Income Tax Appellate Tribunal - Indore
Income Tax Officer vs Yugal Vijayvargiya. on 19 July, 1996
Equivalent citations: (1996)56TTJ(INDORE)374
ORDER
S. K. YADAV, J. M. :
This appeal of the Revenue is directed against the order of the CIT(A) pertaining to the asst. yr. 1984-85. Briefly stated, the assessee is a registered firm of contractors. For the asst. yr. 1984-85 the assessee did not file return of income during the time allowed under s. 139(1) of the Act. The Assessing Officer (AO) issued a notice under s. 148 on 22nd June, 1987 which was served upon the assessee as per the Revenue on 30th June, 1987. No return was filed during the time allowed under s. 148. The return was, however, filed on 10th Aug., 1987. As the return was filed late by 36 months, the AO imposed a penalty after initiating penalty proceedings. Dissatisfied, the assessee went in appeal before the CIT(A) who deleted the penalty levied by the AO under s. 271(1)(a) of the Act at Rs. 32,110.
2. The Revenue has assailed the order of the CIT(A) on the ground that the CIT(A) has erred in cancelling the penalty levied by the AO under s. 271(1)(a) at Rs. 32,100. The learned Departmental Representative has submitted that the CIT(A) was not justified in cancelling the penalty relying on the decision of the Honble Supreme Court in the case of Ganeshdas Shriram vs. CIT (1988) 169 ITR 221 (SC). He submitted that the decision of the Honble Supreme Court was not applicable to the instant case. The Honble Supreme Court has held that where the advance tax paid covers the entire amount of tax assessed, there is no question of charging a registered firm with interest even though the return is filed beyond the time allowed. He further submitted that in that case the return was submitted voluntarily by the assessee under s. 139(4) beyond the period mentioned in s. 139(1) or (2) before the assessment and before the end of four assessment years mentioned therein. In the instant case, the assessee did not file the return either within the time allowed under s. 139(1) of the Act or within the period given as per notice issued under s. 148 of the Act. At the most, relaxation in imposing the penalty can only be given when the return could have been filed voluntarily by the assessee. The learned Departmental Representative submitted that the notice under s. 142 could not be called proper notice as this notice cannot be issued after issuance of the notice under s. 148, which can only be issued when the AO takes a cognisance about the escaped income under s. 147 of the Act. The notice under s. 142 can only be issued when the assessee did not make compliance under s. 139 of the Act. By this notice the period for filing the return cannot be extended. The learned Departmental Representative relied on the judgment of the Honble Madhya Pradesh High Court in the case of CIT vs. Bhabuti Contractors (1990) 183 ITR 445 (MP) in which cases discussed by the CIT(A) have been thoroughly discussed and the Honble High Court has come to the conclusion that when the return is not filed within the period allowed under s. 139(1) of the Act and the penalty under s. 271(1)(a) can be imposed though the assessee has paid the advance tax which was much more than the tax payable by the assessee. Apart from this judgment, the learned Departmental Representative has also relied on the judgments reported in CIT vs. Ravi Talkies (1982) 137 ITR 176 (Ori), Jamunadas Mannalal vs. CIT (1985) 152 ITR 261 (Pat) (FB), CIT vs. Aminchand Payarelal Ltd. (1990) 182 ITR 222 (Cal), Kaluram Ladharam vs. CIT (1990) 184 ITR 294 (MP), Delux Publishing Co. vs. Addl. CIT (1981) 127 ITR 782 (MP), CIT vs. Gangaram Chapolia (1976) 103 ITR 613 (Ori) (FB), CIT vs. Hind Motor Cycle Works (1982) 134 ITR 348 (All) and Nemichand Ganeshmal vs. CIT (1980) 124 ITR 438 (MP) and submitted that in all these cases the issue has been thoroughly discussed and the various Honble High Courts are of the view that the penalty can be imposed if the assessee makes a default of not filing the return within the stipulated period given under s. 139 of the Act. The issuance of the notice under s. 139(2) will not dispense with the default committed under s. 139(1) of the Act. He further submitted that the assessee did not make any effort to disclose the reasons why he has not filed the return within the stipulated time either before the AO or before the CIT(A) so that no sympathetic view can be taken for the assessee.
