Income Tax Appellate Tribunal - West Bengal
Abhay Kumar vs Assistant Commissioner Of Income-Tax on 17 July, 1997
Equivalent citations: [1997]63ITD15(CAL), [1999]237ITR98(CAL)
ORDER
Shri V.K. Sinha, A.M.
1. These two appeals, filed by the assessee, are being disposed of by a common order since they involve common issues.
2. The assessee is an Individual, and the due dates for filing of returns under section 139(1) and the actual dates of filing are given below :
Assessment Due date Actual date Delay Year 1978-79 31-7-1978 31-3-1981 31 months 1979-80 31-7-1979 31-3-1981 19 months
3. In reply to a show-cause notice why penalties should not be levied for the delays, the assessee filed a common reply for the two years, extract of which is given in the penalty orders and is also reproduced below :-
"the assessee's first assessment was completed on 15-1-1983, which was subsequently cancelled and a fresh assessment was made on 6-2-1984 in the same status of individual although it was proposed to be made in the status of HUF in the protective assessment. No assessment order was issued to the assessee. Hence, there was no cause for imposition of penalty under that section."
4. It was also stated subsequently that the assessee's appeals for the two years were pending before the CIT(Appeals) and, therefore, the proceedings may be stayed till disposal of the appeals.
5. The Assessing Officer (A.O.) observed that the appeals before the CIT (Appeals) had been decided and no further reply was given in response to further show-cause notices. He also observed that the first assessment was completed on 15-1-1983 but was not cancelled on 6-2-1984 as stated by the assessee, but only revised under section 155 on that date. In absence of satisfactory reply, he held that there was no reasonable cause for the delay and levied a penalty of Rs. 12,509 for assessment year 1978-79 and Rs. 12,395 for assessment year 1979-80.
6. It was submitted before the CIT(Appeals) that firstly, the assessment on the assessee was a protective assessment and although the protective assessment is permissible in law, no penalty is leviable as protective measure. Secondly, it was submitted that interest under section 139(8) had been charged for the delay in filing the return and, therefore, it must be presumed that extension of time for filing of the return had already been granted and, therefore, no penalty was leviable. Reliance was placed on the following decisions :-
(i) CIT v. M. Chandra Sekhar 151 ITR 433/20 Taxman 3 (SC)
(ii) Ajit Singh Rais v. CIT 174 ITR 418 (Gau.)
(iii) Duars Transport 162 ITR 383 (Cal.).
7. The CIT (Appeals) rejected the contentions summarily and dismissed the appeals.
8. The ld. counsel for the assessee reiterated the same arguments and added that there was a dispute amongst the members of the HUF of Bishwanath Prasad since 1975 of which the assessee was a Member which led to filing of the partition suit in a Civil Court. The dispute was settled after the intervention of well-wishers of the family. The assessee was, therefore, unable to submit the returns on due dates.
9. In reply to a query from the Bench, the ld. counsel submitted that substantive assessment had been made in case of the HUF and an appeal was still pending before the CIT(Appeals) against the addition. Further, he said that no appeal had been filed against the assessment orders in the assessee's own cases.
10. The ld. counsel further submitted that in case of the assessee, interest had been levied under section 139(8) for assessment years 1976-77, 1977-78, 1980-81, 1981-82 and 1982-83. Only assessment years 1978-79 and 1979-80 had been left out and there was no reason why the penalties for these two years should also not be deleted.
11. The ld. counsel for the assessee further relied on a decision of the Calcutta Bench of the Tribunal in the case of ITO v. Miss Vasudha Bajoria 40 ITD 414 where it was held that penalties could not be sustained because the assessment had been made on a protective basis.
12. The ld. Departmental Representative (D.R.), on the other hand, submitted that in the present case, there was a limitation for passing penalty orders for the two years under consideration and, therefore, they could not be kept pending indefinitely. The substantative assessments in case of the HUF had not become final even till date and, therefore, there was no option but to pass the penalty orders. He further emphasised that the penalties were only for delay in filing of returns, and this fact stood established, and not for concealment under section 271(1)(c) of the Act. The ld. D.R. further submitted that under the law, as it stood amended from 1-4-1971, both interest under section 139(8) and penalties under section 271(1)(a) could be levied. Lastly, he submitted that there was no material on record to show family disputes, as contended before the Tribunal, and no such explanation had been given either before the Assessing Officer or before the CIT(Appeals). This explanation should, therefore, be rejected.
