Patna High Court
Commissioner Of Income-Tax vs Kalyani Selected Kargallia Colliery on 2 April, 1983
Equivalent citations: [1984]148ITR468(PATNA)
JUDGMENT Ashwini Kumar Sinha, J.
1. Under Section 256(1) of the I.T. Act, 1961, the Income-tax Appellate Tribunal " B " Bench, Patna, has submitted the statement of case and has referred the following question for the opinion of this court:
" Whether, on the facts and circumstances of the case, the Tribunal was correct in restricting the period of default to one month only for the purpose of levy of penalty under Section 271(1)(a) of the Income-tax Act, 1961 ? "
2. Brief facts are as follows : The case relates to the assessment year 1966-67. The filing of the return by the assessee was due by September 30, 1966. Notice under Section 139(2) of the I.T. Act, 1961 (hereinafter to be referred to as "the Act "), was sent by registered post on April 28, 1966. According to the stand of the Revenue, the notice is supposed to have been served by May 4, 1966. The assessee filed its first return on November 8, 1966, which was signed by its accountant, Shri K.T. Doshi. On being pointed out this defect in the course of the assessment proceeding, another return under the signature of a partner of the firm was filed on August 6, 1968. As no valid return was filed till this date (August 6, 1968), the ITO initiated penalty proceedings under Section 271(1)(a) and levied a penalty of Rs. 28,298 for the default for a period of about 24 months. A copy of the order of the ITO has been marked annex. A to the statement of the case.
3. The assessee went up in appeal and in appeal before the AAC it was stated that the returns under the signature of the agent, in similar circumstances, were filed by the assessee in the earlier and subsequent years and the same were accepted by the Department, and no penal action was taken. The assessee, in these circumstances, submitted that there was no delay in filing the return, and, as such, the firm was not liable for any penalty. The AAC accepted the assessee's contention and deleted the penalty as a whole. A copy of the order of the AAC has been marked annex. B to the statement of case.
4. Thereafter, the Department went in appeal before the Income-tax Appellate Tribunal (hereinafter to be referred to as " the Tribunal ") and the Tribunal allowed the departmental appeal in part only. The Tribunal held that the AAC was not correct in deleting the entire penalty in the assessment year 1966-67. The Tribunal agreed with the submission of the departmental representative that the assessee had not explained the cause for the delay of one month in the assessment year 1966-67 and to that extent the assessee was a defaulter and penalty should have been confirmed by the AAC. The Tribunal held as follows:
" We accordingly reverse the order of the Income-tax Officer in upholding his action for levying the minimum penalty but "we restrict the period to one month only. The penalty should be levied according to law, after taking into account the income finally determined in quantum--to this extent only the order of the Appellate Assistant Commissioner in that year is reversed."
5. Thus, in the opinion of the Tribunal, the default was of one month only and the Tribunal accordingly confirmed the order of the ITO for the levy of penalty to the extent of one month only. A copy of the order of the Tribunal has been marked annex. C to the statement of case.
6. Learned senior standing counsel for the Department has firstly submitted that the return filed by the assessee on November 8, 1966, signed by the accountant (Shri K. T. Doshi) of the firm was not a valid return in law and the only valid return which was filed by the assessee was one, dated August 6, 1968, after receipt of notice under Section 139(2) and, hence, there was a default of about 24 months from the date of the receipt of the notice.
7. Section 271(1)(a) reads as follows :
" 271. (1) If the Income-tax Officer or the Appellate Assistant Commissioner, in the course of any proceedings under this Act, is satisfied that any person-
(a) has without reasonable cause 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 or Section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by Sub-section (1) of Section 139 or by such notice, as the case may be..........
he may direct that such person shall pay by way of penalty........."
(The words have been underlined* by me for the sake of emphasis.)
8. In the present case the AAC has found that from the records it was obvious that for some assessment years earlier to the assessment year in question returns were filed on behalf of the assessee signed by Shri K. T. Doshi who was not a partner of the firm, but who held the power-of-attorney from the managing partner, Shri Ramniklal Kothari. For those assessment years no objection was ever raised by the Department, and the assessments were made on the basis of such returns filed. The AAC has taken notice of another instance from the record that the return on behalf of the appellant-firm, on another occasion, was filed by an accountant, Shri P. N. Lal, and the assessing officer even on that occasion did not raise any objection against the return so filed and completed the assessment on the basis of that return which was not signed by any partner. In my opinion, on the facts available on the record before the Department, it was clear that the assessee was induced to believe that the return filed by the assessee signed by the accountant on behalf of the firm was a valid return and, as such, the assessee was under a genuine and bona fide belief that the return so filed, signed by the accountant, was a valid one, as was accepted in the past by the Department, for some earlier assessment years as well.
9. In the instant case the penalty was imposed by the ITO taking the delay to be 24 months counting from May 4, 1966, which has been restricted to only one month by the Tribunal. In my opinion, the question with regard to the validity of the return filed by the assessee on November 8, 1966, does not arise from the Tribunal's order. There is nothing in the orders of the ITO or the AAC or the Tribunal that the notice under Section 139(2) was, in fact, served on May 4, 1966. The ITO says only this :
" The notice must have been served by May 4, 1966."
