Karnataka High Court
Saraswathi Estate vs Commissioner Of Agricultural ... on 19 April, 2001
Equivalent citations: [2001]251ITR168(KAR), [2001]251ITR168(KARN), 2001 AIR - KANT. H. C. R. 1675
Author: D.V. Shylendra Kumar
Bench: D.V. Shylendra Kumar
ORDERRevisional authority set aside order of appellate authority deleting penalty under section 22(1)(d) Catch Note: Though there was nothing coming in way of revisional authority himself exercising power to levy penalty under section 22, as he was an authority so empowered under section 22 itself--Exercise of power under section 35, for restoring order of penalty levied by an assessing authority which had been set aside erroneously by an appellate authority, is also an order well within powers and jurisdiction of revisional authority and two powers are independent of one another. Held: The concept of an order prejudicial to the interests of the revenue cannot be restricted to cases where there is actually loss of revenue in the matter of quantification of the tax liability. The very object of levy of penalty is to ensure that there is compliance with the requirement of law and the object of the Act, inevitably is the collection of revenue for the state. An order of penalty is an order which is passed as a deterrent to dissuade errant assessees from indulging in acts of suppression of income or furnishing of inaccurate or false particulars of income resulting in loss of revenue to the state. The levy of penalty under the Act has definitely a purpose to achieve namely, to ensure compliance with the provisions of the Act and to discourage non-compliance. If an order of penalty is justified in the facts and circumstances of a given case, it is an order to be sustained and a later order setting aside levy of a justifiable penalty can definitely be said to be an order prejudicial to the interests of the revenue in the proper sense of those words accordingly, the revisional authority is entitled to correct an appellate order if it is found erroneous in the matter of setting aside the order of penalty. Though there was nothing coming in way of revisional authority himself exercising power to levy penalty under section 22, as he was an authority so empowered under section 22 itself, exercise of power under section 35 for restoring order of penalty levied by an assessing authority which had been set aside erroneously by an appellate authority, is also an order well within powers and jurisdiction of revisional authority and two powers are independent of one another. The mere possibility that an authority who has been empowered to levy penalty under section 22, also happens to be the revisional authority exercising powers under section 35 of the Act, will not in any way detract from the powers of the revisional authority exercisable under section 35 of the Act. In this view of the matter, court is not impressed with the submission of assessee that the revisional authority himself having not exercised the powers under section 22, nor having directed the other authorities to exercise the power to levy penalty by recording his satisfaction, the revisional order is bad in law and is liable to be set aside. Application: Also to current assessment year. Decision: In favour of revenue. Karnataka Agrl ITA 1957 s.35 JUDGMENT D.V. Shylendra Kumar, J.
1. The assessee, which is a partnership firm is the petitioner before us in this civil revision petition preferred under Section 55(1) of the Karnataka Agricultural Income-tax Act, 1957 ("the Act" for short).
2. The assessment year in question is 1989-90, relevant for the accounting year ended on March 31, 1989. Though normally the financial year starting from the 1st April of the year and ending with the 31st of March succeeding year is the period of the accounting year, in the instant case, it appears it was of a longer duration. In view of the fact that the period of accounting year was sought to be standardised, to be the 12 months of a financial year with effect from the assessment year April 1, 1989, and as the petitioner-assessee had been following an accounting period other than the accounting year as its previous year during the earlier years, and in view of the transaction brought about with effect from April 1, 1989, the previous year of the assessee with reference to this assessment year comprised a larger period, namely, from July 1, 1987 up to March 31, 1989, i.e., a duration of 21 months, The subject-matter of dispute between the assessee and the respondent-Revenue is the levy of penalty in a sum of Rs. 1,00,517 levied under Section 22(1)(d) of the Act. The subject-matter of this revision petition is also the legality or otherwise of this penalty.
3. The assessee is a coffee planter in Mudigere Taluk and it appears he had been cultivating other cash crops like cardamom, pepper, etc., also. The extent of holding of agricultural land by the assessees is quite considerable. The assessee is a person required to file a return of its agricultural income under Section 18 of the Act in the prescribed form verified in the prescribed manner and setting forth particulars of the total agricultural income, by furnishing the relevant material required for this purpose. It appears that for the relevant assessment year, the assessee filed a return on September 16, 1992, though in law the assessee was required to file such a return on or before the end of July, 1989, and claimed a net loss of Rs. 70,12,091.25. Though the assessee had purported to file a return as required in Form No. 3 which is the prescribed form for the purpose of Section 18 read with Rule 12 of the Karnataka Agricultural Income-tax Rules, 1957 ("the rules" for short), in fact the said return did not factually contain all the requisite information contemplated by law to be accompanied with a return in Form No. 3 and could not have been characterised as a proper return in law.