13. We have considered the rival submissions carefully. We will first deal with the question whether both interest under section 139(8) and penalties under section 271(1)(c) are leviable in law, together. We find that the case law relied upon by the ld. counsel for the assessee before the CIT(Appeals) and also before us relates to pre 1971 law, under which the interest was charged under a differently worded proviso to section 139(1), which was thereafter deleted. The ld. Commentary of Nani A. Palkhivala on "The Law and Practice of Income-tax", Eighth Edition, Volume I, Page 1633 states that a penalty under clause (a) may be levied in addition to interest under section 139(8) which is chargeable whether or not the Assessing Officer has extended the date for furnishing the return. Further, we are under the jurisdiction of the Hon'ble Patna High Court and a similar matter was considered by their Lordships in Jamunadas Mannalal v. CIT 164 ITR 66. It was held that penalty under section 271(1)(a) of the Act can be levied for delay in filing the returns without reasonable cause, even after interest has been charged for such delay under section 139. The assessment year concerned was assessment year 1966-67, i.e., the pre-1971 law. The decision of the Hon'ble Supreme Court in Chandra Sekhar's case (supra) was found to be distinguishable on facts. In that case, the extension was a matter falling within the sub-section (1) of section 139 and was not a case of returns filed under section 139(4). However, in the case of Jamunadas Mannalal (supra), the assessee never filed any application for extension of time. Under these different facts, it was held that it could not be deemed that extension of time has been allowed by the Assessing Officer merely by charging interest under section 139(8). The case before us has facts similar to the facts in the case of Jamunadas Mannalal (supra), and there is nothing on record to show that any application for extension of time was filed by the assessee. Thus, respectfully following the decision of the jurisdictional High Court also, we also hold, even under the pre-1971 law, that both interest and penalty were leviable together. The contention of the assessee is, therefore, rejected.
14. We have perused a copy of the order under section 139(8) read with rule 117A for assessment years 1976-77, 1977-78, 1980-81, 1981-82 and 1982-83, relied on by the ld. counsel for the assessee. It is a combined order for all of the above years. However, the order is not in the case of the assessee, who is an Individual, but in case of Shri Abhay Kumar (HUF). The facts in that case are not available and certainly the decision in that case has no application to the case before us.
15. We now come to the question whether penalty should have been levied where the assessment was on protective basis. For a proper appreciation, it may be the first seen what is the justification of a protective assessment itself. The following passage from the ld. Author Sampath Iyengar's "Law of Income Tax", Eighth edition, revised by Justice S. Ranganathan, former Judge, Supreme Court of India and former President, Income Tax Appellate Tribunal, may be usefully referred to :
"It is no doubt true that the Income-tax Act nowhere provides that a protective or precautionary assessment can be raised in respect of one and the same income on two different persons. A departmental practice that has however gained judicial recognition is that, in certain circumstances, where it appears to the income-tax authorities that certain income has been received during the relevant assessment year but it is not clear who has received that income and prima facie it appears that the income may have been received either by A or B or by both together, it would be open to the relevant income-tax authorities to determine the said question by taking appropriate proceedings both against A and B. This is done so that such income may not escape taxation altogether. This has been held to be quite sensible because the revenue has to be protected against the bar of limitation. If the income-tax authorities are precluded from making an alternative assessment, then by the time the disputes are over the real assessment would be barred. But while protective assessment is permitted protective recovery is not allowed. It is one thing to say that the authorities are merely making an assessment and another thing to say that at one and the same time they could not only make assessment in respect of one set of dues but proceeds to realise both.
Thus, until there is a final assessment in existence the raising of alternative assessment by the revenue cannot be prevented. Besides, the assessment to tax is one of the processes open in law to adjudicate the title of the parties or the shares of the parties. The powers of the Assessing Officer are also, so far as revenue purposes are concerned, plenary in the sense he has to decide who is the owner and to whom does a particular income belong. He must, of course, decide the question in accordance with law the rights of the parties and to decide to whom the income in respect of the properties in question belongs. It was therefore held that the notice initiating reassessment proceedings in respect of a dissolved firm and the association of persons was validly issued."
