Income Tax Appellate Tribunal - Madras
V. Anandmull Jain (Indl.) vs Assistant Commissioner on 28 October, 1994
Equivalent citations: [1995]54ITD469(MAD)
ORDER
S. Kannan, Accountant Member
1. Giving rise, as they do, to certain common issues, these appeals by the assessees were heard together and are disposed of by a common order.
2. The aforesaid assessees are members of one and the same group doing business in money-lending, vehicle financing, sale of fertilizers and hulling of paddy. This group was subjected to search and seizure operations on 31-7-1986. After the search the group came forward with an aggregate disclosure of Rs. 49.99 lakhs, with the rider that the said amount may be spread over the members of the group in a certain fashion. It is a matter of record that the quantum matter was settled on the said lines.
3. To give effect to the said settlement, the assessees of the group, it is common ground, filed revised returns of income, which were all accepted pursuant to the said settlement. In the course of the reassessment proceedings, penalty proceedings were initiated under Section 271(l)(c) and Section 273 of the Income-tax Act, 1961. And the impugned penalties were levied by the Assessing Officer, going on the basis of the additional income disclosed by the assessees in the revised returns and in pursuance of the aforesaid settlement.
4. Thereupon, the assessees moved the Commissioner (Appeals) contending that these were essentially cases of voluntary surrender of additional income and that therefore were not fit cases for levying penalties under Section 271(l)(e)/273 of the Act. The said contention did not find favour with the Commissioner (Appeals), who declined to interfere in the matter and dismissed the appeals filed by the assessees. It is in these circumstances that the assessees are now before us.
5. Early in the course of hearing before us, Shri Devanathan, the learned counsel for the assessee, contended that the assessees having voluntarily agreed to have certain additional amounts brought to charge in their hands and, what was more significant, the department not having collected any evidence to show that the assessees had concealed the particulars of their income, penalties under the said sections could not have been validly imposed in these cases. He also drew our attention to the fact that in other cases, under similar circumstances, the Tribunal had also taken a similar line.
6. On his part, Shri Sriram Singh, the learned departmental representative, relying on the Madras case of CIT v. Krishna &Co.[\ 979] 120ITR144, strongly supported the impugned orders of the lower authorities. He particularly drew our attention to the fact that in the said case the jurisdictional High Court has held that in a case where the assessee himself has admitted that the amount represented his own income, no further evidence would be necessary to show that it was the amount which represented his income and which represented his concealed income. Consequently levy of penalty under sections 271(l)(c) and 273 was justified in such circumstances.
7. Shri Sriram Singh then drew our attention to the fact that, as a sequel to the search and seizure operations that were conducted on 31-7-1986, the members forming part of this group had moved petitions under Section 273A of the Act before the Commissioner of Income-tax, and that the Commissioner had passed, as far back as on 31-1-1994, necessary orders thereon, reducing substantially the penalties earlier levied by the Assessing Officer under the said two sections. Relying on the provisions of Section 273A(5), which in terms stipulate that every order made under Section 273A shall be final and shall not be called into question by any court or any other authority, Shri Sriram Singh contended that the assessees' appeals are fit to be dismissed on this count too.
8. At this stage of the hearing, the Bench specifically elicited the response of the learned counsel for the assessee on the following two questions : (a) Was it a fact that the assessees belonging to the group in question had moved the Commissioner under Section 273A of the Act and that the Commissioner had passed orders under the said section, substantially reducing the penalties earlier levied by the Assessing Officer? and (b) If so, would not the proceedings before us abate on the said footing alone, having regard especially to the fact that under Section 273A(5) every order made under Section 273A shall be final and shall not be called into question by any court or any other authority? The Bench also desired that an abstract be furnished of the penalties originally levied and the quantum of the reduction of the penalties allowed by the Commissioner by the Order(s) passed by him under Section 273A of the Act.
9. In response, the learned counsel for the assessee conceded not only that the assessees of this group had approached the Commissioner under Section 273 A of the Act but also that the Commissioner had substantially reduced the penalties levied earlier by the Assessing Officer. He also filed the abstract called for by the Bench.
Responding to the query at item (b) above, Shri Devanathan vehemently contended that, merely because the Commissioner had passed orders under Section 273A of the Act, the appeals that are now before us would neither abate nor become infructuous. According to him, under the scheme of the Act, the assessee has two avenues open to him, namely, (a) appellate avenue and (b) Section 273A avenue. And there is nothing in the Act to suggest that the assessees are not free to pursue both the avenues simultaneously. For a fact, to a specific query in this regard from the Bench Shri Devanathan strongly averred that, even after the Commissioner had passed an order under Section 273 A of the Act, it was open to the assessee in the pending proceedings before the Tribunal to contend that on merits no penalty was at all exigible.
