Income-tax---

---Penalty---Delay in filing return---Minor---Representative assessee bound to file return on behalf of minor and also responsible to file return in time-- Imposition of penalty on assessee for delay in filing return during period when assessee was minor---Valid---Indian Income Tax Act, 1961, Ss. 160, 161 & 271(1)(a).

Under section 160 of the Income Tax Act, 1961, the guardian of a minor is treated as a representative assessee and every representative assessee is deemed to be an assessee for the purpose of the Act. The liability of the representative-assessee is found in section 161 of the Income Tax Act, 1961, and under section 161 of the Act, every representative assessee, as regards the income in respect of which he is a representative assessee, shall be subject to the same duties, responsibilities and liabilities as if the income were income received by or accruing to or in favour of him beneficially, and shall be liable to assessment in his own name in respect of that income. The expression "such duties, responsibilities and liabilities" found in section 161 of the Act clearly indicates that the representative assessee is duty bound to file the return on behalf of the minor and he is also responsible to file the return in time on behalf of the minor, and if there is any default or delay on his part in filing such a return, then the liability for such default or delay is also liable to be imposed on him.

Even in the case of a minor, the return has to be filed within time and if it is otherwise, there will be no liability on the representative assessee to file the return on behalf of the minor leading to non-compliance with an essential requirement of the enactment of filing the return in time and would open the door for escapement of assessment of the minor's `income altogether. The Legislature certainly could not have intended such a contingency as is clear from the various provisions of the Act more particularly sections 160 and 161 of the Act and the statutory responsibility cast upon the representative assessee on behalf of the minor in the matter of filing the return.

The assessee was a minor and was admitted to the benefits of partnership. The assessee became a major on April 1, 1976. During his minority his affairs in the firm were looked after by his natural guardian, his father. There was a delay in filing the returns of the assessee for the assessment years 1971-72, 1972-73, 1974-75, 1975-76 and the delay was partly caused by the delay in the finalisation of the accounts of the film. The Income-tax Officer levied penalties for all the four assessment years under section 271(1)(a) of the Income Tax Act, 1961, for delay in filing returns by the assessee. The Appellate Assistant Commissioner affirmed the order of the Income-tax Officer. The Tribunal held that till April 1, 1976, the assessee was a minor and till that date, the default was on the guardian father and the obligations cast on the representative assessee would clearly indicate that the penalty could be levied for the default committed during the period when the assessee was a minor. The Appellate Tribunal also rejected the contentions that there was reasonable cause for the delay for the assessment years 1971-72, 1972-73, 1975-76 but for the assessment year 1974-75, the Tribunal found that there was justification for not filing the return in time. The Appellate Tribunal held that for the assessment year 1975-76, there was a delay of 21 months in filing the return even after taking into account the finalisation of the accounts of the firm and there was no explanation by the assessee whatsoever for the subsequent period and in this view of the matter, the Tribunal confirmed the penalty for the period of 21 months. The Tribunal allowed the assessee's appeal for assessment year 1974-75 in full but allowed the appeals for assessment years 1971-72, 1972-73 and 1975-76 in part. On a reference:

Held (i) that the minor had attained majority when the penal proceedings were initiated and the Income-tax Officer after issuing notice to the assessee imposed penalty on the assessee for the period during which the assessee was a minor. Therefore, the Income-tax Officer was justified in levying the penalty on the assessee, As on the date when the order of penalty was passed. He could not levy penalty on the representative assessee, as the guardian could no longer be considered as a representative assessee and he ceased to be a guardian on the attaining of majority by the assessee. Therefore, the Tribunal was correct in holding that the penalty was validity imposed on the assessee.

(ii) That for the assessment years 1971-72 and 1972-73, the Tribunal had found that there was no reasonable cause for the delay in filing the returns by the assessee and in the absence of any explanation by the assessee, the Tribunal was correct in upholding the penalty for the above assessment years.

(iii) That for the assessment year 1975-76, the Tribunal had found that there was reasonable cause for the delay till the firm filed the return, i.e. May 30, 1976, but even before that date, the assessee had attained majority on April 1, 1976, and the delay of twenty-one months had occurred after the assessee had become a major and for the said delay, the assessee did not offer any explanation. Therefore, the levy of penalty was justified.

CIT v. R. Srinivasan (1997) 228 ITR 214 (Mad.) ref.

K. Ramgopal for the Assessee.

C.V. Rajan for the Commissioner.