16. Reference has also been made by the ld. Authors to the decision of the Hon'ble Supreme Court in the case of Lalji Haridas v. ITO 43 ITR 387, where an equitable procedure to be followed in such a situation has also been laid down.
17. The justification for a protective assessment is to ensure that such income may not escape taxation altogether [see Lalji Haridas's case (supra)]. In our view, a similar consideration should prevail with regard to penalty on the income assessed protectively, and it is to be ensured that the assessee does not escape penalty altogether. We have read carefully the decision of the Calcutta Bench of the Tribunal in Miss Vasudha Bajoria's case (supra), which was authored by my ld. Brother here. With respect, the facts in the present case are distinguishable. In that case, the question was levy of penalty under section 271(1)(c) for concealment of income and also under sections 271(1)(b) and 273 of the Act. The assessee filed her return and the assessment was made ex parte under section 144 stating that investment made in business was made by her father. Assessment of the assessee was completed on protective basis by making addition of such investment amount. Penalties were also levied. It was held as under :
"8. Looking from another angle also the penalties cannot survive, for the reason that ITO made the assessment on the assessee on a protective basis though the return was filed by her through her guardian claiming declared income to be her income. The finding given by the ITO in that protective assessment is that the income and investment made is not the income or investment by or of the assessee but that of her father and the ITO has specifically mentioned that the same will be assessed in the hands of the father only. Levy of penalty on such protective assessment is not sustainable at all because it tantamounts to levy of protective penalties. Admittedly there is no concept or warrant of levy of any protective penalties under the provisions of the Income-tax Act, 1961. It has first to be establishment conclusively whether the income declared is of the assessee or of her father. Until this exercise is done no penalties can be levied on the present assessee on whom protective assessment has been made. No evidence is laid before us by the revenue whether the income and the investment added protectively in the assessment of the assessee has been considered in the individual assessment of her father and final result or decision in the case of assessee's father. The matter, therefore, is still hanging and undecided. We are, therefore, of the opinion that no penalties can be levied on the assessee on protective assessment. We are strengthened in our view by the decision of our Calcutta High Court in the case of CIT v. Super Steel (Sales) Co. [1989] 178 ITR 451 wherein the Calcutta High Court has held as under :
"There can be a protective assessment but there cannot be any protective penalty. Before any penalty can be levied, the income has to be assessed as concealed income in the assessment of an assessee. Thereafter, in penalty proceedings, the competent authority has to probe into and decide whether there has been any concealment of income. But, where there is a dispute as to whether such income allegedly concealed would be assessed in the hands of X and Y unless the determination is made by the Income-tax Officer, no charge of concealment can be made against the person in whose hands the income is added on protective basis. He is liable only if it is his income which has been concealed. In other words, a person upon whom a substantive assessment is made would only be liable for penalty provided the conditions precedent for the imposition of the penalty are satisfied."
The Gauhati High Court has also held in the case of Metal Stores v. CIT that protective penalties cannot be levied or sustained. We, therefore, hold that the assessee was not liable for any penalty under section 271(1)(b), 273 or 271(1)(c) of the Income-tax Act, 1961."
18. In the present case, facts are distinguishable, inasmuch as the ld. counsel for the assessee has stated before us that substantive assessments had been made in case of Shri Abhay Kumar (HUF) and appeals are pending before the CIT(Appeals). The matter is, therefore, quite advanced. The facts are further distinguishable because in the case of an allegation of concealment a probe has to be carried out and a decision taken whether there has been any concealment. However, no probe is necessary in case of a penalty for delay in filing of the return. It is an admitted fact by both the parties that the delay took place. The only question to be considered is whether there was a reasonable cause.