10. In support of the said proposition he specifically referred to and relied on the Madras case of CWT v. MK.S. Vanavarayar [1980] 122 ITR 184. According to Shri Devanathan, in the said case even though the Commissioner had passed an order under Section 18(2 A) of the Wealth-tax Act, 1957, the court held that the appeals filed by the assessee before the Appellate Assistant Commissioner were competent.
11. Shri Devanathan also contended that the circumstances under which an order could be passed under Section 273A are totally different from those under which the penalties could be levied under sections 271 (1 )(a), 271(l)(c), 273 and the like. Hence, it was open to the assessee to urge in the proceedings pending before the Tribunal that in a given case no penalty is exigible on merits. In this regard he referred and relied on the following reported cases:
1. Jagdish Agarwalv. CWT[ 1983] 143 ITR 941 (MP);
2. CWT v. Kekatpure Ginning & Pressing Factory [1984] 145 ITR 8131 (MP);
3. CWT v. Smt. Gulab Bai Mittal [1983] 141 ITR 755 (MP);
4. CWT v. Basumal & Sons;
5. CWT v. Lt Col. Mirza Mahmood Ali Baig [1985] 152 ITR 7401 (AP);
6. Bindra & Co. v. CIT [1987] 165 ITR 256 (MP);
7. CWT v. KashiRam Lila;
8. B.R. Sound-N-Music v. O.P. Bhardwaj [1988] 173 ITR4332 (Bom.);
9. CWT v. Tumbi Bai [1984] 150 ITR (St.) 78; and
10. Associated Traders v. ITO [1989] 180 ITR 4063 (Ker.).
12. The second limb of Shri Devanathan's argument was that the disclosure came to be made in the wake of the raid that took place on 31-7-1986 and that consequently the assessee is entitled to the benefit of Section 132(4) read with Explanation 5 to Section 271(l)(c) of the Act.
13. The next limb of Shri Devanathan's argument was that during the discussion that took place between the assessee and the Commissioner in connection with the settlement, the assessee gathered the impression that no penalty would be levied. Even so, in the order under Section 273A passed by him on 31-1-1994, the Commissioner had not waived the penalties in their entirety. True, he substantially reduced the penalties. Even so, he did not give the assessee an opportunity of being heard before doing so. Therefore, the order under Section 273A was vitiated by the failure to follow the principles of natural justice - see the Supreme Court case of R.B. Shreeram Durga Prasad and Fatechand Nursing Das v. Settlement Commission [1989] 176 ITR 1694.
14. Dealing then with the merits of the case Shri Devanathan made the following points. The Madras case of Krishna & Co. (supra), was not applicable to the cases before us, because there the Assessing Officer had found certain discrepancies to start with. It was only thereafter that the assessee surrendered the sums in question. It was in those circumstances that the Madras High Court rightly came to the conclusion that levy of penalty under Section 271(l)(c)of the Act was justified in that case. In the cases before us, however, the facts are totally differ it. The Assessing Officer did not collect any evidence to show that the assessees of this group had concealed particulars of their income or had furnished inaccurate particulars of their income. True, there was a search in these cases, but the assessees agreed to the settlement in question "with a view to avoid protracted litigation and to avoid the unpleasantness to a number of creditors". Thus, we have before us a case of voluntary surrender of income and in such cases penalty under Section 271(l)(c)/ 273 is not exigible. In this regard he referred to and relied on the following cases:
1. CIT v. M. George & Bros. [1986] 160 ITR 511 (Ker.);
2. CIT v. Saraf Trading Corpn. [1987] 167 ITR 909 (Ker.);
3. CIT v. Pa-wan Kumar Dalmia [1987] 168 ITR I1 (Ker.);
4. 7. Rasiklal & Co. v. G.K. Mishra [1991] 188 ITR 591 (Bom.).
In this context he also drew our particular attention to the fact that, in similar circumstances, following the Supreme Court case of SirShadilal Sugar & General Mills Ltd v. CIT [1987] 168 ITR 7052, the Tribunal had cancelled the penalties levied in certain cases. He also contended alternatively that it is well settled that where there are two views on the imposition of penalty, the view favouring the assessee should be adopted - see the Supreme Court case of CIT v. Vegetable Products Ltd [1978] 88 ITR 192.
15. In view of the foregoing, therefore, Shri Devanathan, contended that the assessees were entitled to succeed.
16. On his part, the learned departmental representative strongly opposed the aforesaid arguments of Shri Devanathan and contended that the assessees' appeals are fit to be dismissed as having become infructuous, especially in view of the fact that the Commissioner had passed an order under Section 273 A on 31 -1 -1994. In this regard he particularly relied on the Calcutta case of Smt. IchhabaiPanchal v. CWT [1982] 137 ITR 2323, which according to him is directly on the point. He highlighted particularly the fact that the Calcutta High Court has held that the very fact that the assessee had applied for reduction of penalty under Section 18(2A) of the Wealth-tax Act implied that penalty was leviable to start with. In support of the contention that the assessee should not be permitted to take recourse to parallel avenues, he referred to and relied on the Bombay case of Comunidade of Chicalim v. ITO[1992] 196 ITR 170.