JUDGMENT

N.V. BALASUBRAMANIAN, J.---The assessee was a minor and was admitted to the benefits of a partnership in a firm styled as Mysore Silk Palace which was carrying on business in Madras. The assessee became a major on April 1, 1976. During his minority, his affairs in the firm were looked after by his natural guardian, his father. There was a delay in filing the returns of the assessee for the assessment years 1971-72 to 1975-76 and the delay was partly caused by the delay in the finalisation of accounts of the firm.

The Income-tax Officer completed the assessments for the assessment years 1971-72 to 1975-76, and initiated proceedings under section 271(1)(a) of the Income Tax Act, 1961 (hereinafter referred to as "the tact"), and levied penalties under section 271(1)(a) of the Act. The Income-tax Officer issued notices proposing to levy penalties and there was no response at all from the assessee and hence he levied penalties for all the four years as under:

The assessee preferred appeals before the Appellate Assistant Commissioner against the order levying of penalty. But the Appellate Assistant Commissioner confirmed the orders of the Income-tax Officer levying penalty. The assessee carried the matter in appeal before the Income tax Appellate Tribunal, and before the Tribunal it was contended on behalf of the assessee that under the provisions of the Act, the guardian was responsible for the filing of the returns of -the minor and under these circumstances the penalty proceedings could not be initiated against him for the default committed during the period when the assessee was a minor. It is submitted that the penalty was imposed on the minor directly and penalty could not be imposed on a minor for the delay in filing the returns. It was also pleaded that there was sufficient cause for the delay in filing the returns of income for the three years in question. The Appellate Tribunal held that till April 1, 1976, the assessee was a minor and till that date a the default was on the guardian father and the obligations cast on the representative assessee would clearly indicate that the penalty could be levied for the default committed during the period when the assessee was a minor. The Appellate Tribunal also rejected the contention that there was reasonable cause for the delay for the assessment years 1971-72, 1972-73; 1975-76 but for the assessment year 1974-75, the Tribunal found that there was some justification for not filing the return in time. The Appellate Tribunal held that for the assessment year 1975-76, there was a delay of 21 months in filing the return even after taking into account the period till the finalisation of the accounts of the firm and there was no explanation by the assessee whatsoever for the subsequent period and in this view of the matter, the Tribunal confirmed the penalty for the period of 21 months. Thus, the Appellate Tribunal allowed the assessee's appeal for the assessment year 1974-75 in full, but allowed the appeals for 1971-72, 1972-73, 1975-76 in part.

The assessee has challenged the order of the Tribunal and sought a reference and the Appellate Tribunal has stated a case and referred the following common questions of law for the assessment years 1971-72. 1972-73 and 1975-76 under section 256(1) of the Income-tax Act for our consideration:

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the penalty under section 271(1)(a) could be imposed on the applicant-minor for the delay in filing the returns?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the requirements under section 271(1)(a) were satisfied in the case?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in placing the burden of establishing that the delay in filing the return was with reasonable cause on the applicant and upholding the penalty?"

Mr. K. Ramgopal, learned counsel appearing for the assessee, submitted that the penalty was imposed on the minor and, therefore, the penalty is not sustainable in law. He referred to the relevant provisions of the Act and submitted that during the period of minority, the assessee could not file the returns and, therefore the penalty could not be imposed on the minor.

Mr. C.V. Rajan, learned counsel for the, Revenue, submitted that the penalty in this case was imposed on the assessee when he became a major and ' is not a case of levy of penalty on the minor.

We have carefully considered submissions made by learned counsel for the assessee and learned counsel for the Revenue. In so far as the first question referred to us is concerned, the question proceeds on a wrong assumption that penalty was levied on a minor. The Appellate Tribunal found that the assessee attained majority on April 1, 1976, and the penalty orders for the assessment years in question were passed on February 23, 1979. It is, therefore, clear that penalty was not imposed on a minor, but only after the assessee attained majority the penalty was imposed and consequently, the question proceeds on a wrong assumption that penalty was levied on a minor.

The contention of learned counsel for the assessee is that the default in filing the returns occurred during the period when the assessee was a minor and, therefore, the penalty cannot be imposed on the assessee as he was not responsible for the delay in, filing the return. The submission overlooks the provisions of sections 160 and 161 of the Act.