4. Sri G. Sarangan, learned senior counsel appearing on behalf of the petitioner-assessee, who had occasion to look into the records which had been made available before the court, was fair enough to point out this position and we do appreciate such fairness on the part of learned senior counsel.
5. The significant contents as disclosed from the return filed by the assessee were, while the return as such only indicated the figure of Rs. 70,12,091.25 to be the loss for the relevant period and absolutely nothing else, a very brief statement of agricultural income which had been appended to the return indicated that the income from cardamom was Rs. 22,23,156.75, income from pepper was Rs. 2,28,752 and by adding the two, the total income was shown at a sum of Rs. 24,51,908.75. An amount of Rs. 94,64,000 was shown as cultivation expenditure for the accounting period of 21 months resulting in a net loss of Rs. 70,12,091.25. The statement also indicated the names of the partners Sri K. L. Ananthapadmanabha and Sri K. L. Swamy. It is further mentioned that the payment of a sum of Rs. 11,48,306 has been made to the bank towards interest. Certain copies of bank statements have been appended presumably for justifying the claim for payment of interest.
6. A notice under Section 18(4) of the Act came to be issued by the Agricultural Income-tax Officer, III Circle, Chikmagalur, as on December 22, 1990, calling upon the assessee to produce the accounts and/or documents at the office of the person issuing notice and to cause such production on January 5, 1993.
7. Sri G. Sarangan, learned senior counsel appearing for the assessee, has drawn the attention of this court to the fact that this notice in fact did not spell out what exactly are the documents which were required to be produced as no such documents had been indicated either on the face of the notice or behind it as recited in the printed form of the notice.
8. In response to this notice, it appears, the assessee's representative, namely, Sri C. S. Kote, chartered accountant of the assessee, appeared and submitted that the assessee was unable to produce the books of account of the firm since they were seized by the Central income-tax authorities, but nevertheless, produced a copy of the profit and loss account of the assessee which contained details of income and expenditure, etc. It appears, thereafter the Assessing Officer had issued a notice in Form No. 5, dated April 22, 1993, indicating therein that the return as had been filed by the asses-see was not satisfactory nor gave full and true particulars and as such it was proposed to be rejected and the Assessing Officer further proposed to pass an assessment order to the best of his judgment as indicated in the notice issued. The assessee did respond to this proposition notice and by its reply dated April 28, 1993, amongst other things indicated that the expenditure incurred for the entire period of 21 months was at a sum of Rs. 8,73,942.50 as indicated in the profit and loss account and that may be considered. It is in this reply that the assessee, for the first time, had admitted that the deduction towards expenditure may be at a sum of Rs. 8,73,942.50 though in its return filed earlier, such expenditure was claimed at a sum of Rs. 94,64,000. Quite naturally, this huge difference in the head of expenditure did bring about a substantial difference in the tax effect on the assessee under the Act and, ultimately, the Assessing Officer concluded the assessment as per order dated May 20, 1993, whereunder a total taxable agricultural income was assessed at a sum of Rs. 11,70,118.64 and the tax liability in respect of such an agricultural income was determined at a sum of Rs. 5,29,810.
9. It appears the said assessment order had been appealed against by the assessee and, ultimately, the tax liability had been redetermined at a sum of Rs. 1,00,517 for the assessment year in question pursuant to such appeal at the instance of the assessee. But, what is significant for the purpose of this revision petition is the question of levy of penalty on this amount of tax liability. It is not clear from the records before us as to at what point of time the liability of the assessee for the assessment year 1989-90 got crystallised at a sum of Rs. 1,00,517, but what is significant is that the assessee was issued with a notice dated April 8, 1996, under Section 22(1)(d) of the Act by the Assessing Officer, namely, the Assistant Commissioner of Agricultural Income-tax, III Circle, Chikkamagalur, proposing levy of penalty for contravention of the provisions of Section 22 of the Act. This notice had been issued much later in point of time from the date of the assessment order and did not form part of the assessment proceedings as such. The proposed penalty was sought to be resisted by the assessee pointing out that the Assessing Officer having not initiated penalty proceedings while concluding the assessment, penalty cannot be levied by initiation of proceedings later and not as part of the assessment order. The Assessing Officer did confirm the proposition by levying penalty of Rs. 1,00,517.
