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Kashiram Tea Industries Ltd. Vs. Income-tax Officer and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberC.R. No. 1275(W) of 1976
Judge
Reported in[1981]132ITR783(Cal)
ActsIncome Tax Act, 1961 - Sections 2(40), 139, 139(1), 139(2), 143, 144, 147, 148, 271, 273 and 274; ;Constitution of India - Article 139(1)
AppellantKashiram Tea Industries Ltd.
Respondentincome-tax Officer and ors.
Appellant AdvocateDilip Kumar Haldar and ;Sadananda Ganguli, Advs.
Respondent AdvocateAjit Kumar Sengupta and ;Rupendra Nath Mitra, Advs.
Excerpt:
- .....was more than rs. 25,000 such a proceeding could be initiated by the iac ; but two simultaneous penalty proceedings before the ito as also before the iac were unknown to law. according to mr. haldar the initiation of two simultaneous proceedings unmistakably showed the non-application of mind by the ito. as such, mr. haldar argued, both the notices are liable to be cancelled. mr. sengupta, the learned advocate appearing for the revenue, submitted that for the two assessment years in question the ito in the course of the proceedings found that the petitioner had an income of more than rs. 25,000 from undisclosed sources and as such he was entitled to initiate a penalty proceeding under section 271 and to refer the case to the iac for the imposition of penalty, in accordance with.....
Judgment:

Monoj Kumar Mukhekjee, J.

1. Alleging infraction of various provisions of the I.T. Act, 1961, the ITO, Central Circle XXIV, Calcutta, served three sets of notices upon the petitioner in respect of the assessment years 1969-70 and 1973-74. Challenging the competence and jurisdiction of the concerned officer to issue such notices the petitioner moved this court by filing the instant writ application.

2. To appreciate the contentions raised by the petitioner in the application, it will be necessary to detail the nature and contents of the notices. The first set of notices dated November 29, 1975, copies of which have been annexed to the application (annex. ' C ') is based on the premises that in the course of proceedings for the above two assessment years it appeared to the ITO that the petitioner concealed the particulars of its income or furnished inaccurate particulars and the petitioner was directed to appear before him (the ITO) and show cause why an order imposing a penalty should not be made under Section 271 of the I.T. Act. On the selfsame allegations the other notice intimated the petitioner that the case for a levy of penalty under Section 271(1)(c) was being referred to the IAC and that further proceeding in regard to the levy of penalty would take place before the IAC as provided for in Section 274(2) of the I.T. Act. The second set of notices (annex. ' D ') directed the petitioner to appear before the ITO and to show cause why an order imposing a penalty should not be made under Section 273 of the I.T. Act, 1961, for its failure, without reasonable cause, to furnish an estimate of advance tax payable in accordance with the provisions of Section 212(3) in respect of the two assessment years. By the last set of notice (annex. ' E '), the petitioner was informed of the initiation of proceedings under Section 274 read with Section 271 of the I.T. Act for its failure to furnish the returns of income within the time allowed and in the manner required by Section 139(1) of the Act, without reasonable cause, for the above two assessment years.

3. In assailing the first set of notices (annex, ' C '), Mr. Haldar contended that for concealment of income or for furnishing inaccurate particulars of such income, a proceeding for imposing penalty can be initiated by the ITO under Section 271 of the I.T. Act and if the offending income was more than Rs. 25,000 such a proceeding could be initiated by the IAC ; but two simultaneous penalty proceedings before the ITO as also before the IAC were unknown to law. According to Mr. Haldar the initiation of two simultaneous proceedings unmistakably showed the non-application of mind by the ITO. As such, Mr. Haldar argued, both the notices are liable to be cancelled. Mr. Sengupta, the learned advocate appearing for the revenue, submitted that for the two assessment years in question the ITO in the course of the proceedings found that the petitioner had an income of more than Rs. 25,000 from undisclosed sources and as such he was entitled to initiate a penalty proceeding under Section 271 and to refer the case to the IAC for the imposition of penalty, in accordance with Section 274(2) of the Act. To substantiate his contention Mr. Sengupta produced before me the relevant assessment order for the assessment year 1969-70.

