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Shiv Kishan Shiv NaraIn Vs. Addl. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtRajasthan High Court
Decided On
Case NumberD.B. Income-tax Case No. 170 of 1974
Judge
Reported in[1980]121ITR168(Raj)
ActsIncome Tax Act, 1961 - Sections 139(1), 256(2) and 271(1)
AppellantShiv Kishan Shiv Narain
RespondentAddl. Commissioner of Income-tax
Advocates: S.M. Mehta, Adv.
Excerpt:
.....act it is for the revenue to establish that the return was not filed by the assesses within the prescribed time and that the failure without reasonable cause on the part of the assessee to furnish the return was either deliberately made in defiance of law or was a result of conscious disregard of the obligation of the assessee. thus, there is no doubt that the legal burden is on the department to establish by leading some evidence that prima facie the assessee had without reasonable cause failed to furnish the return within the time specified by law, but once the initial burden is discharged by the department, which may be very light, it is for the assessee to show that he had reasonable cause for failing to file the return within the prescribed time. in anwar ali's case..........back the amount of the interest paid by the assessee to its partners in the total income of the assessee-firm, while making the assessment and also gave a notice to the assessee under section 271(1)(a) of the act to show cause why a penalty be not imposed upon him. the assessee did not file any reply to the aforesaid notice. the ito felt satisfied that the assessee was not prevented by sufficient cause from furnishing the return of his income within the time permissible under the law. he, therefore, imposed a penalty of rs. 10,081 upon the assessee under section 271(1)(a) of the act.3. an appeal preferred by the assessee to the aac of income-tax, kota range, kota, was dismissed and a second appeal preferred to the income-tax appellate tribunal, jaipur bench, jaipur, also met the same.....
Judgment:

Dwarka Prasad, J.

1. This is an application under Section 256(2) of the I.T. Act, 1961 (hereinafter referred to as 'the Act'), on behalf of M/s. Shiv Kishan Shiv Narain, Bhawani Mandi, District Jhalawar (hereinafter referred to as 'the assessee').

2. The facts which are not in controversy between the parties are that the assessee did not file any return under Section 139(1) of the Act in respect of the assessment year 1967-68 within the prescribed time or even within the extended time, which was up to 15th August, 1967. Thereafter, anotice under Section 139(2) of the Act was served upon the assessee by the ITO on March 13, 1968. But even thereafter for a period of more than a year, the assessee did not file any return and the return was actually filed by the assessee on December 23, 1969. The return showed that the assessee had paid a sum of Rs. 18,900 by way of interest to the partners, but the same was not added back by the assessee. The assessee disclosed its income for the relevant assessment year at Rs. 24,798 only which was below the minimum taxable limit prescribed at the relevant time in respect of a registered firm, which was Rs. 25,000. The ITO was of the view that if the amount of interest paid by the assessee to its partners had been added back, while computing the total income of the firm, then the income of the firm was certainly above the taxable limit and the firm was duty bound to file its return under Sub-section (1) of Section 139 of the Act. The ITO added back the amount of the interest paid by the assessee to its partners in the total income of the assessee-firm, while making the assessment and also gave a notice to the assessee under Section 271(1)(a) of the Act to show cause why a penalty be not imposed upon him. The assessee did not file any reply to the aforesaid notice. The ITO felt satisfied that the assessee was not prevented by sufficient cause from furnishing the return of his income within the time permissible under the law. He, therefore, imposed a penalty of Rs. 10,081 upon the assessee under Section 271(1)(a) of the Act.

3. An appeal preferred by the assessee to the AAC of Income-tax, Kota Range, Kota, was dismissed and a second appeal preferred to the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, also met the same fate. The Tribunal while dismissing the appeal filed by the assessee before it, hold that not only the assessee did not offer any explanation for not filing the return within the prescribed time as extended, but the assessee could not hold an honest and bona fide belief that there was a borrowing when in fact there was no borrowing.