10. The assessee, being aggrieved, had carried this order of levy of penalty by way of appeal before the Joint Commissioner of Commercial Taxes (Appeals), Shimoga, and met with success. The appellate authority being satisfied that this is not a fit case for levy of penalty, particularly when the assessee itself had come forward to disclose the correct amount of expenditure incurred as culled out from the profit and loss statements produced before the Assessing Officer and the initial claim towards the head of "cultivation expenditure" incurred for the period at a sum of Rs. 94,64,000 being merely based on estimation in the absence of any books of account with the assessee which had come to be seized by the income-tax authorities, held that there is no attempt on the part of the assessee to either suppress particulars of income or deliberately furnish inaccurate particulars.
11. The revisional authority, namely, the Additional Commissioner of Commercial Taxes, Mysore Zone, Mysore, being of the view that this appellate order dated September 17, 1997, passed by the Joint Commissioner of Commercial Taxes (Appeals) was erroneous and prejudicial to the interests of the Revenue, required to be set right by the exercise of his powers under Section 35 of the Act, issued a show-cause notice in this regard- The assessee was afforded an opportunity of hearing and the assessee did file its objections and was also heard in person. Thereafter, the revisional authority passed an order dated April 11, 1998, in exercise of its powers under Section 35 of the Act, setting aside the appellate order and restoring the order of penalty, as imposed by the Assessing Officer. It is aggrieved by this order of the revisional authority that the petitioner is before this court seeking for revision of the said order in the exercise of this court's power under Section 25 of the Act.
12. Sri Sarangan, learned senior counsel appearing on behalf of the asses-see-petitioner, has put forth several grounds to attack the validity of the revisional order. His first and foremost ground of attack is that, the levy of penalty under Section 22(1)(d) of the Act is justified only when an assessee indulges in an act of conscious suppression of agricultural income or has deliberately furnished inaccurate particulars of such income and in the instant case, on the contrary the assessee itself having come forward with trie profit and loss account statements which indicated the correct amount of expenditure incurred by the assessee towards cultivation expenses, though this was not the same amount as had been declared by the assessee in its return of income and the Department, on the other hand, having not unearthed any suppression on the part of the assessee, there is absolutely no case made out by the Department to hold that the assessee had consciously suppressed this agricultural income nor can it be said to have furnished inaccurate particulars of its income. What learned senior counsel strongly urges is that the act of furnishing the correct amount of agricultural expenses is a voluntary act on the part of the assessee and not because of any detection or due to any efforts on the part of the Departmental officials and as such does not come within the scope of the provisions of Section 22(1)(d) of the Act.
13. Elaborating the submission, learned senior counsel submits that the return and the particulars furnished along with the return, were bona fide and based on estimation as the assessee was handicapped in the absence of books of account which had come to be seized by the income-tax authorities and when once the assessee realised that the actual amount of agricultural expense was much lower, as found from the statement of profit and loss account, this position had been brought to the notice of the Assessing Officer and this being a voluntary act on the part of the assessee, no motive can be attributed to the assessee to characterise the inaccurate figures furnished in its original return as either an act of conscious suppression of agricultural income or a deliberate intention to suppress the particulars. Learned senior counsel submits that in this view of the matter, there is absolutely no justification for levy of penalty and the levy of penalty being not a mere mechanical act, for any technical infraction of the provisions of the Act, but to be visited upon the assessee only for an act of conscious concealment and for an act of deliberate furnishing of inaccurate particulars of income, when the conduct of the assessee clearly did not indicate any attempt on the part of the assessee to evade payment of tax, no penalty could have been levied on the assessee, more so when the Department had not placed any other material justifying the levy of penalty pointing out any other compelling circumstances for the same.