4. From the said order it appears that the ITO found, in the course of the assessment proceeding, that the petitioner had an income of Rs. 28,463 from undisclosed sources and decided to initiate proceedings for the imposition of penalty under Section 271 of the Act. On such satisfaction he was fully justified to refer the matter to the IAC under Section 274(2) of the Act for imposing penalty. But, then, having referred the matter in accordance with the provisions of Section 274(2), the ITO had no jurisdiction to ask the assessee to appear before him and to show cause against the imposition of penalty under Section 271 of the I.T. Act. The scheme of the Act clearly envisages that if in the course of proceedings the ITO finds that the assessee concealed particulars of his income or furnished inaccurate particulars of such income, the officer concerned can initiate proceedings against him for the imposition of penalty but if the amount of income determined by the officer on assessment in respect of which the particulars had been concealed or inaccurate particulars had been furnished exceeds a sum of Rs. 25,000 the jurisdiction to proceed against the assessee concerned for the imposition of the penalty is with the IAC. In other words, as soon as the ITO finds in the course of a proceeding for assessment that the offending income exceeds Rs. 25,000 it is incumbent upon him to refer the matter to the IAC who has to continue with the proceeding for levying penalty after giving an opportunity to the assessee to show cause against such imposition. That being the position, the ITO was not justified in calling upon the petitioner to appear before him and to show cause why an order imposing a penalty should not be made under Section 271 of the Act when he was referring the matter to the IAC under Section 274 and intimated the assessee that further proceeding would take place before the latter. The two identical notices issued by the ITO, being No. 11-000-CX-7837/Cal/CC(24)/69-70/1065 dated 29th November, 1975, and No. 11-000-CX-7837/Cal/CC(24)/73-74/1060, dated 29th November, 1975, which form part of annex. 'C', must, therefore, be held to be without jurisdiction and the ITO, the respondent No. 1 in the instant rule, is hereby commanded to forbear from giving effect or taking any steps in pursuance of the said two notices. Inasmuch as I find that the proceedings for penalty were initiated by the ITO on a proper satisfaction recorded under Section 271(1)(c) of the Act, I am unable to accept the contention of Mr. Haldar that the issuance of two simultaneous notices showed non-application of mind by the concerned officer.

5. As regards the second set of notices (annex. ' D '), Mr. Haldar contended that the ITO had no jurisdiction to initiate proceedings against the petitioner under Section 273 of the Act for not furnishing an estimate of the advance tax, as the satisfaction of the officer was not recorded in connection with the regular assessment for the two assessment years in question. Relying upon the definition of ' regular assessment ' in Section 2(40) of the Act, Mr. Haldar submitted that the assessments in question were made in accordance with the provisions of Section 147 of the Act and such assessments could not be ' regular assessments '. Mr. Sengupta, on the other hand, contended that for the purpose of making assessment under Section 147 of the Act the procedure laid down under Sections 143 and 144 has to be followed and it necessarily means that the assessment made under Section 147 is also the regular assessment.

6. The decision of the Patna High Court in the case of the CIT v. Ram Chandra Singh [1976] 104 ITR 77, on which Mr. Haldar relied, fully supports his contention as would be evident from the following observation (p. 82):

'It will be noticed that in Section 273 also the words 'regular assessment ' have been used. It is clear from the various provisions of the 1922 Act as well as the 1961 Act, that a penalty can be imposed for non-furnishing of the estimate of advance tax only in connection with the regular assessment under Section 23 of the 1922 Act or regular assessment under Section 143 or Section 144 of the 1961 Act. As the proceeding for assessment or reassessment under Section 34 of the 1922 Act or under Section 147 of the 1961 Act is not a proceeding in connection with the regular assessment, no penalty can be imposed for non-furnishing of an estimate of the advance tax payable by the assessee.'

7. As against the above decision, Mr. Sengupta relied upon the decision of Deviprasad Kejriwal v. CIT : [1976]102ITR180(Bom) . For deciding the question whether the expression ' regular assessment ' occurring in Section 18A(9) of the Indian I.T. Act, 1922, would cover reassessment proceedings under Section 34(1) of the said Act or whether that expression should be interpreted to mean only the initial or original assessment made by the ITO under Section 23 of the said Act, the Bombay High Court discussed the relevant provisions of the Act in the light of various decisions, including one of the Privy Council and ultimately held (p. 187) :

' Having regard to the above discussion, it is clear that the expression 'regular assessment' occurring in Section 18A(9) would cover cases of reassessment undertaken under Section 34(1) of the Act.'

8. Having given my anxious consideration to the relevant provisions of the Act I am unable to share the views expressed by the Patna High Court and it appears to me that the decision in the case of Deviprasad Kejriwal : [1976]102ITR180(Bom) lays down the correct proposition, though the same is under the Indian I.T, Act, 1922, which did not define 'regular assessment'.