19. Further, we find merit in the contention of the ld. D.R. that in view of a statutory limitation of time for levying of penalties under section 271(1)(a), the proceedings could not be kept pending indefinitely. What would be an equitable procedure in such circumstances ? Guidance is available in the judgment of the Hon'ble Supreme Court in the case of Lalji Haridas (supra) at pages 392 & 393 as under :
"We would, however, like to add one direction in fairness to the appellants. The proceedings taken against both the appellants should continue and should be dealt with expeditiously having regard to the fact that the matter is fairly old. In the proceedings taken against Lalji, the Income-tax Officer should make an exhaustive enquiry and determine the question as to whether Lalji is liable to pay the tax on the income in question. All objections which Lalji may have to raise against his alleged liability would undoubtedly have to be considered in the said proceedings. Proceedings against Chhotalal may also be taken by the Income-tax Officer and continued and concluded, but until the proceedings against Lalji are finally determined no assessment order should be passed in the proceedings taken against Chhotalal. If in the proceedings taken against Lalji it is finally decided that it is Lalji who is responsible to pay tax for the income in question it may not become necessary to make any order against Chhotalal. If, however, in the said proceedings Lalji is not held to be liable to pay tax or it is found that Lalji is liable to pay tax along with Chhotalal it may become necessary to pass appropriate orders against Chhotalal. When we suggested to the learned counsel that we propose to make an order on these lines they also agreed that this would be a fair and reasonable order to make in the present proceedings.
In the result, the appeals fail and are dismissed. There would be no order as to costs."
20. Keeping in mind the above guidelines, we would set aside the orders of the CIT(Appeals) for both the years restoring the matter to his file with a direction to dispose of the appeals for the relevant years against assessment orders in the case of Shri Abhay Kumar (HUF) expeditiously and thereafter decide penalty for these two years in the assessee's case keeping in mind the decision in the case of Shri Abhay Kumar (HUF), i.e., whether the substantive addition in the case of the HUF is retained or deleted. The CIT(Appeals) may also consider any other reason advanced by the assessee as reasonable cause for the delay in filing the returns, including the submission that there were family disputes, if so, permitted by rule 46A of the Income-tax Rules, 1962.
21. In this manner there will be a harmonious disposal of the penalty appeals along with the appeals in the case of HUF and limitation for passing the penalty order will not compel the revenue to decide the matter in pre-mature way.
22. For statistical purposes, the appeals are treated as allowed.
Shri Abdul Razack, Judicial Member
1. I have stated the order passed by my ld. Brother(AM) holding that penalties under section 271(1)(a) of the Act for both the years under appeal can and were rightly levied by the Assessing Officers though the assessments were made protectively and not substantively on the assessee. I have also noticed that my ld. Brother in para 17 at page 6 has distinguished the order passed by Calcutta Bench 'D' of the Tribunal in the case of Miss Vasudha Bajoria (supra) to which I have been a party. With respect to my ld. Brother, I am unable to subscribe to the view taken by him.
2. The facts of no two cases, I agree, are identical. But there is a very thin distinction between facts of this case and the facts in the case of Miss Vasudha Bajoria which were in relation to the levy of protective penalties under sections 271(1)(b), 273 and 271(1)(c) of the Act whereas in this case the penalties are levied for late filing of the returns under section 271(1)(a) of the Act. But that does not make any difference as to the applicability of the ratio decidendi of the case of Miss Vasudha Bajoria to this case because the controversy is common, that is to say; whether or not protective penalties can be levied under the penal provisions of Income-tax Act, 1961. It is elementary and almost universally accepted that it is not the conclusion arrived at of an earlier case which is binding precedent but the ratio decidendi or the principle of that decision which is binding for deciding a subsequent case. The ratio of the decision of the Calcutta Bench 'D' of this Tribunal, I repeat, in the case of Miss Vasudha Bajoria (supra) was to the effect that in law protective penalties cannot be levied and the Calcutta Bench 'D' while taking such a view has taken support from the judgment of the Calcutta High Court in the case of Super Steel (Sales) Co. (supra) and the decision of the Gauhati High Court in the case of Metal Stores (supra). My ld. Brother has been kind enough to extract the relevant portion in para 17 at page 6 of his order.