14. Learned senior counsel has relied upon the decision of the apex court in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 ; [1970] 25 STC 211. Sri Sarangan, learned senior counsel, elaborating his submission on this aspect, has submitted that a mere incorrect entry in the books of account or incorrect information furnished in the return as in the instant case, does not in itself lead to the conclusion that it was a deliberate act intended to conceal particulars of income nor can it be inferred that it had been deliberately so written with a motive to make an illegal gain. What learned counsel stresses upon is a mere incorrect entry in itself does not lead to an inference of intended and conscious violation of law calling for levy of penalty. In support of this line of argument, Sri Sarangan, learned senior counsel relied upon the decision of a Division Bench of the Bombay High Court in the case of CIT v. Gokuldas Harivallabhdas [1958] 34 ITR 98, a decision rendered in the context of an interpretation of Section 28(1)(c) of the Indian Income-tax Act, 1922 ("the IT Act 1922" for short), which provide for levy of penalty. That was a case where a credit entry which had been brought into the books of account of the assessee was disbelieved and in view of the provisions of the income-tax law, that was deemed to be the income of the assessee, and as such brought to tax as "undisclosed income". After treating that as "undisclosed income", as a consequence, the Income-tax Officer sought to levy penalty. The court made a distinction between the assessment proceedings and penalty proceedings and held that merely because a sum was treated to be "income" of the assessee, though the assessee had not declared it, it did not mean that the Department had positively proved that the assessee had actually earned such income and further failed to disclose that income with the intention to avoid payment of tax on the same. In this view of the matter, the court came to the conclusion that levy of penalty was not justified. In the instant case, the particulars as disclosed by the assessee, the conduct of the assessee and the positive indication on the part of the assessee, clearly indicate that the act of the petitioner-assessee in claiming the agricultural expenses at a sum of Rs. 94,64,000 is not an innocuous act and the assessee merely estimated such a sum in the absence of books of account. In fact, there are two reasons not to accept the theory put forward on behalf of the assessee. One is that even while filing the return of income the assessee did have in its possession, the statement of profit and loss account. Nevertheless, the assessee, though aware that it did not have its books of account, did not make any reference to this in the statement of agricultural income appended to the Form No. 3 return of income filed by it. The act of the assessee in furnishing the different figures towards agricultural expenses cannot also be construed as a voluntary act inasmuch as, the assessee came up with this information only after a notice was issued by the authorities calling upon the assessee to produce proper particulars with reference to the return that had been filed by the assessee. These aspects apart, what is more important is, the assessee never came forward to file a revised return of his income disclosing the true and correct particulars. The assessee cannot be oblivious of the implications of claiming an astronomically huge sum of Rs. 94,64,000 towards agricultural expenses as against a sum of Rs. 6,95,703.11 which came to be allowed towards agricultural expenses ultimately by the Assessing Officer.
15. Under Section 18(2B) of the Act, the assessee is entitled to file a return of its income, have the same determined by the Assessing Officer and it will enable the assessee to carry forward such loss to be absorbed as against the agricultural income of subsequent years up to a maximum of six years. The assessee in fact did file a return of "loss". The significance of filing a return of "loss" cannot be termed as an act of innocence or inadvertence and the assessee is not totally ignorant in the matter of its statutory obligations under the Act. The assessee is being regularly assessed under the provisions of the Act and it cannot be said that the assessee was totally unaware of the implications of claiming a loss of a sum of Rs. 70,12,091.25 in its return. Accordingly, we are of the view, that the decision relied upon by learned counsel does not in any way farther the case of the petitioner.
16. Sri G. Sarangan, learned senior counsel, has also relied upon the decision of the apex court rendered in CIT v. Anwar Ali [1970] 76 ITR 696, which again was a case arising under the provisions of the Indian Income-
tax Act, 1922, levying penalty under Section 28 and in our considered view, the ratio laid down in this case is not applicable to the facts and circumstances of the case before us.
17. Sri G. Sarangan, learned senior counsel, also brought to our notice two other decisions of the apex court again rendered in the context of levy of penalty under Section 28 of the Indian Income-tax Act, 1922, namely, cases reported in CIT v. N. A. Mohamed Haneef and CIT v. Khoday Eswarsa and Sons . As discussed above, these are again cases where on the facts it was found that there was no material to hold there was any conscious act of suppression on the part of the assessee nor had it been positively proved that the sum in question was actually income of the assessee which it had deliberately sought to conceal.
18. Two other cases relied upon by Sri G. Sarangan, learned senior counsel are-a Division Bench decision of the Jarnmu and Kashmir High Court rendered in the case of CIT v. Pardeep Kumar [2000] 246 ITR 94, in the context of the provisions of Section 271(1)(c) of the Income-tax Act, 1961, providing for penalty for concealment of income or furnishing of inaccurate particulars of income. This again is a case where on the facts it was found that certain incorrect return which had been filed by the assessee, namely, omission to disclose certain commission income of the assessee in the original return was not intended and as such there was no justification for levy of penalty. The High Court took this view following the ratio laid down by the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa . The other decision relied on by learned senior counsel in this line of submission is the decision of a Division Bench of the High Court of Madras reported in CIT v. Sri Rajram Cloth Stores . This again was a case where the assessee had filed a return of income initially disclosing an income of Rs. 8,274 which on the filing of a revised return by the assessee itself, got increased to Rs. 22,970. Pursuant to the filing of such revised return, the assessing authority imposed a penalty which came to be set aside by the Tribunal and on a reference to the High Court, the finding of the Tribunal was confirmed holding that there was no discovery by the Department of any act of suppression or concealment on the part of the assessee and, on the other hand, when the assessee himself had come forward with a voluntary return there was no justification for levying penalty. However, in the instant case before us, the assessee, initially had filed a very sketchy return which neither conformed to the requirement of law nor gave full and true particulars of all facts. The assessee did not on its own come forward with any correct particulars even thereafter, but only in response to a notice issued by the Department, placed the statement of profit and loss, which it had in its possession even earlier also. It was only thereafter the assessee reconciled to the position that the claim of expenditure at a sum of Rs, 94,64,000 as had been indicated in its statement along with the return, was not correct, but, on the other hand, restricted its claim towards agricultural expenditure to a sum of Rs. 11,98,449.22, as indicated in the statement of profit and loss account. Such an act cannot be characterised as a voluntary act. In fact, the assessee did not come forward to file a revised return at any point of time. On the other hand, the original return remained as it is. Under the circumstances, it is very difficult for us to accept the submissions on behalf of the assessee that there was absolutely no contumacious conduct on the part of the assessee to justify the levy of penalty. Conduct justifying the levy of penalty is a matter for inference under the circumstances of the case and not a thing which is written in so many words anywhere. In the instant case, the conduct of the assessee is definitely not one indicating total innocence or mere inadvertence on the part of the assessee, but definitely much more than that.
