Income Tax Appellate Tribunal - Kolkata
Income-Tax Officer vs Miss Vasudha Bajoria on 7 November, 1991
Equivalent citations: [1992]40ITD414(KOL)
ORDER
Abdul Razack, Judicial Member
1. These are three departmental appeals filed against the orders dated 28-6-1989 of D.C.(Appeals) deleting penalties levied by the ITO under Sections 271(1)0), 273And 271(1)(c) of the Income-tax Act, 1961.
2. The DC (Appeals)deleted the penalties on the ground that the ITO has not brought in clear cut terms as to when and how a reasonable opportunity was given to the assessee to plead her case before him. It has also been observed by the DC (Appeals) in the impugned orders that if the contentions regarding filing of the application under Section 146 is correct and the ITO has not passed any order in that regard then the application would be deemed to have been accepted and the penalties imposed automatically become redundant.
3. The ground in the appeal by the revenue is that the DC (Appeals) erred in holding that the assessee filed petition under Section 146 and thereby cancelled the penalties levied by the ITO. In order to decide the appeal it is necessary to cull out the facts of the case. The assessee is a minor and her father and natural guardian, Sri Narendra Bajoria filed a return of income of Rs. 5,525 from business. The ITO fixed the case for hearing on 14-1-1983, but since there was no compliance he completed the assessment under Section 144. In the assessment order the ITO has stated that since no evidence was produced along with the return, the investment of Rs.43,729 made in business was made by her father, Sri Bajoria himself and should be considered in his hands. The ITO further observed in the assessment order dated 14-1-1983 that since the return has been filed he completed the assessment on the minor on a protective basis and computed the income at Rs. 49,250 which is inclusive of the addition of Rs. 43,729 being unexplained investment in the business. No appeal was filed against the assessment order of the ITO made under Section 144.
4. It is the case of the assessee that after the completion of the assessment under Section 144 an application under Section 146 dated 9-5-1983 was filed before the ITO on 17-5-1983And according to the provision of Section 146 as it stood then the ITO should have acted upon that application one way or the other. But since no such action was taken by the ITO within 90 days on the application under Section 146 of the assessee it is deemed in law that the said application has been allowed and thus the assessment made on 14-1-1983 did not survive.
5. The ITO also initiated penalty proceedings under Sections 271(1)(b), 273 and also under Section 271(1)(c) during the course of assessment proceedings on 14-1-1983. In continuation to the initiation of the penalty proceedings, the ITO levied penalties of Rs. 148 under Section 271(1)(6), Rs. 1,113 under Section 273 and Rs. 14,840 under Section 271(1)(c). These are the three penalty orders which have been cancelled by the DC (Appeals) as mentioned above against which the department is in appeal before us.
6. The learned departmental representative arguing for the revenue stated that the application made under Section 146 is not on the file of the ITO and no order has been passed thereon. Therefore, it cannot be deemed or assumed that the assessment order made on 14-1-1983 ceased to exist and the penalties became redundant as has been held by the DC (Appeals). He further submits that the DC (Appeals) has not verified the records at all and has unjustifiably stated that no reasonable opportunity was given. It is, therefore, urged by the learned departmental representative that the order of the DC (Appeals) should not be sustained and penalties imposed should be upheld. On the other hand, Sri S.K. Tulsiyan, learned counsel for the assessee, has filed a paper book before us containing 31 pages with a certificate signed by him that documents in the paper book filed before us were filed before the authorities below. He has drawn our attention to application under Section 146 dated 9-5-1983 made to the ITO for reopening the ex parte assessment and also a copy of receipt of filing of said petition in the Income-tax Office, as an evidence of his submission that application was in fact filed. We, therefore, accept the plea of the assessee's counsel that an application under Section 146 was made on 17-5-1983 which is within the time prescribed under Section 146. It is submitted further by the assessee's counsel that according to Sub-section (2) of Section 146 such application made should have been disposed of by the ITO within 90 days from the date of receipt thereof. And since the ITO did not dispose of the said application within 90 days as per Section 146(2) then it shall be deemed, presumed and accepted that the same has been allowed by him and consequently the assessment made on 14-1-1983 ceased to exist and had become nonest. In support of this submission he relies on the judgment of the Bombay High Court in the case of Lachman Chaturbhuj Java v. R.G. Nitsure [1981] 132 ITR 631. It is also submitted that since the assessment made by the ITO was protective and not substantive assessment then it lawfully follows that whatever income declared by the assessee is not considered as her but of some other person then in such an event until a final decision is arrived at as to who is the real earner of the income or investment, till then the assessee is not liable for tax nor exigible for any of the penalties more particularly penalties levied under Sections 273And 271 (1)(c). It is also submitted by the assessee's counsel that the DC (Appeals) was correct in holding that there has been no reasonable opportunity given as laid down under Section 274 before levy of penalties and, therefore, no interference is called for in the peculiar facts of this case.