3. In my view, therefore, this assessee's case is squarely covered by the judgment of the Calcutta High Court in the case of Super Steel (Sales) Co. (supra) and of the Gauhati High Court in the case of Metal Stores (supra) and the decision of the Calcutta Bench 'D' of this Tribunal to which I have been a party. I, therefore, in this case adopt the reasons given in that decision of Miss Vasudha Bajoria's case (supra) to which I have been a party. There is no sanction or authority under any provisions of the Income-tax Act, 1961 to make protective assessments. But nonetheless on the basis of the judicial sanction given by the Hon'ble Supreme Court in the case of Lalji Haridas (supra) precautionary or protective assessments are being made with a view to protect the interest of the Revenue. When an assessment is made upon an assessee protectively then in law it means that the income earned and returned by such an assessee is not his income but the income of some other person. In such a situation, how can the Assessing Officer turn around, as in the instant case, and say, look; though the income returned by you, though belatedly, is not the income earned by you but by some other person; yet I must penalise you under section 271(1)(a) of the Act for the alleged default of late filing of the return. My view is : Let it be finally established and concluded by due process of law that the income returned by an assessee is his income only and not of any other person. And if there are laches or inordinate delay on the part of the revenue authorities (A.O.) in tracing out and assessing the correct person then the assessee who has been assessed protectively cannot be penalised protectively.
4. There is no statutory authorisation or sanction for imposing protective penalties under the Income-tax Act and the same cannot be derived from the judgment of the Apex Court rendered in the case of Lalji Haridas (supra) relied by my ld. Brother or even from the comments of the Author Shri Sampath Iyengar's in his book "Law of Income-tax" Eighth Edition, relevant passage from which book has been reproduced by my ld. Brother at page 5 of his order. I do not with respect subscribe to such a view.
5. The plea of the Revenue that penal proceedings may get time barred under section 275 of the Act for delay in searching and assessing the correct person cannot be a ground to impose and/or sustain protective penalties. In such a situation, the Revenue authorities act at their own risk and peril, and for their laches, inaction and inordinate delays protective penalties cannot be imposed or sustained protectively.
6. There is one more reason why I do not agree with the imposition of protective penalties. As is known penalty in fiscal laws is a monetary punishment awarded to a person/assessee for the act of offending or contravening a statutory provision or mandate contained in an enactment. In addition to the penal provisions, several fiscal statutes like the Income-tax Act, 1961, also contain provisions of prosecuting the offenders for violation and contraventions of certain statutory provisions, prescribing imprisonment of varying periods depending upon the severity and magnitude of the offence. Now if a person or an assessee can be penalised and punished monetarily on protective basis then he can as well on the same reasoning, analogy and principle be prosecuted and imprisoned on a protective basis. Consider a case where after imposition of protective penalty and protective prosecution it is finally known and established that the income returned by that particular person who was protectively assessed, penalised and imprisoned was not his income but of some other person who has been assessed substantively, then in such a case, I fail to understand how the revenue authorities can remedy the punishment and imprisonment suffered and undergone by the protectively assessed person ? Any amount of monetary payments to such a person by the revenue authorities or the State will not adequately compensate such an assessee for the sufferance and punishment undergone.
7. It is for these reasons I am of the considered opinion that protective penalties under any penal provisions of the Income-tax Act, 1961 cannot be imposed. This is the essence and ratio decidendi of the Calcutta and Gauhati High Courts and also Calcutta Bench 'D' of this Tribunal in the cases discussed by me elsewhere above and I rely on them.
8. I, therefore, vacate the impugned order of the A/C and order cancellation of the protective penalties imposed on the assessee for both the years as laid down in section 271(1)(a) of the Act.
9. In the result, appeals of the assessee are allowed.
REFERENCE FOR 3RD MEMBER CASE UNDER SECTION 255(4) OF THE IT ACT, 1961, IN THE ABOVE MATTER As we differ in our views in the above case, we request the Hon'ble President to kindly refer the matter to the 3rd Member on the following points :
Points of difference :
(1) Whether, on the facts and circumstances of the case and in law, the Assessing Officer was justified in imposing penalties for assessment years 1978-79 and 1979-80 under section 271(1)(a), when the assessment had been made on a protective basis ?
(2) If so, whether, on the facts and circumstances and in law, penalties imposed under section 271(1)(a) of the Act for late filing of returns for assessment years 1978-79 and 1979-80, should be set aside to CIT(Appeals) as held by Accountant Member ?
THIRD MEMBER ORDER
1. These two appeals were heard by a Division Bench. The learned Accountant Member had proposed his order in August 1995, with which the learned Judicial Member did not agree and wrote a dissenting order dated 19-9-1995. Thereupon, the following two points of difference were referred to the President for appointing a Third Member under section 255(4) of the Income-tax Act, 1961 :-
"1. Whether, on the facts and circumstances of the case and in law, the Assessing Officer was justified in imposing penalties for assessment years 1978-79 and 1979-80 under section 271(1)(a), when the assessment had been made on a protective basis ?