19. However, Sri G. Sarangan, learned senior counsel, has drawn our attention to another decision rendered by a Division Bench of the Madras High Court in the case of CIT v. Popular Lunghi Co. , which was a case arising under the provisions of the Income-tax Act, 1961, and in the context of levy of penalty under Section 271(1)(c) of the Act. Learned senior counsel relied upon this decision for the proposition that where disclosure of a correct income is voluntary and not at the instance of the Revenue, no penalty could be levied. Even accepting this proposition as a correct proposition of law, on the facts of the present case, the assessee cannot be exonerated of the consequence of levy of penalty totally, inasmuch as the act of furnishing of the agricultural expenditure at a lower sum of Rs. 20,49,623.25, cannot also be characterised as a voluntary act inasmuch as the assessee came forward with this figure only in response to a notice issued by the Department in the context of incorrectness of the return filed by the assessee. The difference between the two figures is also so very vast that it cannot be accepted that the initial claim was as a result of either innocence or inadvertence. Even applying the ratio laid down by the Division Bench of the High Court of Madras in the case of CIT v. Popular Lungi Co. the levy of penalty in the instant case has to be upheld. In that case, a Division Bench of the Madras High Court, held that if the facts as indicated and as admitted by the assessee on record were sufficient to come to the conclusion that there was concealment of income and having regard to the provisions of Section 271(1)(c), proviso, the levy of penalty was justified and held that cancellation of the penalty by the Tribunal was wrong. In the instant case also, the material on record itself is sufficient to draw the inference that the assessee had knowingly furnished inaccurate particulars in its return of income particularly in claiming the quantum of agricultural expenses. In this view of the matter, we are unable to accept the submission of learned senior counsel on the aspect of levy of penalty being illegal in the absence of any positive proof or material unearthed by the Department.
20. The next ground of attack on the order levying penalty is that the order levying penalty is not one forming part of the assessment order, not one which immediately followed the assessment order, but after a considerable time, must be as an afterthought and not as an immediate consequence of the assessment order. Sri G. Sarangan, learned senior counsel, has drawn the attention of the court that the proposition notice for levy of penalty and the order of penalty is almost three years after the finalisation of the assessment and moreover, the very show-cause notice calling upon the assessee to show cause as to why penalty should not be imposed, clearly indicates that there was no application of mind on the part of the concerned authority for initiation of proceedings for levy of penalty and as such the penalty proceedings are bad in law.
21. Learned senior counsel further submits that the assessing authority initially had occasion to look into the corrected figures relevant for the agricultural expenses incurred by the assessee and being satisfied about the same and being satisfied about the bona fides of the assessee, had concluded the assessment and the Assessing Officer himself did not find any reason or necessity for issue of penalty notice in respect to the assessment proceedings and accordingly did not issue any such notice and the Assessing Officer having also not recorded any facts and circumstances indicating justification or necessity warranting levy of penalty at the time of concluding the assessment, a subsequent notice, that too issued after a gap of three years from the date of passing of the earlier order, is not at all justified on the facts and in this view of the matter, learned senior counsel submits that the levy of penalty pursuant to issue of such a show-cause notice itself is vitiated and as such the revisional order passed by the Additional Commissioner restoring such penalty also is required to be set aside.
