Income-tax---

----Advance tax---Penalty---General principles---Failure to file estimate in time---Delay of a fraction of a day---Explanation that assessee was not aware of statutory provision---Cancellation of penalty was valid---Income Tax Act, 1961,

An order imposing penalty for failure to carry out a statutory obligation is the result of quasi-criminal proceedings and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute:

Held, that under the provisions of section 212(3) of the Income Tax Act, 1961, the estimate of advance tax had to be filed for the Assessment Year 1972-73 before March 15, 1972, which meant that the estimate should have been filed before 12 o'clock of March 14, 1972. But, actually, the estimate was filed on March 15, 1972, when the office was opened. Hence, the delay was not even of one complete day, but a fraction of a day. Penalty cannot be levied under section 273(b) of the Act if the assessee has shown a reasonable cause for the delay. Since the delay was of a fraction of a day and the explanation of the assessee was that it was not aware of the provisions, the Tribunal was justified in cancelling the penalty levied under section 273(b).

Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26; 25 STC 211 (SC) applied.

S. V. Subramanian for the Commissioner.

P.P.S. Janarthana Raja for the Assessee.

JUDGMENT

K. A. THANIKKACHALAM, J.---In pursuance of the directions given by this Court in T.C.P. No.229 of 1980, the Tribunal referred the following question for the opinion of this Court under section 256(2) of the Income Tax Act, 1961:

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in cancelling the penalty of Rs.10,600 levied in the assessee's case under section 273(b) for the assessment year 1972-73?"

The assessee, K. P. V. Shaik Muhammad Rowther (Private) Limited, Madras; is a company carrying on business as shipping agents. For the Assessment Year 1972-73 (previous year ended on June 30, -1971), it filed a return admitting an income of Rs.1,54,550 on February 9, 1973, and the assessment was finally completed on a total income of Rs.1,99,870. On March 15, 1972, the assessee had filed an estimate of advance tax estimating the tax payable at Rs.66,625 and tax as per the estimate was paid on May 24, 1972, by the assessee. As the assessee did not furnish an estimate of advance tax payable before the due date and the estimate filed on March 15, 1972, was not a valid estimate since it was filed belatedly, the Income-tax Officer held that there was a default on the part of the assessee under section 212(3) of the Income-tax Act. In response to the penalty notice, the assessee pleaded ignorance of law.. The Income-tax Officer reject6d the assessee's contention as untenable and levied a penalty of Rs.10,600 under section 273(b) of the Act.

On appeal, the Appellate Assistant Commissioner held that as the assessee filed an estimate on March 15, 1972, though belatedly and that as the assessee had not acted deliberately in definite defiance of law and also as there was no contumacious conduct on the part of the assessee, there was no case for levy of penalty. In this view of the matter, the penalty .was cancelled.

The Department went on appeal before the Tribunal. The Appellate Tribunal held that inasmuch as the estimate was filed on the last date, namely, March 15, 1972, there is no default. According to the Tribunal; there are separate provisions for imposition of penalty for non-payment of advance tax and, therefore, there was no offence inviting penalty under section 273(b) of the Act in the assessee's case. The Tribunal also pointed out that there was no material on record to show that the assessee deliberately acted in defiance of law. Accordingly, the Tribunal confirmed the order passed by the Appellate Assistant Commissioner in cancelling the penalty levied under section 273(b) of the Act.

Before us, learned senior standing counsel appearing for the Department submitted that inasmuch as the estimate was not filed before March 15, 1972, penalty is levied under section 273(b) of the Act. It was further submitted that ignorance of law couldn t be a ground to excuse the delay in filing the estimate. According to learned senior standing counsel, the Tribunal was not correct in cancelling the penalty on the ground that the delay was technical, and therefore, pardonable. On the other hand, learned counsel appearing for the assessee, while supporting the order passed by the Tribunal submitted that inasmuch as the estimate was filed on March 15, 1972, it cannot be said that the assessee has committed deliberately and willfully any delay in filing the estimate. As per the provisions under section 212(3) of the Act, the estimate should be filed before March 14,1972. But the estimate was filed on March 15, 1972, and the tax was paid on May 24, 1972. The estimate was filed a few hours later. The assessee is entitled to file the estimate before 12 o' clock on March 14, 1972. But the estimate was filed on March 15, 1972, when the office was. opened at 10 o'clock in the morning. The assessee explained that it is not aware of the law on this aspect. Technically speaking, there is not even a complete day's delay in filing the estimate. In Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26, the Supreme Court held as under (head note):

"An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.

In the present case, the assessee filed an estimate on March 15, 1972, though under section 212(3) of the Act it is stated that the estimate should be filed before March 15, 1972, that means that the estimate should be filed before 12 0' clock of March 14, 1972. But, actually, the estimate was filed on March 15, 1972, when the office was opened. Hence, the delay is not even of one complete day, but a fraction of a day. Penalty cannot be levied under section 273(b) of the Act if the assessee has shown a reasonable cause for the delay. Since the delay is a fraction of a day and the explanation of the assessee is that it is not aware of the provisions, applying the principles laid down by the Supreme Court in Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26, we hold that there is no infirmity in the order passed by Tribunal in cancelling the penalty levied under section 273(b) of the Act. In that view of the matter, we answer the question referred to us in the affirmative and against the Department. No costs.

M.B.A/3216/SCReference answered