3. The contention of the learned Departmental Representative was strongly rebutted by the learned counsel for the assessee. He submitted that though the return was due to be filed on 30th Sept., 1984 but the delay was condoned by the issuance of notice under s. 148 and as per the notice under s. 148 which was received by the assessee on 5th July, 1987 the return was due to be filed within 30 days, i.e., 4th Aug., 1987 and the return was filed on 10th Aug., 1987 whereby there was a delay of only six days and this being less than one month, no penalty would be leviable. He further submitted that the return in this case was not filed under s. 139(1) of the Act since no tax was payable as TDS having been paid in excess which has resulted in refund of Rs. 13,024 even after the assessment. The counsel for the assessee strongly relied on the judgments in the case of CIT vs. Marfatia & Co. (1982) 136 ITR 159 (MP), CIT vs. Ganesh Das Sreeram (Firm) (1983) 141 ITR 946 (Gau), CIT vs. Builders Engineers Co. (1989) 175 ITR 317 (Raj), P. Venkata Krishnayya Naidu & Sons vs. CIT (1984) 150 ITR 547 (AP), CIT vs. Maskara Tea Estate (1981) 130 ITR 955 (Gau) and Ganesh Dass Sreeram vs. ITO (1988) 169 ITR 221 (SC) and emphatically submitted that in view of these judgments when the assessee has already paid the advance tax which is more than the due tax payable by the assessee, the provisions of s. 271(1)(a) cannot be called for and the penalty imposed by the AO is liable to be deleted.
4. We have heard the submissions of the parties and carefully examined the orders of the authorities below and the judgments cited by the parties. It has become necessary for us to discuss s. 271(1)(a) before proceeding in the matter. Sec. 271(1)(a) is reproduced hereunder :
"271(1). If the ITO or the AAC or the CIT(A) in the course of any proceedings under this Act, is satisfied that any person -
(a) has failed to furnish the return of total income which he was required to furnish under sub-s. (1) of s. 139 or by notice given under sub-s. (2) of s. 139 or s. 148 or has failed to furnish it within the time allowed and in the manner required by sub-s. (1) of s. 139 or by such notice as the case may be."
As per Chaturvedi & Pithisaria book the defaults under s. 271(1)(a) are contemplated of four kinds -
(i) any person who (upto 9th Sept., 1986, without reasonable cause) has failed to furnish the return of total income which he was required to furnish under s. 139(1); or
(ii) any person who (upto 9th Sept., 1986, without reasonable cause) has failed to furnish the return of total income which he was required to furnish by notice given under s. 139(2) or s. 148; or
(iii) any person who (upto 9th Sept., 1986, without reasonable cause) has failed to furnish the return within the time allowed and in the manner required by s. 139(1); or
(iv) any person who (upto 9th Sept., 1986, without reasonable cause) has failed to furnish the return within the time allowed and in the manner required by notice given under s. 139(2) or s. 148.
The words "as the case may be" have been put because all these four cases have been condensed in one paragraph and these words only means that whichever of the four cases may be, the person shall be deemed to have committed default for which penalty may be imposed under s. 271(1)(a). In all these cases, the default continues only till the time the return has been furnished or if no return has been furnished at all, it continues till the assessment is made. It means delay in not filing the return will be considered as per s. 139(1) of the Act though the return may or may not have been filed after the issuance of notice under s. 139(2) or 148 of the Act. If the assessee does not file the return inspite of notice under s. 133(2)/148 of the Act, his offence of not filing the return may be considered more grave. The issuance of notice under s. 148 or 139 will not condone the delay in filing the return under s. 139(1) of the Act. This issue was discussed by the Honble Orissa High Court in the case of Ravi Talkies (supra) in which they have held that where there are deficiency in taxing statute, the provision should be interpreted in favour of the taxpayer, but where the provision is clear, it is not open to the Court to treat the situation as a case of ambiguity and interpret it in favour of the taxpayer. Therefore, the issue of a notice under s. 139(2) does not wipe out the liability of penalty under s. 271(1)(a) for default under s. 139(1) and it cannot be held that the penalty should be confined to the period after the issue of the notice under s. 139(2) or 148 of the Act. We have carefully examined the judgment of the Supreme Court in the case of Ganesh Dass Shreeram vs. ITO (supra) but the facts of that case are different from the instant case as in that case the return was voluntarily filed by the assessee under s. 139(4) of the Act beyond the period mentioned in s. 139(1) or 139(2) before the assessment and after the and of the four assessment years mentioned therein. Moreso that judgment says about charging of interest under the proviso to s. 139(1) of