22. In support of such submission, learned senior counsel has relied upon the decision of the apex court in CIT v. S. V. Angidi Chettiar [1962] 44 ITR 759. In that case, the Supreme Court was concerned with a situation wherein penalty had been levied under Section 28(1)(c) of the Indian Income-tax Act, 1922, on a firm, subsequent to the dissolution of the firm and about the validity of such an order of penalty which had come to be passed not in the course of the assessment order, but much later. The debate in the said case revolved around the wording of Section 28(1)(c) of the Indian Income-tax Act, 1922, whereunder the requirement of law was that the satisfaction of the officer levying penalty was one which should have been arrived at in the course of the assessment proceedings, justifying the levy of penalty. In that case, the Assessing Officer had at the foot of the assessment order indicated that the action under Section 28 had been taken for concealment of income. However, the levy of penalty was not immediately thereafter, but a little later. The High Court, being of the view that the actual initiation of penalty proceedings being not in the course of the assessment proceedings and as such was not permitted in law, it set aside the levy of penalty. The apex court, while reversing this order of the High Court, held that the High Court was in error in assuming that a penalty under Section 28(1)(c) of the Act could not be imposed unless it was forming part of the assessment proceedings and in continuation of the same. The apex court, pointed out that the requirement of law was only that satisfaction should have been reached in the course of the assessment proceedings and actual levy of penalty could be initiated later also and it was one such case. It also clarified that an order of penalty could be passed in respect of the firm even after the dissolution of the firm.
23. However, in the instant case, penalty which had been levied under Section 22(1)(d) of the Act is impeached by learned counsel on the ground that the officer who has concluded the assessment proceedings himself having not recorded any satisfaction and the penalty proceedings being not in continuation of the same, the order levying penalty is bad in law. Section 22 of the Act reads as under :
"Penalty for concealment of income.--(1) If the Assistant Commissioner of Agricultural Income-tax or the Joint Commissioner or the Commissioner is satisfied that any person-
(a) has without reasonable cause failed to furnish the return of his total agricultural income which he was required to furnish under Subsection (2) of Section 18 ; or
(b) has without reasonable cause failed to furnish such return within the time allowed and in the manner required by Sub-section (1) of Section 18 or by a notice served under Sub-section (2) of that section ; or
(c) has without reasonable cause failed to comply with a notice issued under Sub-section (4) of Section 18 or under Sub-section (2) of Section 19 ; or
(d) has concealed the particulars of his agricultural income or has deliberately furnished inaccurate particulars of such income ;
he may direct that, such person shall pay by way of penalty, in addition to the amount of agricultural income-tax, if any, payable by him, a sum not exceeding that amount :
Provided that-
(a) no penalty shall be imposed under this sub-section upon a person who has failed to furnish a return under Sub-section (1) of Section 18, if he proves that he has no income liable to tax ;
(b) where a person has failed to comply with a notice under Sub-section (2) or Sub-section (4) of Section 18 or under Sub-section (2) of Section 19 and proves that he has no income liable to tax, the penalty imposable under this sub-section shall not exceed ten rupees ;
(c) no penalty shall be imposed under this sub-section upon any person assessable as the agent of any person not resident in the State of Karnataka for failure to furnish the return required under Section 18 unless a notice under Sub-section (2) thereof or under Section 35 has been served on him.
(2) No order under Sub-section (1) shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard.
(3) No prosecution for an offence against this Act shall be instituted in respect of the same facts on which a penalty has been imposed under Sub-section (1).
(4) If the Commissioner or Joint Commissioner makes an order under Sub-section (1) he shall forthwith send a copy of the same to the Assistant Commissioner of Agricultural Income-tax concerned."
24. The opening words of Sub-section (1) of Section 22 of the Act indicate that if the Assistant commissioner of Agricultural Income-tax or the Joint Commissioner or the Commissioner is satisfied that any person-
(a) has without reasonable cause failed to furnish the return of his total agricultural income which he was required to furnish under Sub-section (2) of Section 18 ; or
(b) has concealed the particulars of his agricultural income or has deliberately furnished inaccurate particulars of such income ;
he may direct that such person shall pay by way of penalty, in addition to the amount of agricultural income-tax, if any, payable by him, a sum not exceeding that amount."