17. We have looked into the facts of the case. We have considered the rival submissions. We may at once point out that Shri Devanathan's arguments based on (a) Section 132(4) read with Explanation 5 to Section 271(1 )(c) of the Act, and (b) the failure of the Commissioner to follow the principles of natural justice while passing the order under Section 273A are fit to be rejected, because we are not here concerned with the validity of the order passed by the Commissioner under Section 273A of the Act; nor are we the proper forum before which the issue could be raised. Accordingly we reject the said arguments.
18. As for the contention of Shri Devanathan that even after the passing by the Commissioner of the order under Section 273A of the Act, the appeals that are pending before us would not abate, here again we disagree.
19. As for the Madras case of M.K.S. Vanavarayar (supra), as we see it, that was not a case of parallel proceedings. There the High Court held that the order passed by the Commissioner under Section 18(2A) of the Wealth-tax Act was non est in law. The court therefore held that it was open to the assessee therein to pursue the normal appellate proceedings in relation to the penalty orders passed by the Assessing Officer. This case thus is distinguishable on facts. s
20. As rightly contended by the learned departmental representative, the ratio of the Calcutta case of Smt. Ichhabai Panchal (supra), provides the key to resolve the issue before us. In that case, in response to a show-cause notice issued in that regard, the assessee contended before the Assessing Officer that, there being no concealment of income on his part, the provisions of Section 18(l)(c) of the Wealth-tax Act, 1957 were not applicable. The Assessing Officer, however, took the line, invoking the provisions of Explanation 1 to Section 18(l)(c), that penalty was exigible in that case. Meanwhile, the assessee had applied to the Commissioner under Section 18(2A) of the Act for waiver of penalty and the Commissioner had reduced the penalty to 5% of the minimum amount leviable. The Assessing Officer, therefore, imposed penalty at 5% of the minimum penalty imposable under the Act. Thereupon, the assessee moved the Tribunal, which dismissed the assessee's appeal. The Tribunal was of the view that, on the facts and in the circumstances of the case, the provisions of Section 18(2A) and Section 18(2B) taken together rendered the assessee's appeal unmaintainable. Thereupon, the case reached the High Court of Calcutta by way of reference made at the instance of the assessee. On a consideration of the scheme of Section 18 and 24 of the Act, the High Court held that an appeal would not be competent against an order passed under Section 18(2 A). In that regard Shri Sabyasachi Mukharji, J., as he then was, on page 239 of the report observed :
In order to merit a waiver or reduction in penalty it implies that penalty must be imposable. Therefore, the moment the assessee chooses to go to the Commissioner for a waiver of penalty, in our opinion, he admits the position that conditions under Clause (a), Clause (b) and Clause (c) of Sub -section (1) of Section 18 have been fulfilled. If on that basis any order is passed, then he cannot feel aggrieved by such an order on the quantum of the waiver. Of course, it is well settled that in exercising his power under Sub -section (2A) of Section 18 and subsection (2B) of Section 18 the Commissioner must Act quasi-judicially and if there is an improper exercise of the power, then such an exercise would be liable to be challenged in an appropriate proceeding.
Secondly, the Calcutta High Court distinguished the Madras case of M.K.S. Vanavarayar (supra), because there the Madras High Court had held that there was no valid order of the Commissioner under Section 18 (2 A) of the Act and that consequently an appeal would be competent against the penalty order passed by the Assessing Officer. Thirdly, the Calcutta High Court dissented from the decision of the Karnataka High Court in the case of CWT v. B. Kempanna [1980] 126 ITR 825. In that regard the Calcutta High Court observed :
Reliance, however, was placed on the observations of the Karnataka High Court in the case of CWT v. Kempanna [1980] 126 ITR 825, where it was held, inter alia, that the power conferred on the Commissioner under Section 18(2A) of the Wealth-tax Act, 1957, was only to reduce or waive the amount of minimum penalty imposable on a person under Clause (i) or Clause (iii) of Sub -section (1) of Section 18. The power could be exercised by the Commissioner notwithstanding the default and there being no reasonable cause for the failure to furnish the return within the time prescribed. The question, the court observed, of the existence of a reasonable cause was not within the ambit of Section 18(2A); that inheres in the WTO. The opening words of the section also indicated that it was only notwithstanding anything contained in Clause (i) or Clause (iii) of Sub -section (1) of Section 18 and notwithstanding any other provision in the Act that the Commissioner could act. The provision did not override or obliterate the jurisdiction conferred on the other authorities under the Act. The court further observed that, under Section 18(2B), what was made final was the order made under Section 18(2A), ie., in regard to the quantum of minimum penalty that was directed to be waived or reduced and nothing more. There was no provision that once the assessee filed an application under Section 18(2A) before the Commissioner he waived his other rights. With great respect, we are, however, unable to agree with this conclusion. The expression 'notwithstanding' makes it quite clear, in our opinion, that only on the fulfilment of the conditions where penalty was imposable, ie., under Clause (a),(b) or (c) of subsection (1) of Section 18, that the power of the Commissioner becomes exercisable. If on that basis the Commissioner exercises his power and an order has been passed, then a person cannot be aggrieved by the exercise of that power. In that view of the matter, in view of the language used in Section 18(2B) read with Section 18 (sic), in our opinion, these two powers cannot co-exist, in the facts and circumstances of the case.