the Act, but this judgment is totally silent in respect of imposition of penalty under s. 271 of the Act in case the assessee commits a default in filing the return within the prescribed period under s. 139 of the Act or even within the period stipulated in the notice under s. 148 of the Act. In these circumstances, we do not find that this judgment will render any assistance to the assessee. We have carefully examined the other judgments cited by the assessee, i.e. (1984) 150 ITR 545 (AP), (1983) 141 ITR 946 (Gau), (1982) 136 ITR 159 (MP) and (1981) 130 ITR 955 (Gau) (supra). We do not find any assistance from these judgments in favour of the assessee as all these judgments were discussed by the Honble High Court of Madhya Pradesh in the case of CIT vs. Bhabuti Contractors (1990) 183 ITR 445 (MP) in which the Honble High Court has held as under :
"While interpreting a provision which deals with penalty, it cannot be lost sight of that the main purpose of such a provision is to ensure compliance with the provisions of the Act. Filing of a return within the relevant time, as contemplated by the Act, is one of the requirements of the Act. Clause (a) of sub-s. (1) of s. 271 of the IT Act, 1961 was apparently enacted to ensure compliance with the requirement of the return being filed within the prescribed period. It seems that, on account of the benefits available to a registered firm, Parliament intended to take a more stringent view in the matter of imposition of penalty if it was a case of a registered firm. Imposing of penalty cannot be made to depend on the payability of the tax. If such a view is taken, it would encourage violation of the provisions of cl. (a) of sub-s. (1) of s. 271 by a registered firm on the pretext that the advance-tax which, according to it, was payable had been paid and, consequently, it was not at all necessary for it to file any return. This obviously would militate against the very purpose of for which s. 271(1)(a) had been enacted. Prior to the amendment of s. 271 by the Direct Taxes (Amendment) Act, 1974, the mere default in compliance with any of the provisions contained in cl. (a), (b) or (c) of sub-s. (1) of s. 271 was sufficient to visit the assessee with penal consequences. If any change in this established rule of interpretation was contemplated by parliament while enacting the amending Act of 1974 which would have had the effect of making a departure from the established interpretation in regard to the corresponding penalty provision in the 1922 Act, it was expected that a specific provision would have been made making the intention of Parliament clear and not to leave the matter to varying interpretations. In this background, it is apparent that it was never intended while enacting the amending Act, that cl. (i) together with its Explanation was to be read as an exception to cl. (a) of s. 271(1). Hence, where a registered firm fails to furnish its returns on time, penalty can be imposed on it under the provisions of s. 271(1)(a). The penalty cannot be cancelled on the ground that the registered firm had not committed default in paying its tax."
We have also examined the judgment in the case of CIT vs. Birla Engineering Co. (supra) but we do not find any assistance from the judgments in favour of the assessee as in that case also the return was voluntarily filed by the assessee. On the other hand, it was held by the Honble Calcutta High Court in CIT vs. Aminchand Payarelal Ltd. (supra) that once a notice under s. 139(2) of the Act is served upon the assessee, there is an obligation to file the return in pursuance of such notice irrespective of the fact whether it has income or loss and the assessee must satisfy the ITO that there was a reasonable ground for the delay in complying with the said notice. The mere fact that an outer limit is fixed by s. 139(4) enabling an assessee to file a belated return and the fact of filing the return under s. 139(4) would not by itself affect the power of the ITO to impose penalty under s. 271(1)(a) particularly when a notice under s. 139(2) is not complied with. The provisions of s. 271(1) (a) can also be invoked even after charging the interest under s. 139(8) for delayed submission of the return. This section is quite unambiguous and requires the straight interpretation of law. The Honble Patna High Court has held in Jamunadas Mannalal (supra), that penalty can be imposed under s. 271(1)(a) for default in filing the return of income within the time even after charging interest under s. 139(8) for delayed submission of the return. Their Lordships have further held that in case the default is committed by a registered firm, the penalty should be calculated on the basis of tax on an unregistered firm even though the firm has paid advance-tax and its entire tax liability as a registered firm has been fully discharged by the payment of advance-tax. This view was also taken by the Honble Madhya Pradesh High Court in Nemichand Ganeshmal vs. CIT (supra), in which their Lordships have held that the imposition of penalty under s. 271(1)(a) of the Act for the delay