B. S. DHILLON J. - The following question of law has been referred to us for our opinion at the instance of the revenue by the Income-tax Tribunal, Amritsar:
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the penalty of Rs. 90,600 imposed on the assessee under section 271(1)(a) of the Income-tax Act, 1961 ?'
The brief facts giving rise to this reference are that the assessee-firm known as Mangat Ram Hazari Mal Kuthiala, Pathankot, carried on the business of exploitation of forests and sale of timber. It closed its accounts on the June 30, of each year. Its constitution was as follows:
Name of the partner
(i) Mangat Ram Kuthiala
(ii) Hazari Mal Kuthiala
On May 30, 1958, Mangat Ram Kuthiala, passed away and so the firm was dissolved. By an agreement, dated June 7, 1958, Hazari Mal Kuthiala, in consideration of an agreed amount, transferred his rights and interest in the firm and the business was taken over by Radhakishan and Kewaal Kishan, sons of Mangat Ram Kuthiala, with effect from May 30, 1958. Hazari Mal also died in September, 1960.
A notice under s. 22(2) of the Indian I.T. Act 1922, was issued against Mangat Ram Hazari Mal, Pathankot, and the same was served on Radhakishan on June 11, 1959. Time for filing the return of the assessee-firm for the assessment year 1959-60, relevant to the accounting period ending on May 30, 1959, was extended up to October 31, 1959. However, the return was filed by Radhakishan on January 22, 1964, and the assessment was completed on March 19, 1964.
For the late submission of the return of income, penalty proceedings were initiated against the assessee-firm. In response to the show-cause notice, the assessee raised many contentions. The ITO rejected these contentions and levied a penalty of Rs. 90,600 on the assessee-firm under s. 271(1)(a) read with s. 189 of the I.T. Act, 1961.
On appeal, the AAC held that the penalty was leviable. However, he directed the ITO to levy penalty on the assessee after taking into consideration the relief of Rs. 51,877 granted to it in the quantum appeal.
In second appeal, the Tribunal held that the provisions of the I.T. Act, 1961(hereinafter referred to as 'the Act'), were applicable to the present case. The learned counsel for the parties are agreed that this finding of the Tribunal is unassailable. The Tribunal further held that the provisions of s. 189 of the Act are not attracted in the facts of the present case as, though the firm stood dissolved on the death of Mangat Ram, yet the business was not discontinued, and therefore, the provisions of s. 189 of the Act are not attracted. In the alternative, the Tribunal held as follows:
'Now, in the present case, there is no material on record to prove that the assessee-firm (or Radhakishan as the legal heir of Shri Mangat Ram Kuthalia) was prompted by any deliberate design to delay the filing of the return. There is also no evidence on record to hold that the conduct of Radhakishan was, in any way, contumacious or dishonest. In our opinion, therefore, though there was delay in filing the return, the default on the part of Radhakishan (who had, in fact, no concern with the assessee-firm) was nothing more than a technical or venial breach of the provisions of the Act, specially when no notice was issued by the department to Hazari Mal Kuthiala, partner of the assessee-firm, who was alive till September, 1960. We are, therefore, of the view that, even on merits, no penalty is leviable on the assessee-firm.'
After hearing the learned counsel for the parties, we are unable to answer this question and are of the opinion that the case has to be remitted to the Income-tax Tribunal for deciding the appeal afresh in accordance with law. As already observed, as regards the finding of the Tribunal that the provisions of the new Act will govern the present case, the said finding is unassailable. The learned counsel for the parties are agreed that the provisions of the new Act will be applicable to the present case. As regards the finding of the Tribunal that the provisions of s. 189 of the Act are not attracted to the present case, we are unable to agree. The provisions of s. 189(1) of the Act, as they stand in the new Act, are as follows:
'189. (1) Where any business or profession carried on by a firm has been discontinued or where a firm is dissolved, the Income-tax Officer shall make an assessment of the total income of the firm as if no such discontinuance or dissolution had taken place, and all the provisions of this Act, including the provisions relating to the levy of a penalty or any other sum chargeable under any provision of this Act, shall apply, so far as may be to such assessment.'
The bare reading of the provisions would show that the said provisions are attracted where any business or profession carried on by a firm has been discontinued or where a firm is dissolved.
According to the plain language of the section, it is not necessary that the business or profession of the dissolved firm should stand discontinued and only then provisions of this section will be attracted. Bhagirath Dass, the learned counsel for the assessee, relies on a decision of the Supreme Court in Shivram Poddar V. ITO : 51ITR823(SC) , to contend that with a view to attract this provision, the dissolution of the firm and discontinuance of the business of the firm are two necessary ingredients. We are unable to agree with this contention of the learned counsel. It may be pointed out that the analogous provision of s. 189 of the Act was s. 44 of the 1922 Act. Section 44 was amended in 1958. Before the amendment, the said section was as follows:
'Where any business, profession or vocation carried on by a firm or association of persons has been discontinued, or where an association of persons is dissolved, every person who was at the time of such discontinuance or dissolution a partner of such firm or a member of such association shall, in respect of the income, profits and gains of the firm or association, be jointly and severally liable to assessment under Chapter IV and for the amount of tax payable and all the provisions of Chapter IV shall, so far as may be, apply to any such assessment.'
The Supreme Court interpreted the unamended s. 44 and while interpreting the same, it was held that in addition to the dissolution of the firm, the discontinuance of the business was a necessary ingredient for attracting the provisions of s. 44. As is clear from the language of s. 44, as it stood before the 1958 amendment, the findings arrived at by the Supreme Court were based on the language of the section itself, but the provisions of s. 189 , as they stand now in the new Act, are different and are unambiguous. The said provisions are not capable of any other interpretation than the one that the provisions of the said section are attracted where any business or profession carried on by a firm has been discontinued or where the firm is dissolved. The provisions are attracted in either case. To read the provisions otherwise, would be violating the very plain language of the section, which we are unable to do. Therefore, the decision of their Lordships of the Supreme Court in Shivram Poddars case : 51ITR823(SC) is of no help to the assessee. We are, therefore, of the opinion that the provisions of s. 189 of the I.T. Act are attracted in the present case.
As regards the alternative findings given by the Tribunal, which have been reproduced in the earlier part of the judgment, the said findings also cannot be sustained. The provisions of s. 271 of the Act, which govern the imposition of penalty provide that if the ITO or the AAC in the course of any proceedings under the Act is satisfied that any person has, without reasonable cause, failed to furnish the return, or has without reasonable cause failed to furnish it within the time allowed, he may direct that such person shall pay by way of penalty, the quantum of which has been specified in the section. From the language of the section, it is clear that the authority determining the question of imposition of penalty has to precisely address itself to the question whether the delay in filing the return has been or has not been without reasonable cause. In determining this question, all relevant facts appearing on the record of the case shall have to be taken into consideration. The Tribunal did not address itself to this precise question which was necessarily to be determined. It may be a relevant factor to be taken into consideration that the delay in filing the return was not prompted by the dishonest motive, but the Tribunal shall have to address itself to the question whether the assessee has furnished any explanation for the delayed filing of the return and whether such explanation is enough for the Tribunal to come to the conclusion that the delay in filing the return has been without reasonable cause. No such finding has been given by the Tribunal whereas the Tribunal found as a fact that there was no dishonest intention for the delay in filing the return.
In view of what has been stated above, we are unable to answer the question referred to us and we direct that the Tribunal shall proceed to determine as to whether, on the facts and circumstances of the case, the delayed filing of the return by the assessee was without reasonable causes or not The imposition non-imposition of the penalty will follow the determination of that question. We order accordingly. However, there will be no order as to costs.