21. If we may say so, with respect, the construction which found favour with the Calcutta High Court is the proper construction to place on the relevant provisions of the Wealth-tax Act. Further, the provisions of Section 273 A of the Income-tax Act on the one hand and those of sections 271 and 273 on the other being in pari materia with the corresponding provisions of the Wealth-tax Act, the aforesaid construction would equally apply to the Income-tax Act also. Respectfully following the Calcutta decision, therefore, we hold that once an order is passed by the Commissioner under Section 273A of the Act, the penalty orders passed earlier by the Assessing Officer would, in law, cease to exist. Concomitantly, therefore, the appellate proceedings before the Tribunal relating to the penalty orders passed earlier by the Assessing Officer would become infructuous.
22. We may now notice the other cases referred to and relied on by Shri Devanathan - cases which are listed in paragraph 11 supra.
23. In the case of Smt. Gulab Bai Mittal (supra), the Madhya Pradesh High Court, following the Karnataka case of B. Kempanna (supra), held that even after an order under Section 273A is passed, the appellate proceedings against the penalty levied could be pursued. For the reasons given earlier, with respect, we find ourselves unable to follow either the said Karnataka case or the said Madhya Pradesh case.
24. As for the cases listed at item Nos. 1, 2, 4, 5 and 6, all these cases are distinguishable because there the question that arose for consideration was whether an appeal to the first appellate authority against a penalty order would not be competent by reason only of the fact that the application filed by the assessee under Section 18(2A) of the Wealth-tax Act/273A of the Income-tax Act was rejected by the Commissioner. These cases, therefore, cannot avail the assessee.
25. The Rajasthan case of KashiRamLila (supra)(Item No. 7 of paragraph 11 supra) cannot also avail the assessee. There the court was not concerned with the merits of the case. There the court was concerned with the question of maintainability of an appeal against a penalty order passed by the Assessing Officer pursuant to an order under Section 18(2 A) passed by the Commissioner. In that regard the High Court held that a question of law arose in that case and that question had to be referred to the High Court for their esteemed opinion.
26. The Bombay case at No. 8 of paragraph 11 supra, too cannot avail the assessee because it turned on different set of facts. There the Assessing Officer had levied penalties under sections 271(l)(c) and 273B of the Income-tax Act. An application filed by the assessee before the Commissioner under Section 273 A was rejected in limine by the Commissioner on the ground that the provisions of Section 273A are applicable only to voluntary disclosure of concealed income and not to a case where there is a delay in filing a routine return of income or there is any default in payment of advance tax. Allowing the writ petition filed by the assessee the Bombay High Court held that the power to waive interest and penalty under Section 273 A of the Income-tax Act, 1961 is an independent power which is not affected in any way by the right of appeal and/or revision which granted under the other provisions of the Act and can be exercised by the Commissioner even assuming that penalty and interest have been rightly levied.
27. The Kerala case at serial No. 10 of paragraph 11 supra, too cannot avail the assessee because it turned on the peculiar facts of that case.
28. The stark reality of the situation in the case before us is that rightly or wrongly the assessee moved the Commissioner under Section 273A of the Act, and the Commissioner passed the necessary orders under that section, substantially reducing the penalties imposed by the Assessing Officer. With the passing by the Commissioner of orders under Section 273A, the penalty orders passed by the Assessing Officer in the first instance get supplan tedby the order passed under Section 273 A of the Act. With the result the penalty orders originally passed by the Assessing Officer (which have given rise to the present appeals) no longer exist in the eye of law. It should, therefore, follow that both in law and in logic the present appeals have become infructuous. We hold accordingly.
29. In the view that we have taken of the matter the question of considering the case on merits just does not arise.
30. In view of the foregoing, therefore, we dismiss all the appeals, as having become infructuous.