in filing the return is legal even where the interest is charged under cl. (iii) of proviso to s. 139(1) of the Act and even where the assessee filed the return within the time allowed under the provisions of s. 139(4) of the Act. This view was repeatedly taken in another case by the Madhya Pradesh High Court in the case of Ramlal Agarwal vs. CIT (supra). In case of imposition of penalty under s. 271(1)(a) of the Act, sympathetic view can only be taken in case the assessee satisfied the AO with the reasonable cause of not filing the return within the stipulated period. The burden of reasonable cause under s. 271(1)(a) is on the assessee as the matter is within his special knowledge. This burden can be discharged by preponderance of probabilities as in a civil case and not necessarily by proof beyond a reasonable doubt. These observations were taken by the Honble Orissa High Court in the case of CIT vs. Gagaram Chapolia (supra) but in the instant case the assessee did not make any effort to show any reasonable cause of not filing the return within the stipulated time under s. 139(1) even after receiving the notice under s. 148 of the Act. Instead of disclosing the reasons for not filing the return within the stipulated time, the assessee contended that he had paid the advance-tax much more than the tax due from the assessee. Since no tax was payable, the return was not filed under s. 139(1) of the Act. These are not sufficient grounds for condoning the delay caused by the assessee in filing the return. Once it is established that the return has not been intentionally filed within the stipulated period under s. 139(1) or within the period mentioned in the notice issued under s. 148 of the Act, the AO has no other option but to initiate the penalty proceedings under s. 271(1)(a) of the Act. Once the AO has formed an opinion under s. 271(1)(a) of the Act, penalty has to be imposed according to sub-s. (2) of s. 271 of the Act and as such in the instant case the return was not filed by the registered firm in the prescribed period and as such the registered firm has to be treated as unregistered firm for the purpose of levy of penalty and the tax assessable to be worked out as if it were an unregistered firm and the penalty to be calculated on the tax so determined. This view was observed by the Honble Madhya Pradesh High Court in Delux Publishing Co. vs. Addl. CIT (supra). In another case Kaluram Ladharam vs. CIT (supra) the Honble Madhya Pradesh High Court has held as under :
"In cases covered by s. 271(2) of the IT Act, 1961, in order to calculate penalty, the tax payable by a registered firm has to be determined on the basis that the assessee is an unregistered firm and penalty has to be calculated on the tax so determined. Hence, under the provisions of s. 271(1)(a) r/w s. 271(2), a registered firm would be liable to pay penalty for delay in filing returns inspite of the fact that it had no assessed tax in terms of the Explanation to s. 271(1)(i)(b)."
In this case the Honble High Court has discussed the Supreme Court judgment in the case of Ganesh Dass Sreeram vs. ITO (supra) and further held as under :
"The decision of the Supreme Court in Ganesh Dass Sreeram vs. ITO (1988) 169 ITR 221 (SC) deals with the question of charging a registered firm with interest when the return is filed by it beyond time but the entire amount of tax is paid by way of advance-tax. The Supreme Court held that regard being had to the fact that payment of interest was only compensatory in nature, the question of payment of any compensation did not arise when the entire amount of tax was paid by way of advance-tax. This decision is not attracted in considering the question of imposition of penalty under s. 271(1)(a) of the Act. In Delux Publishing Co. vs. Addl. CIT (1981) 127 ITR 782 (MP) and CIT vs. Bhabuti Contractor (1990) 183 ITR 445 (MP) (Misc. Civil Case No. 43 of 1983 decided on 13th March, 1987 Gwalior Bench), two Division Benches of this Court have held that in cases covered by s. 271(2) of the Act, in order to calculate penalty, the tax payable by the assessee on the income assessed has to be determined on the basis that the assessee is an unregistered firm and penalty has to be calculated on the tax so determined. Following these decisions, it must be held that the Tribunal was right in holding that the assessee was liable to pay penalty under s. 271(1)(a) of the Act r/w s. 271(2) of the Act."
In view of the above observations, we are of the view that the assessee has committed a default of not filing the return within the stipulated period prescribed under s. 139(1) of the Act and even within the period given under the notice under s. 148 of the Act and the reasons of not filing the return within the time were not explained either before the AO or the CIT(A). In these circumstances, the AO has rightly initiated penalty proceedings and has imposed the penalty under s. 271(1)(a) of the Act and 271(2) of the Act. We, accordingly, set aside the order of the CIT(A) and restore that of the AO.
5. In the result, the appeal of the Revenue is allowed.