9. Chapter XIV of the Act prescribes the procedure for assessment of income. Section 139(1) casts an obligation upon every person who has a total income exceeding the maximum amount which is not taxable, to furnish a return of his income or the income of any other person in respect of which he is assessable under the Act. Section 139(2) empowers the ITO to issue a notice to any person to furnish a return of his income if he is of the opinion that he is assessable under the Act. Section 141A empowers the ITO to make in a summary manner a provisional assessment where regular assessment is likely to be delayed in respect of returns which have been furnished under Section 139. Section 142 enables the ITO to serve on any person who has made a return under Section 139 or upon whom a notice has been served under Section 139(2) requiring him to furnish necessary information or to produce documents which the ITO may require. Section 143 prescribes the mode of making the assessment in respect of returns made under Section 139. Section 144 entitles the ITO to make assessment to the best of his judgment in case of failure of any person to comply with the requirements referred to therein. The other two provisions of the said chapter which are relevant for our present purpose are, Section 147, which entitles the ITO to assess or reassess income which has escaped assessment, and Section 148 which casts a duty upon the ITO to serve a notice before making such assessment or reassessment. The latter section expressly provides that the notice to be served is to contain all or any of the requirements which may be included in a notice under Sub-section (2) of Section 139 and that the provisions of the Act shall, so far as may be, apply accordingly as if the notice was a notice issued under that sub-section.

10. It will thus appear that if the requirements of Section 147 are fulfilled, the ITO may initiate a proceeding for assessing tax in respect of income that has escaped assessment by issuing a notice under Section 148 and the notice to be so issued shall be deemed to be under Section 139(2) and all the provisions of the Act which would have applied to such a notice will also apply to the notice under Section 148. That necessarily means that the provisions of Sections 143 and 144 will equally apply, thereby making the assessment a ' regular assessment ' within the meaning of Section 2(40) of the Act. In this connection it may not be out of place to mention that ' assessment' has been denned in the Act to mean ' reassessment' and ' regular assessment' has not been defined to mean an initial assessment, in which case, however, the contention of Mr. Haldar might have been accepted. In view of the above discussions, I must hold that the requisite satisfaction to issue the notice for imposing penalty was obtained by the ITO in the course of a proceeding in connection with a ' regular assessment ' and no exception can be taken to the same. The contention of Mr. Haldar challenging the above notice (annex. ' D ') must, therefore, fail.

11. In respect of the third set of notices (annex. ' E '), Mr. Haldar contended that having regard to the fact that a notice under Section 148 was issued, the ITO could initiate a penalty proceeding under Section 271(1) of the Act, for non-compliance with the said notice but not for non-submission of return under Section 139(1) of the Act. In support of his contention Mr. Haldar relied upon a, decision of the Patna High Court in the case of Addl. CIT v. Bihar Textiles : [1975]100ITR253(Patna) , wherein it was held that once a notice under Sub-section (2) of Section 139 of the Act was validly issued, it precluded the penal provision being attracted so far as the failure to furnish the return under Section 139(1) was concerned and only penalty for non-compliance with notice under Section 139(2) could be imposed. Undoubtedly the above decision supports the contention of Mr. Haldar, but then a Division Bench of our High Court in the case of G.S. Atwal and Co. v. CIT : [1979]117ITR171(Cal) dissented from the said decision with these words (p. 173):

' We are unable to agree with the view of the Patna High Court. Our view is that once a default is committed under Section 139(1), the fact that a notice under Section 139(2) has been served would not make any difference to the date of imposition of penalty, namely, the date of default under Section 139(1).'

12. The law so far as our court is concerned is, therefore, settled that a person who is in default under Section 139(1), cannot escape the liability of being penalised for a non-submission on the ground that he submitted a return pursuant to a notice subsequently issued under Section 139(2) or 148.

13. The second line of attack of Mr. Haldar in respect of the above notice was that as the petitioner sustained loss for the relevant year, it was under no obligation to submit return under Section 139(1) of the Act and as such could not be penalised under Section 271. Mr. Haldar submitted that; for initiating a proceeding under Section 271(1)(a), the pre-requisite was that the petitioner was required to furnish a return under Sub-section (1) of Section 139; inasmuch as the petitioner had no assessable income for the relevant years in question, it was under no obligation to furnish such a return. In support of his contention, Mr. Haldar relied upon the judgment of the Allahabad High Court in the case of CIT v. N. Khan and Brothers : [1973]92ITR338(All) , which lays down the proposition that an assessee is not required to file a voluntary return under Section 139(1) if the assessee bona fide believes that his income is less than the amount which is not chargeable to tax, even if the income finally assessed is more than the maximum amount which is not chargeable to tax. Needless to say the question of bona fide belief is one of fact and at this stage such a question can neither be gone into nor decided.

14. In the result, the application fails, except to the extent earlier indicated.

15. The rule is thus disposed of. There will be no order as to costs.

16. Let the operation of the judgment be stayed for a fortnight, as prayed for by the petitioner.


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