Under section 160 of the Income Tax Act, 1961, the guardian of the minor is treated as a representative assessee and every representative assessee is deemed to be an assessee for the purpose of the Act. The liability of the representative assessee is found in section 161 of the Act and under section 161 of the Act, every representative assessee, as regards the income in respect of which he is a representative assessee, shall be subject to the same duties, responsibilities and liabilities as if the income were received by or accruing to or in favour of him beneficially, and shall be liable to assessment in his own name in respect of that income. The expression, "such duties, responsibilities and liabilities" found in section 161 of the Act clearly indicates that the representative assessee is duty bound to file the return on behalf of the minor and he is-also responsible to file the return in time on behalf of the minor, and if there is any default or delay on his part in filing such it return, then the liability for such default or delay is also liable to be imposed on him.

This Court, in CIT v. R. Srinivasan (1997) 228 ITR 214, held that though the tax was payable for the income of the minor since the minor cannot file the return, his father and guardian has to file the return on behalf of the minor for the minor's income. When the guardian has not taken any steps to file the return in time, the guardian would be responsible and it cannot be stated that no penalty can be levied on the minor. The penalty imposed in such circumstances would be on the guardian arid the guardian will have a right to recover the tax paid on behalf of the minor from and out of the estate of the minor.

Therefore, we are of the opinion that even in the case of a minor, the return has to be filed within time and if it is otherwise, there will be no liability on the representative-assessee to file the return on behalf of the minor leading to non-compliance of an essential requirement of the enactment of filing ,the return in time and it would open the door for escapement of assessment of the minor's income altogether. The Legislature certainly could not have intended such a contingency as is clear from the various provisions of the Act, more particularly sections 160 and 161 of the Act and the statutory responsibility cast upon the representative assessee on behalf of the minor in the matter of filing the return. Therefore, we are not able to accept the contention of learned counsel for the assessee that penalty cannot be imposed for the default which occurred in filing the returns during the period when he was a minor. The next question that arises is whether the order of penalty was validly passed. In the instant case, the minor had attained majority when the penal proceedings were initiated and the Income tax Officer after issuing notice to the assessee imposed penalty on the assessee for the period during which the assessee was a minor. Therefore, we are of the view that the Income-tax Officer was Justified in levying the penalty on the assessee, as on the date when the order of penalty was passed he could not levy penalty on the representative assessee, as the guardian can no longer be considered as a representative assessee and he ceased to be a guardian on the attaining of the majority by the assessee. Therefore, we are of the view that the Tribunal is correct in holding that the penalty was validly imposed on the assessee.

In so far as the second question that is referred at the instance of the assessee is concerned, we find that the assessee has not offered any explanation for the delay in filing the return before the Income-tax Officer nor any explanation was offered by the assessee before the Tribunal. For the assessment years 1971-72 and 1972-73, the Appellate Tribunal has positively found that there was no reasonable cause at all and in the absence of any explanation by the assessee, we are of the view that the Appellate Tribunal is correct in upholding the penalty for the above said assessment years.

In so far as the assessment year 1975-76 is concerned, the Appellate Tribunal took notice of the fact that there was a delay in finalisation of the accounts of the firm and the Tribunal found that the assessee had reasonable cause for the delay in filing the return till the finalisation of the accounts of the firm. However, for the period subsequent to the completion of the accounts, i.e., for the period of 21 months, there was no explanation offered by the assessee and in the absence of any explanation for the delay, the Tribunal held that the penalty levied could be restricted to a period of 21 months. We are of the view that the Tribunal has come to a. correct conclusion in holding that the requirements of section 271(l)(a) of the Act are satisfied. It is also relevant to notice that the Tribunal found that there was a reasonable cause for the delay till the firm filed the return, i.e., on May 30, 1976, but even before that date, the assessee had attained majority on April 1, 1976, and the delay of twenty one months has occurred after the assessee has become a major and for the said delay, the assessee did not offer any explanation. Moreover, the assessee has not adduced any evidence or explanation for the delay, and, therefore, the question of placing the burden of proof on the Department does not arise on the facts of the case.

The first question proceeds on the assumption as if the penalty was imposed on the minor. We have already held that the penalty was imposed on the assessee after he attained the majority. We, therefore, reframe the first question of law as under: '

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in upholding the orders of penalty imposed under section 271(1)(a) of the Act on the assessee for the delay in filing the return during the period when the assessee was a minor?" '

We answer the first question of law, as refrained by us, in the affirmative and against the assessee.

In so far as the second question is concerned, we answer the same in the affirmative and against the assessee and we answer the third question referred to us in the negative and against the assessee. However, in the circumstances of the case, there will be no order as to costs.

M.B.A./4070/FC Reference answered.