10. There is no presumption in law as to the date of service of a notice purported to be sent under registered cover. Neither the AAC nor the Tribunal has proceeded on this footing. This presumption about the date of service being not available to the Department, the period for counting the penalty for default from this date falls. The period for counting the penalty for default was neither argued before the AAC nor before the Tribunal. There is also nothing in the order of the ITO or in the order of the AAC or in the order of the Tribunal to show that the assessee filed the return in pursuance of the notice under Section 139(2). From the stand taken by the Department, before the AAC and also before the Tribunal, it is apparent that the Department took the return filed by the assessee as one under Section 139(1) of the Act. The stand taken by the Department before the Tribunal is quoted as below :
" It was stated by the departmental representative that the Appellate Assistant Commissioner was not correct in deleting the penalty.........According to him, there was no explanation of the assessee for filing the original return in the assessment year 1-966-67 which admittedly was delayed by one month and eleven days even if we ignore the filing of the second return duly signed by the partners of the firm. It was stated that in any case for this year the penalty for the period of full one month should have been confirmed by the Appellate Assistant Commissioner."
11. From this, it is obvious that the return filed by the assessee was treated by the Department as one under Section 139(1) of the Act and, hence, the Department took the stand that at least the delay was one month and eleven days because the assessee, under Section 139(1), could have filed its return by September 30, 1966, and this stand of the Department was accepted by the Tribunal, as the assessee, though (it) had time to file the return till September 30, 1966, did not file its return till November 8, 1966. In my opinion, the Department, on the stand taken by it, gave a go-by to the notice under Section 139(2), if at all issued, and to me it appears very rightly, as the Department could not positively state as to when the notice was served, and, as stated earlier, the presumption taken by the ITO that it must have been served was not available to the assessing officer in law. Thus, in my opinion, the submission as made by the learned senior standing counsel for the Department does not arise from the order of the Tribunal and, as I have already held above, the Department itself having accepted the returns filed by the assessee for some earlier assessment years signed by the accountant induced the assessee to a genuine and bona fide belief that such returns filed by the assessee concerned were valid returns.
12.Learned senior standing counsel for the Department has argued that the return filed by the assessee on November 8, 1966, must, in law, be taken to be non est and the AAC, while deleting the penalty, was wrong in law to take into consideration the element of fraud or wilful neglect or the mens rea on the part of the assessee. In my opinion, on my findings as above, the assessee has shown reasonable cause and it cannot be said that it is not a reasonable cause, because it is not a sufficient cause. Learned senior standing counsel for the Department, in support of his submission, has relied upon the case of Commr. of Agrl. LT. v. Sri Keshab Chandra Mandal [1950] 18 ITR 569 (SC). But, in my opinion, on the facts and in the circumstances of the instant case, the case relied upon is not attracted on the statement of fact submitted by the Department, nor does it arise out of the order of the Tribunal. Thus, in my opinion, the first submission advanced on behalf of the Department fails.
13. This takes me to the second submission advanced by the learned senior standing counsel for the Department. Learned senior standing counsel has submitted that once a notice under Section 139(2) is issued and served, then the return has to be filed by the assessee within one month from the date of the service of the notice, and, if not filed, the default starts.
14. As I have held above, the Department changed its stand as it appears from the order of the AAC and the order of the Tribunal, and gave a go-by to the notice under Section 139(2), if at all issued. I have already held that there is nothing on the record to indicate that the notice, if at all was issued, was factually served upon the assessee on May 4, 1966, and as I have already stated above, it was probably for this reason that the Department chose to take the stand, taking the least resistance, that at least the default was for one month and eleven days, thereby taking the return filed by the assessee under Section 139(1) of the Act. Learned senior standing counsel for the Department has relied upon the case of Tarzan Hosiery P. Ltd. v. ITO [1968] 69 ITR 842 (All), Addl. CIT v. Bihar Textiles [1975] 100 ITR 253 (Pat) and Venkateswara Power Rolling Mills v. CIT [1974] 97 ITR 168 (Mys). If the Department had stuck to the stand that as notice was served upon the assessee, the default started from the date of the service of notice, in that case, these cases relied upon by the Department could have been pressed into service in support of the submission.
15. In the instant case, the return being due by September 30, 1966, and the same having been filed on November 8, 1966, the Department, in my opinion, took a very correct stand that there was a default for at least about one month. This consistent stand of the Department before the AAC and the Tribunal was accepted by the Tribunal, and the Tribunal, in my opinion, rightly reversed the order of the AAC in part and very rightly restricted the period of default to one month only.
16. Thus, I hold that, on the facts and in the circumstances of the case, the Tribunal was justified in law in restricting the period of default under Section 271(1)(a) of the Act to one month only for the assessment year 1966-67. In the result, the question referred to this court for opinion is answered in the affirmative, in favour of the assessee and against the Department. In the circumstances of the case, there will be no order as to costs.
S.K. Jha, J.
17. I agree.