 46 of 1978, in favour of the assessees and against the department and dispose of the references accordingly. The parties are left to bear their own costs.

B.S. Dhillon, J.

16. I agree.


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