MCKENZIES LTD. AND ORIENTAL TIMBER TRADING CORPORATION (P.) LTD. VS COMMISSIONER OF INCOME TAX
2002 P T D 1792
[242 I T R 669]
[Bombay High Court (India)]
Before Dr. B. P. Saraf and Ms. Pratibha D. Upasani, JJ
MCKENZIES LTD. AND ORIENTAL TIMBER TRADING CORPORATION (P.) LTD.
versus
COMMISSIONER OF INCOME‑TAX
Income‑tax Reference No. 347 of 1984, decided on 05/11/1998.
Income‑tax‑‑‑
‑‑‑‑Penalty‑‑‑Delay in submission of returns‑‑‑Show‑cause notice issued by ITO ‑‑‑Failure by assessee to give reasons‑‑‑Tribunal justified in confirming amount of penalty levied tinder S.271(1)(a)‑‑‑Indian Income Tax Act, 1961, S.271(1)(a).
The assessee was a partnership firm The return of the assessee pertaining to the assessment year 1964‑65 was due on June 30,.1964. The assessee submitted the return on June 30, 1965. The Income‑tax Officer issued show‑cause notice for imposition of penalty under section 271(1)(4) of the Income Tax Act, 1961, to which the assessee did not submit any explanation. The Income‑tax Officer levied a penalty of Rs.47,808 at the rate of 2 per cent. of the net tax payable for every month of default in furnishing the return in time under section 271(1)(4) read with section 271(2). On appeal, the Appellate Assistant Commissioner recalculated the penalty and reduced the quantum of penalty to Rs.40,764. On further appeal to the Tribunal, the assessee contended that the difference between the tax assessed and advance tax paid being about Rs.2,597 only, no penalty ought to ,have been imposed. The Tribunal dismissed the appeal of the assessee. On a reference:
Held, that it was clear from the order of the Tribunal that the assessee did not submit any explanation whatsoever about a reasonable cause for the delay of 12 months in submission of the return. Therefore, the Tribunal was justified on the facts and circumstances of the case in coming to the conclusion that the provisions of section 271(1)(4), were attracted to the case of the assessee.
CIT v. Vegetable Products Ltd. (1971) 80 ITR 14 (Cal.) Jan Bombay Pipe Traders v. CIT (1995) 79 Taxman 363 (Bom.) ref.
J.D. Mistry instructed by Pathare Dhru & Co. for t e Assessee.
R.V Desai with B.M Chatterjee for the Commissioner.
JUDGMENT
Dr. B.P. SARAF, J.‑‑‑By this reference under section 256(1) of the Income Tax Act, 1961, the Income‑tax Appellate Tribunal has referred the following question of law to this Court for opinion at the instance of the assessee:
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in confirming the amount of penalty of Rs.40,764 levied under section 271(1)(4)/271(2) of the Income Tax Act, 1961, when the firm had paid Rs.29,357 as provisional demand against the final demand of Rs.31,950 the net tax payable being Rs.2,597""
The assessee is a partnership firm. The assessment pertains to the assessment year 1964‑65. The return of the assessee was due on June 30, 1964. The return was submitted by the assessee after one year on June 30, 1965. The Income‑tax Officer issued show‑cause notice to the assessee for imposition of penalty under section .271(1)(a) of the Income Tax Act, 1961. The assessee did not submit any explanation in response to the said show‑cause notice. The Income‑tax Officer, therefore, levied penalty of Rs.47, 808 at the rate of two per cent. of the net tax payable for every month of default in furnishing the return in time under section 271(1)(4) read with section 271(2) of the Act, since the assessee was a registered firm. The assessee appealed to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner following the decision of the Calcutta High Court in CIT v. Vegetable Products Ltd. (1971).80 ITR 14, recalculated the penalty and reduced the quantum of penalty to Rs.40,764. The assessee went in further appeal to the Income‑tax Appellate Tribunal (the "Tribunal"). The contention of the assessee before the Tribunal was that the difference between the tax assessed and the‑ tax payable being about Rs.2,597 only, no penalty should have been imposed under section 271(1)(4) of the Act. The Tribunal dismissed the appeal of the assessee as it was of the opinion‑that the assessee had failed to show any reasonable cause for the delay in submission of the return. The Tribunal recorded the following finding of fact:
"The assessee has not either before the lower authorities or before us given any reasons for its failure to file the return of income in time. If any reasons were given then it would have been possible for us to consider whether in the face of such reasons the assessee's conduct would have been construed as not contumacious or dishonest or whether the assessee had acted in conscious disregard of its obligation. We are unable, however, to take any decision as to the conduct of the assessee or as to the reasonable cause of the delay in filing the return, in the absence of the assessee having not shown any such reasonable cause either before the lower authorities or before us. We are, therefore, satisfied, that on the facts and circumstances of the case, the provisions of section 271(1)(a) are squarely attracted in the assessee's case."
Hence, this reference at the instance of the assessee.
We have heard Mr. Mistry, learned counsel for the assessee, who submits that the difference between the assessed tax as a registered firm and the advance tax paid being only Rs.2,597, it is not a fit case for an imposition of penalty. According to him, the assessee could not have visualized the exact amount of advance tax and paid and could not pay full tax payable as a registered firm. He submits that no penalty could be levied in such circumstances under section 271(1)(a) of the Act. Learned counsel referred the order of this Court in Bombay Pipe Traders v. CIT (1995) 79 Taxman 363 (Income‑tax Reference No.37 of 1988), decided on September 22, 1992, by which the controversy whether the penalty could be levied on the registered firm under section 271(1)(a) read with section 271(2) of the Act even when the assessee is not liable to pay any tax as a registered firm after considering the advance tax paid by it in the status of a registered firm has been referred to a larger Bench. We have considered the above order. We, however, do not find any relevance of that order for the purpose of the present case because in this case, the assessee is liable to pay tax even in the status of a registered firm after considering the advance tax paid by it. In the instant case, the only controversy is whether there was a reasonable cause for non‑submission of the return within time. The finding regarding reasonable cause is ordinarily a finding of fact. In the instant case, it is clear from the statement of the case as also the order of the Tribunal that the assessee did not submit any explanation whatsoever about the reasonable cause for the delay of 12 months in submission of the return. The assessee even did not respond to the show‑cause notice issued by the Income‑tax Officer under section 271(1)(a) of the Act. The Tribunal has specifically recorded this fact in its order. On a consideration of the totality of the facts and circumstances of the case, the Tribunal has come to the conclusion that the provisions of section 271(1)(a) of the Act are attracted to the case of the assessee. We do not find any infirmity in the above finding of the Tribunal. The Tribunal was justified in the facts and circumstances of the case in coming to the above conclusion.
In view of the above, we answer the question referred to us in the affirmative, i.e., in favour of the Revenue and against the assessee.
Reference is disposed of accordingly. No order as to costs.
M.B.A./738/FC?????????????????????????????????????????????????????????????????????????????????? Reference answered: