Orissa High Court
Commissioner Of Income-Tax vs Tara Trading Co. on 20 December, 1979
Equivalent citations: [1980]123ITR97(ORISSA)
JUDGMENT R.N. Misra, J.
1. On being moved under Section 250(2) of the Income-tax Act of 1961 (hereafter referred to as "the Act'') this court called upon the Cuttack Bench of the Income-tax Appellate Tribunal to state a case and refer the following common question for the opinion of the court:
" Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the order of the Appellate Assistant Commissioner in the matter of deletion of penalty under Section 271(1)(a) of the Act?"
2. The assessee is a firm and the relevant years of assessment are 1968-69 and 1969-70. Returns for the respective years were due by September 30, 1968, and September 30, 1969. The assessee had filed both the returns on March 23, 1971. The ITO, therefore, initiated proceedings under Section 271(1)(a) of the Act and called upon the assessee to show cause why it may not be penalised for delayed filing of returns. On the date appointed by the ITO there was no explanation and the ITO, therefore, proceeded to impose penalty for both the years. The assessee appealed and before the AAC offered its explanation for non-submission of the returns within the time allowed by law. The AAC accepted the explanation as a fact by holding :
" In the case of Hindustan Steel Ltd. v. State of Orissa [1910] 25 STC 211 ; [1972] 83 ITR 26, it Was held by the Supreme Court that an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding. Penalty according to the Supreme Court, will ordinarily not be imposed unless the party acted deliberately in defiance of law or was guilty of dishonest conduct or acted in conscious disregard of its obligations. It was held that penalty will not be imposed merely because it is lawful to do so. A penalty should not be imposed for a mere technical or venial breach of law. In the case of Alimohamad & Co. [1974] 97 ITR 133 the Orissa High Court held that the onus of proving that there was a conscious disregard of a legal obligation by the appellant is on the ITO. In that very case the Orissa High Court decided, the assessee did not comply to the show-Cause notice issued by the ITO and the ITO levied the penalty because the assessee had no explanation to offer to plead against the penalty. Even then the Orissa High Court held that the onus did not shift or vary from the ITO's shoulders to prove that the assessee was guilty of a conscious disregard of the legal obligations under Section 139 of the I.T. Act.
The order of penalty of the ITO is very brief and cryptic. Besides mentioning the bare facts of delay in filing the returns and the consequent default, the ITO did not discuss the possible reasons for the delay and did not place other evidence to prove or show that there was motive or a degree of deliberateness in the delay....."
3. In second appeal at the instance of the revenue, the Tribunal said:
"......We find that the assessee filed the returns voluntarily under Section 139(1) of the Act for both the years on the same date which showed the bona fides of the assessee. We find nothing on the records to suggest that the assessee was guilty of contumacious conduct or deliberate disregarding of its statutory duties so as to come to the conclusion that the assessee failed to furnish the returns within the time without reasonable cause......"
4. In spite of notice the assessee has not appeared in this court. Learned standing counsel places strong reliance on a Full Bench decision of this court in the case of CIT v. Gangaram Chapolia [1976] 103 ITR 613, where it was observed (p. 619):
" Wilful failure to file the return in due time is the gravamen of the offence under Section 271(1)(c) (sic). The burden of proof is on the revenue to establish beyond reasonable doubt that the failure to file the return in due time is wilful. There is a well-marked distinction between the meanings of the expressions 'without reasonable cause' and 'wilfully'. The word ' wilfully' in Chambers' Twentieth Century Dictionary carries the following meanings :' governed only by one's will, obstinate ; done intentionally '. When a person acts wilfully he acts without reasonable cause, but the converse is not true. Not to carelessly or negligently file the return within the time allowed is an act without reasonable cause, but it may not be wilful. The word ' wilful' imports the concept of ' mens rea' while it is absent in the expression 'without reasonable cause'....
On the aforesaid analysis, our conclusion on the express language of Section 271(1)(a) is that the burden of proof is on the assessee to establish that there was reasonable cause for not furnishing the return without the time allowed and that this burden can be discharged on proof of facts and circumstances by preponderance of probabilities as in a civil case and not beyond reasonable doubt."
5. The Full Bench referred to the case of Alimohamad and Co. [1974] 97 ITR 133, and held that the observation in Alimohamad's case that it was for the revenue to establish absence of reasonable cause was contrary to law. It is true that several other High Courts have accepted the ratio in Alimohamad's case [1974] 97 ITR 133 (Orissa) but in view of the decision of the larger Bench we must proceed on the footing that the relevant aspect of the ratio in Alimohamad's case is not good law. To that extent, the AAC as also the Tribunal went wrong. On the facts of this case, however, we think a distinction has to be drawn. The assessee had contended before the AAC that it had been prevented by reasonable cause from filing the returns within the prescribed time and there was no contumacious conduct or deliberate disregard of statutory duties on its part. This stand, as a fact, was accepted by the AAC, as would appear from para. 3 of the statement of the case. It is the settled position in law that even if the assessee had failed to furnish his explanation to the ITO, it was open to him to place materials for the first time before the AAC and he could, on accepting the facts placed, record his satisfaction for existence of reasonable cause. Though the assessee had failed to appear before the ITO, it did offer an explanation to the appellate authority which has been accepted. In para. 4 of the statement of the case, it has been stated:
"......it was contended on behalf of the assessee that the returns could not be filed in time because the accounts were not closed due to the illness of the accountant and that the returns for both the years were filed voluntarily under Section 139(1) of the Act on the same date......"
6. After recording the aforesaid finding, the Tribunal relied upon Alimohamad's case [1974] 97 ITR 133. Even if reliance on the ratio in Alimohamad's case is not available, the finding of fact is clear and we do not think that merely because the ratio in Alimohamad's case [1974] 97 ITR 133 has been overruled so far as this aspect is concerned, the revenue can succeed. This matter seems to have been concluded by a clear finding of fact recorded by the Tribunal that there was sufficient cause for the delay.
7. Our answer to the question, therefore, is :
On the facts and in the circumstances of the case, the Tribunal was justified in upholding the order of the AAC in the matter of deletion of penalty under Section 271(1) of the Act, though it went wrong in relying upon the ratio in Alimohamad's case. [1974] 97 ITR 133, in view of the fact that the same had been overruled by a larger Bench of this court.
8. As the assessee has not appeared at the hearing, there would be no direction for costs.
N.K. Das, J.
9. I agree.