25. From the very reading of this provision it is clear that the power to levy penalty is conferred on an Assistant Commissioner of Income-tax or a Joint Commissioner of Income-tax or the Commissioner of Income-tax. The requirement of law is that such authority who is levying the penalty should be satisfied about the existence of conditions in Sub-section (1)(a) of Section 22 or Sub-section (1)(d) of Section 22 of the Act. Notice had been issued by the Assistant Commissioner of Agricultural Income-tax in the instant case. The language of Section 22 does not in any way indicate that such satisfaction should have been in the course of the assessment proceedings. In fact, it cannot be so in all cases, inasmuch as the power to levy penalty can be exercised even by the Joint Commissioner or the Commissioner, who themselves may not be the Assessing Officers in the first instance, but may have occasion to look into the legality or otherwise of an assessment order in the exercise of their suo motu revisional powers or even otherwise. So, the requirement of satisfaction of the officer levying penalty in the course of the assessment order is not found under Section 22 of the Act. The section also does not impose any time limit for passing an order of penalty nor does it indicate that either a proposition notice for the levy of penalty or the order of penalty in itself should be in quick succession to the passing of the assessment order. There is considerable difference between the wording of Section 22 of the Act and Section 28(1)(c) of the Indian Income-tax Act, 1922. On the other hand, a perusal of the show-cause notice issued by the assessing authority does indicate that the authority issuing the show-cause notice is aware that the assessee had furnished inaccurate particulars with regard to the actual figures of agricultural expenditure incurred by it in the return filed by the assessee. The show-cause notice also indicates the awareness on the part of the authority as to whether the assessee had failed to pay the tax which it was liable to pay and that the assessee had contravened the provisions of Section 22 of the Act. It cannot be said that the authority issuing the show-cause notice is totally obvious to the facts of the case nor can it be said that the show-cause notice had been issued without the officer concerned being at all satisfied for issuance of the same. In this view of the matter, we are unable to accept the submissions made by Sri G. Sarangan, learned senior counsel with regard to the proposition that as there is a time-gap between the passing of the assessment order and issuing of the show-cause notice for levying penalty, the proceedings are vitiated. In this context, Sri G. Sarangan, learned senior counsel also brought to our notice another decision of the apex court rendered in the case of D. M. Manasvi v. CIT [1972] 86 ITR 557. In our considered view, the law laid down by the apex court in this decision, in no way furthers the case of the petitioner and does not advance the case of the petitioner. The decision relied on in support of the proposition canvassed by learned senior counsel, on the other hand, lends support to the action initiated by the Department in issuing the show-cause notice for levy of penalty even subsequent to the passing of the assessment order. In fact, the apex court had occasion to uphold the levy of penalty levied under Section 271(1)(c) and Section 274 of the Income-tax Act, 1961 in D. M. Manasvi's case , holding that there was no need to issue a notice by the Income-tax Officer to the assessee indicating his satisfaction for the levy of penalty so arrived at in the course of the assessment proceedings and that the Income-tax Officer was not obliged to issue a notice to the assessee before arriving at such satisfaction justifying the issue of proposition notice for levy of penalty as the very issue of proposition notice indicates the satisfaction on the part of the Assessing Officer.
26. However, Sri G. Sarangan, learned senior counsel, has brought to our notice a Division Bench decision of the Delhi High Court rendered in the case of Jiten and Co. v. Sales Tax Officer , in support of his submission that the Delhi High Court having followed the ruling of the Supreme Court rendered in several cases and having applied the ratio of the decisions as enunciated by the apex court while interpreting the provisions of Section 28(1)(c) of the Indian Income-tax Act, 1922, and the provisions of Section 271(1)(c) of the Income-tax Act, 1961, to the corresponding sections of the Bengal Finance (Sales Tax) Act, 1941. as extended to the Union Territory of Delhi, for levy of penalty and the Delhi High Court having taken the view that the satisfaction of an assessment order recorded in the course of the assessment proceedings cannot be held to be equivalent to the satisfaction of a successor officer, who had issued the proposition notice to levy of penalty and had held that unless the successor officer who had become the assessing authority and who had initiated the penalty proceedings himself having not recorded his satisfaction, no reliance can be placed on the satisfaction which had been recorded by his predecessor and as such having invalidated the penalty proceedings, the same reasoning should apply to the instant case and the ratio of the ruling laid down by the apex court in the context of the interpretation of the penal provisions of the Income-tax Act, 1961, should be applied for the purpose of interpreting the provisions of Section 22(1)(d) of the Karnataka Agricultural Income-tax Act also. We are afraid, we cannot do so. In the first instance, the language of Section 22(1)(d) of the Act is not the same as the corresponding penal provisions of the Indian Income-tax Act, 1922 or the Income-tax Act, 1961. Moreover, if a ruling is based on the interpretation of the wording in a particular section, that cannot be automatically made applicable in the context of the interpretation of the provisions of another enactment though both the provisions under the two enactments are meant for levying penalty. The penal provisions of Section 22 of the Karnataka Agricultural Income-tax Act cannot be interpreted and understood in the context of the interpretation of the penal provisions of the Indian Income-tax Act having regard to the variance in the wording of the two sections. In this view of the matter, we are of the opinion that the decisions cited by learned senior counsel are not of any avail to seek interference with the order levying penalty and to annul the same.