2. If so, whether, on the facts and circumstances and in law, penalties imposed under section 271(1)(a) of the Act for late filing of returns for assessment years 1978-79 and 1979-80, should be set aside to CIT(Appeals) as held by Accountant Member ?"
2. As regards tracing of facts of the case, there is complete unanimity among the Members. Therefore, for the purpose of appreciating the main issue in the Third Member's case, it is enough if I highlight the bare minimum facts as follows.
3. The assessee in these appeals is an individual. The assessment years involved are 1978-79 and 1979-80, for which the previous years are the financial years ending with 31-3-1978 and 31-3-1979 respectively. For assessment years 1978-79 and 1979-80, the assessments under section 143(3) were completed on 15-1-1983. It is clearly stated in the assessments, copies of which are already on record, that they are protective assessments and that the demands under those assessments were also kept in abeyance. Admittedly, there was a delay of 31 months in filing the return for the assessment year 1978-79 and 19 months for assessment year 1979-80. During the course of assessments, penalty proceedings under section 271(1)(a) were initiated. A common reply to the penalty notices concerning both the years was filed which was considered and ultimately the Assessing Officer considered and rejected the same and he imposed a penalty of Rs. 12,509 for assessment year 1978-79. Similarly, for assessment year 1979-80, penalty of Rs. 12,395 was imposed.
4. Against these penalties, the matter was taken in appeal before the CIT(Appeals), Jamshedpur. It is significant at this juncture to note that the assessee had taken up a specific plea before the CIT (Appeals) in these penalty appeals, which is as follows :-
"It will appeals from records that the assessment was made under section 143(3) as a protective assessment. It is submitted that although protective assessment is permissible in law, no penalty is leviable as a protective measure and, therefore, the levy of penalty is not justified in law and fact."
However, it is significant that the CIT(Appeals) did not deal with this ground at all in his separate orders dated 8-10-1991, by which he confirmed the penalties and dismissed the appeals.
5. Further aggrieved, the assessee came up in second appeal before the Tribunal, in which divergence of opinion was expressed on the points which are already extracted above. It was the case of the assessee before the Tribunal that the assessee was a member of the HUF called 'Bishwanath Prasad' which has been an old assessee. There were disputes among the members of the HUF since 1975 which led to filing of a partition suit in the relevant Civil Court and the dispute was settled after the intervention of the well-wishers of the family. In fact, it was the case of the assessee that due to the disputes which were later compromised and the ultimate settlement by the elders took a very long time, the assessee could not file the returns in time and in fact it was the cause for the delay in filing the returns. It was also his case that substantive assessment was made in the hands of the HUF (Bishwanath Prasad) even for the impugned two assessment years also. On behalf of the HUF, petition was filed under section 139(8) read with rule 117A before the Assistant Commissioner of Income-tax, Inv. Circle 1, Dhanbad, under which the HUF sought for waiver of interest charged for the years 1976-1977, 1977-78, 1980-81, 1981-82 and 1982-83. An order was passed by the ACIT, Inv. Cir. 1, Dhanbad, on 21-5-1992 on the said application for waiver of interest in which it was held as follows :
"Considering the facts of the case and in view of the evidences produced there seems to be a reasonable cause for the delay in furnishing the returns in time and thus the interest charged in all the above assessments are hereby waived.
Copy of the order dated 21-5-1992 had been filed by the assessee and is kept on record.
6. Now, the main point of difference between the learned Members was that in view of the fact that the assessment against the HUF did not as yet become final, whether the protective penalty orders can be said to be valid and whether the penalty proceedings can de ordered to be kept over by the CIT(Appeals) till the assessment proceedings against the HUF becomes final. Shortly put, the Hon'ble Accountant Member was of the opinion that such a course is permissible and is in fact the just course to follow in the facts and circumstances of the case, whereas the learned Judicial Member held that protective penalty proceedings are unknown to law and hence they should be cancelled.