4. The Tribunal also held that the assessee never advanced the plea thatthe amount in respect of which the interest was paid by the firm to itspartners was in the nature of borrowing from other persons or the HUF,even before the ITO or the AAC, but it was only argued for the first timebefore the Tribunal and as such the same could not be allowed. Theassessee, thereafter, filed an application before the Tribunal for makinga reference to this court for its opinion, but that application was rejectedby the Tribunal by its order dated January 28, 1974, on the ground thatthe questions sought to be referred by the assessee were purely questionsof facts on which no reference was possible. Hence, this application under Section 256(2) of the Act.

5. Mr. S.M. Mehta, appearing for the assessee, strenuously argued before us that the approach of the Tribunal in deciding the appeal was erroneousinasmuch as the Tribunal placed the burden of proof on the assessee while the onus of showing that the assessee was not prevented by reasonable cause from filing the return of income within the prescribed time lay upon the department. According to the learned counsel, the department was bound to lead some evidence at least to show the balance of reasonable cause, on the part of the assessee for not filing the return within the prescribed time and in support of his submission relied upon the decisions of the Kerala High Court in P. V. Devassy v. CIT : [1972]84ITR502(Ker) and the Gujarat High Court in Addl. CIT v. I. M. Paid & Co. : [1977]107ITR214(Guj) . In both the aforesaid decisions, it has been laid down, following the decision of their Lordships of the Supreme Court in CIT v. Anwar Ali : [1970]76ITR696(SC) that the penalty proceedings are of the nature of quasi-criminal proceedings and Section 271(1)(a) of the Act is penal in the sense that its consequences are intended to be an effective deterrent and that it defines an offence and provides a punishment for the same and as such it is for the prosecution to establish all the ingredients of the offence. Thus, in penalty proceedings under Section 271(1)(a) of the Act it is for the revenue to establish that the return was not filed by the assesses within the prescribed time and that the failure without reasonable cause on the part of the assessee to furnish the return was either deliberately made in defiance of law or was a result of conscious disregard of the obligation of the assessee. Thus, there is no doubt that the legal burden is on the department to establish by leading some evidence that prima facie the assessee had without reasonable cause failed to furnish the return within the time specified by law, but once the initial burden is discharged by the department, which may be very light, it is for the assessee to show that he had reasonable cause for failing to file the return within the prescribed time. In Anwar Ali's case : [1970]76ITR696(SC) their Lordships of the Supreme Court observed that although the finding given in the assessment proceedings for determining or computing the tax is not conclusive, yet in the penalty proceedings it is good evidence. It was held in that case that the entirety of the circumstances must reasonably point to the conclusion that the disputed amount represented income of the assessee and that the assessee had consciously concealed the particulars of his income or had deliberately furnished incorrect particulars before penalty could be imposed upon it. The case of Anwar Ali : [1970]76ITR696(SC) related to the provisions of the Indian I.T. Act, 1922, analogous to Section 271(1)(a) of the Act and the same principles have been considered to be applicable to penalty proceedings under Section 271(1)(a) of the Act by the Full Bench of the Gujarat High Court in I. M. Patel's case : [1977]107ITR214(Guj) . In the earlier years, the capital of the partners was excluded from computation of total income and when that firm was dissolved and reconstituted, the balance amount remaining in the capital account of that firmtal in the newly constituted firm, while the other part thereof was shown as investment on behalf of the partners. But then there was no real or genuine borrowing. Thus, the plea of bona fide belief on the part of the assessee that its income was below the taxable limit cannot be accepted as such a belief in fact could not have existed and whatever belief the assessee had could not have been held by it bona fide in the facts and circumstances of the case. Further we are of the view that whether there was a borrowing or not is a pure question of fact and whether in the absence of any borrowing the assessee could still entertain a belief that its income was less than the 'minimum taxable limit, not to say of a bona fide and honest belief in that respect, is also a question of fact. On both these questions, the Tribunal has come to a definite conclusion after a careful consideration of the entirety of the circumstances appearing in the case and no contention was even advanced or otherwise has been put forward before us on behalf of the assessee to contest the findings of fact arrived at by the Tribunal, on the basis of the circumstances appearing in the case. Thus, the Tribunal having decided the matter on the basis of the findings of fact arrived at by it, we do not find that any question of law arises in this case, in respect of which we can call for a reference from the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur.

6. In view of the aforesaid discussion, the application has no force and is dismissed.


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