27. Learned senior counsel, Sri G. Sarangan has also contended that while under Section 22 of the Act the power to levy penalty can be exercised either by the Assistant Commissioner or the joint Commissioner or the Commissioner of Agricultural Income-tax and in the instant case the revisional authority himself had not exercised such a power under Section 22 of the Act, but, on the other hand, having exercised its powers under Section 35 of the Act for restoration of an order of penalty which had been levied by the assessing authority and which had come to be set aside by the appellate authority, it does not amount to recording of any satisfaction by the revisional authority justifying the levy of penalty under Section 22 and the original authority in its order having not indicated his satisfaction in the course of the assessment proceedings, nor the proposition notice for issue of such penalty issued much later also having indicated such satisfaction, the order of the revisional authority is bad in law and the order levying penalty is required to be set aside by this court. With regard to this other submission made by learned senior counsel, we are of the view that though there was nothing coming in the way of the revisional authority himself exercising the power to levy penalty under Section 22, as he was an authority so empowered under Section 22 itself, the exercise of the power under Section 35 of the Act for restoring the order of penalty levied by an assessing authority which had been set aside erroneously by an appellate authority, is also an order well within the powers and jurisdiction of the revisional authority and the two powers are independent of one another. The mere possibility that an authority who has been empowered to levy penalty under Section 22 of the Act also happens to be the revisional authority exercising powers under Section 35 of the Act will not in any way detract from the powers of the revisional authority exercisable under Section 35 of the Act. In this view of the matter, we are not impressed with the submission of learned senior counsel that the revisional authority himself having not exercised the powers under Section 22 of the Act nor having directed the other authorities to exercise the power to levy penalty by recording his satisfaction, the revisional order is bad in law and is liable to be set aside. One other submission though feebly canvassed by learned senior counsel is that the revisional authority could not have exercised his power under Section 35 of the Act for the purpose of restoration of an order of penalty inasmuch as setting aside an order of penalty cannot be said to be an order prejudicial to the interests of the Revenue as there is no loss of revenue to the State. We are afraid we cannot accept this submission either. The concept of an order prejudicial to the interests of the Revenue cannot be restricted to cases where there is actually loss of revenue in the matter of quantification of the tax liability. The very object of levy of penalty is to ensure that there is compliance with the requirement of law and the object of the Act inevitably is the collection of revenue for the State. An order of penalty is an order which is passed as a deterrent to dissuade errant assessees from indulging in acts of suppression of income or furnishing of inaccurate or false particulars of income resulting in loss of revenue to the State. The levy of penalty under the Act has definitely a purpose to achieve namely to ensure compliance with the provisions of the Act and to discourage non-compliance. If an order of penalty is justified in the facts and circumstances of a given case, it is an order to be sustained and a later order setting aside levy of a justifiable penalty can definitely be said to be an order prejudicial to the interests of the Revenue in the proper sense of those words. Accordingly, we are of the view that the revisional authority is entitled to correct an appellate order if it is found erroneous in the matter of setting aside the order of penalty.
28. With regard to this other submission made by learned senior counsel, we are of the view that though there was nothing coming in the way of the revisional authority himself exercising the power to levy penalty under Section 22, as he was an authority so empowered under Section 22 itself, the exercise of the power under Section 35 of the Act for restoring the order of penalty levied by an assessing authority which had been set aside erroneously by an appellate authority, is also an order well within the powers and jurisdiction of the revisional authority and the two powers are independent of one another. The mere possibility that an authority who has been empowered to levy penalty under Section 22 of the Act also happens to be the revisional authority exercising powers under Section 35 of the Act will not in any way detract from the powers of the revisional authority exercisable under Section 35 of the Act. In this view of the matter, we are not impressed with the submission of learned senior counsel that the revisional authority himself having not exercised the powers under Section 22 of the Act nor having directed the other authorities to exercise the power to levy penalty by recording his satisfaction, the revisional order is bad in law and is liable to be set aside.
29. On a consideration of all aspects of the matter and even on a perusal of the records which had been made available by the learned Government advocate, who has also strongly supported the order of the revisional authority submitting that there is absolutely no justification for interference in a case of this nature, particularly when the facts of the case very clearly reveal the contumacious conduct of the authority, which leads to the inevitable inference that the assessee has consciously and deliberately furnished inaccurate particulars in the return submitted by it and more so when the assessee in fact had the information has had been culled out from the profit and loss statement of account in its possession even at the time of filing such account, we are of the clear view that the case does not call for any interference in the exercise of revisional jurisdiction by this court under Section 55 of the Act. If at all, it can be said that the assessee has been fortunate that he had been visited with a rather light penalty having regard to the magnitude of inaccurate particulars that was sought to be passed on in the course of its return. We find no reason or justification for interference with the order passed by the revisional authority and accordingly dismiss this revision petition confirming the order impugned. No costs.