7. After carefully going through the orders of the learned Members and also after having regard to the provisions of law and the decided case law on the subject, I am of the view that the view expressed by the learned Judicial Member is perfectly justified. In Metal Stores' case (supra) Hon'ble C.J. Shri A. Raghuvir of Gauhati High Court held that the protective penalty is conceptually antithetical and cannot be conceived in law. The Hon'ble Judge relied upon the decision of the Hon'ble Calcutta High Court in Super Steel (Sales) Co.'s case (supra) and CIT v. Beharilal Pyarelal [1983] 141 ITR 32 (Punj. & Har.) in support of his view. Section 271(1)(a) contemplates to penalise the assessee who has failed to furnish the return of total income which he was required to furnish under sub-section (1) of section 139 or by notice given under sub-section (2) of section 139, etc. The sine qua non for the application of section 271(1)(a) is that the total income which an assessee is required to furnish in his return should belong to him and to none else. In the facts of this case, the prime question is whether the total income which was disclosed by the assessee in his return was his income or was the income of the HUF in which he was a member. As already stated, the substantive assessment was made in the hands of the HUF in which he was a member and only protectively the same total income was also assessed in the hands of the assessee and the tax due thereon was also held in abeyance. The main intendment of section 271(1)(a) is to penalise such an assessee who has to file return of his total income but has failed to do so within the time allowed to him under section 271(1)(a) or who has failed to file the return in pursuance of notice under section 139(2), etc. But, when the revenue itself is not definite as to who earned the total income between the HUF and the individual, there is no basis to conclude that the individual member of the HUF has definitely earned the total income and also failed to return the said total income in the return filed either under section 139(1) or in pursuance of notice under section 139(2), etc. When there is no basis to conclude that the total income belongs to the assessee, the further question whether such an assessee committed default under section 271(1)(a) or not is not possible to determine. Therefore, for that reason, penalty cannot be levied. In fact, this is the purport of the decision relied upon by the learned Judicial Member which are already cited above and which were ultimately followed in Miss Vasudha Bajoria's case (supra). The ld. Accountant Member had extracted from the "Law of Income-tax", Eighth Edition, Revised by Justice S. Ranganathan, Former Judge, Supreme Court of India. But, the portion extracted in para 15 of the ld. Accountant Member's order clearly confined itself only to the assessment proceedings and not at all to penalty proceedings. So also, the Hon'ble Supreme Court's judgment in Lalji Haridas' case (supra) lays down the law and suggests the procedure to be followed in the assessment proceedings and they never suggested about the procedure to be followed in penalty proceedings. Therefore, neither the learned author's commentary nor the Supreme Court decision in Lalji Haridas's case (supra) are authorities laying down the procedure for penalty proceedings or laying down the law with regard to realisation of penalties. The Supreme Court decision in Lalji Haridas's case (supra) would only legalise the protective assessment which would be made by the ITO when there was a doubt whether the income is rightly taxable in the hands of A or in the hands of B or by both together. In para 17, the learned Accountant Member, however, sought to extend the ratio decidendi of the Hon'ble Supreme Court's decision in Lalji Haridas' case (supra) to the penalty proceedings also inasmuch as he proposed in his order the following :
"In our view, a similar consideration should prevail with regard to penalty on the income assessed protectively, and it is to be ensured that the assessee does not escape penalty altogether."
This, in my view, is not permissible under law. Penalty proceedings are to be strictly construed. If there is any ambiguity or doubt about the implementation of the penal provision, the benefit of doubt must be given to the assessee and the point should be decided in favour of the assessee. Secondly, the learned Accountant Member sought to distinguish the facts of the Calcutta Bench decision of the Tribunal in Miss Vasudha Bajoria's case (supra) from the facts of the present case. However, in my view, it is a distinction drawn without any difference. Therefore, in my view, the order of the learned Judicial Member is perfectly justified inasmuch as he held that though protective assessments are known to law and are permissible, protective penalty proceedings are unknown to law. I, therefore, hold on point of difference No. 1 that the Assessing Officer was not justified in imposing penalties for assessment years 1978-79 and 1979-80 under section 271(1)(a). I answer the point of difference No. 2 in favour of the assessee and against the revenue. There is no question of setting aside and restoring the matter to the CIT(Appeals) inasmuch as the penalty orders themselves are quite illegal and cannot be sustained under law. Therefore, I agree with the learned Judicial Member when he said that the penalties should be cancelled.
8. The appeals should now go back to the Division Bench who should decide the issue according to the majority view.