7. Having heard both the parties and after giving careful considerations to the submissions made and facts of the case we agree with the assessee's counsel that penalties are not leviable at all on the assessee. The provisions of Section 146(2) clearly lay down a mandate that once an application under Section 146(1) is filed the same has to be disposed of by the ITO within a period of 90 days from the date of receipt thereof. Thus, the ITO ought to have acted and disposed of the 146 application of the assessee filed on 17-5-1983 within 90 days thereof. We also agree with the assessee's counsel that if an application is submitted and is not acted upon or disposed of by the ITO then it shall be deemed that the same has been entertained and prayer made therein is allowed. We draw support in this regard from the judgment of the Bombay High Court in the case of Lachman Chaturbhuj Java (supra). In that case the assessee made an application to the WTO for extension of time for filing of the return. But the WTO did not chose to reply to the assessee and completed the assessment ex parte and initiated penalty proceedings. The Bombay High Court had held in that case that if an application is made and if the officer chooses not to reply to the assessee's application then the assessee would be justified in assuming that his application has been allowed. In the instant case also the assessee is justified that the application filed under Section 146 was allowed and that the prayer made therein granted resulting in cancellation of the assessment made on 14-1-1983. Therefore, when the assessment made on 14-1-1983 stood cancelled and order had become non-existent and nonest then the assessee cannot be visited with the penalties initiated during the course of such assessment proceeding and the penalties levied arc, therefore, illegal and liable to be quashed.
8. Looking from another angle also the penalties cannot survive, for the reason that the ITO made the assessment on the assessee on a protective basis though the return was filed by her through her guardian claiming declared income to be her income. The finding given by the ITO in that protective assessment is that the income and investment made is not the income or investment by or of the assessee but that of her father and the ITO has specifically mentioned that the same will be assessed in the hands of the father only. Levy of penalty on such protective assessment is not sustainable at all because it tantamounts to levy of protective penalties. Admittedly there is no concept or warrant of levy of any protective penalties under the provisions of the Income-tax Act, 1961. It has first to be established conclusively whether the income declared is of the assessee or of her father. Until this exercise is done no penalties can be levied on the present assessee on whom protective assessment has been made. No evidence is laid before us by the revenue whether the income and the investment added protectively in the assessment of the assessee has been considered in the individual assessment of her father and final result or decision in the case of assessee's father. The matter, therefore, is still hanging and undecided. We are, therefore, of the opinion that no penalties can be levied on the assessee on protective assessment. We are strengthened in our view by the decision of our Calcutta High Court in the case of CIT v. Super Steel (Sales) Co. [1989] 178 ITR 451 wherein the Calcutta High Court has held as under:
There can be a protective assessment but there cannot be any protective penalty. Before any penalty can be levied, the income has to be assessed as concealed income in the assessment of an assessee. Thereafter, in penalty proceedings, the competent authority has to probe into and decide whether there has been any concealment of income. But, where there is a dispute as to whether such income allegedly concealed would be assessed in the hands of X or Y unless the determination is made by the Income-tax Officer, no charge of concealment can be made against the person in whose hands the income is added on protective basis. He is liable only if it is his income which has been concealed. In other words, a person upon whom a substantive assessment is made would only be liable for penalty provided the conditions precedent for the imposition of the penalty are satisfied.
The Gauhati High Court has also held in the case of Metal Stores v. CIT that protective penalties cannot be levied or sustained. We, therefore, hold that the assessee was not liable for any penalty under Sections 271(1)0), 273 or 271(1)(c) of the Income-tax Act, 1961.
9. In the result, the appeals are dismissed.