Delhi High Court

Income-Tax Officer vs Dr. Kedarnath Gupta. on 29 September, 1986

Equivalent citations: 1987 20 ITD 6 Delhi

ORDER

Per Shri V. P. Elhence, Judicial Member - These two appeals of the department arise out of the consolidated order dated 14-1-1985 of the learned AAC, Range-I, Agra by which he cancelled the penalties of Rs. 4,080 under section 10(3) of the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 (the CDS Act) and of Rs. 4,014 under section 273(1) (b) of the Income-tax Act, 1961 (the Act), for the assessment year 1984-85.

2. The assessed is Doctor Kedarnath Gupta a Vaid at Mainpuri (U.P.). He had filed his income-tax return for the assessment year in question on 14-5-1984 declaring an income of Rs. 1,21,150 on which the assessment was completed on 31-8-1984. A raid took place at the premises of the assessed on 3-2-1984 as a result of which cash, fixed deposit receipts and bank deposits as well as gold and silver ornaments were seized. In pursuance of the settlement petition dated 19-4-1984 given by the assessed before the learned Commissioner, Agra, the CRP Agra passed an order of settlement on 1-5-1984. The following table would conveniently express the recoveries made and the amounts accepted as the assesseds income as a result of the said settlement :

Nature of assets

Rs.

Cash

61,770

61,000

50,000

Gold and Silver of gold ornaments

2,62,000

In respect jewellery (235 gms.) for silver jewellery

37,953

Investment

9,012

Investment in pawning business (Gold jewellery 121 gms.)

11,000

Income from profession

13,181

1,21,146

The return of income was filed by the assessed on the basis of the order dated 1-5-1984 of the learned Commissioner (Appeals) under section 132(5) of the Act as mentioned above. However, neither any estimate of advance tax was filed under section 209A (1) (a) of the 1961 Act nor he made the compulsory deposit as required under section 5 of the CDS Act. Accordingly, penalty proceedings were initiated by the ITO. The explanation of the assessed before the ITO was that the case and jewellery, etc. found were surrendered before the department in order to purchase peace and that it did not represent his real income. The further contention raised by the assessed was that a sum of Rs. 61,000 having been seized by the department was already lying with it and, therefore, no penalties could be imposed on the assessed. These explanations were not accepted by the ITO who imposed the above penalties which represented the minimum amounts of penalties impossible under the respective provisions referred to above.

3. In appeal, the learned AAC held that the assessed was prevented by a reasonable cause from filing the estimate of advance tax and from making the compulsory deposit. Accordingly, he cancelled the penalties.

4. In the appeals before us Shri D. K. Sharma, the learned departmental representative strongly supported the penalty orders passed by the ITO and submitted that in the settlement order dated 1-5-1984, the learned Commissioner had not said that no penalty was to be imposed under the CDS Act and that even in regard to the penalty under section 273(1) (b) of the 1961 Act all that the learned Commissioner said that penalty will be imposed in accordance with the law, being penalty not exceeding the minimum leviable. He further pointed out that insofar as the penalty imposed in accordance with the law, being penalty not exceeding the minimum leviable. He further pointed out that insofar as the penalty imposed under section 272(1) (b) represented the minimum penalty imposable, the assessed could not have any grievance. He also argued that the assessed had failed without reasonable cause to furnish the statement of advance tax payable by him in accordance with the provisions of section 209A (1) (a). Similarly, he submitted that the assessed had without reasonable cause, failed to make the compulsory deposit within the time allowed under section 5. Reliance was also placed by him on the following decisions : CIT v. Gujarat Travancore Agency [1976] 103 ITR 149 (Ker.), (FB), Addl. CIT v. Dargapandarinath Tuljaya & Co. [1977] 107 ITR 850 (AP) (FB), H. H. Maharani Sharmishthabai Holkar v. Addl. CIT [1981] 129 ITR 13 (MP) and Jeewanlal (1929) Ltd. v. ITO [1981] 130 ITR 405 (Cal.)

On the other hand, Shri K. C. Agarwal, the learned counsel for the assessed strongly supported the order of the learned AAC and submitted that since the assessment year 1973-74 no advance tax estimate was being filed by the assessed as his income was below the taxable limit. He also submitted that on 15-9-1983, the date when the advance tax estimated was due to be filed, the assessed could not expect that raid would be made on the assesseds premises and that the income would as declared by him at Rs. 1,21,150 on 14-5-1984. He submitted that there was a bona fide belief in the mind of the assessed that his income continued to be below the taxable limit and, therefore, there was neither any obligation to file the estimate of advance tax nor to make any compulsory deposit under section 5. He also placed reliance on the following decisions in CIT vf. Co-operative Cane Development Union Ltd. [1975] 101 ITR 368 (All.), CIT v. S. B. Electric Mart (P.) Ltd. [1981] 128 ITR 276 (Cal.) and Southern Publications (P.) Ltd. v. CIT [1982] 137 ITR 822 (Mad.).

5. We have considered the rival submissions as also the decision referred to above. In his petition dated 19-4-1984 before the learned Commissioner, Agra, the prayer made by the assessed was that his offer of taxation of the amounts referred to therein be accepted and that the same may be taxed for the assessment year 1984-85 without interest or penalties Para 12 of the order dated 1-5-1984 of the learned Commissioner, Agra by which settlement was made was to the effect that penalty under section 273(b) /273(a) of the Act will be imposed in accordance with law, being penalty not exceeding the minimum leviable. Therefore, the settlement did not exclude the levy of penalty under the CDS Act at all and so far as the penalty under section 273(1) (b) is concerned, the penalty could be imposed in accordance with law but the amount of penalty was to be kept at the minimum. We find that only the minimum penalties have been levied by the ITO. Therefore, the assessed cannot say that no penalties could be imposed fin view of the order dated 1-5-1984 of the learned Commissioner.

6. We have, therefore, to see if the penalties in question were leviable on facts. The language of section 273(1) (b) of the 1961 Act and section 10 of the CDS Act is similar, namely, the failure to furnish the statement of advance tax or to make the compulsory deposit should be without reasonable cause. In the case of Co-operative Cane Development Union Ltd. (supra) it was held that the bona fide belief of the assessed that he was not liable to pay advance tax was a sufficient cause. In the case of Gujarat Travancore Agency (supra) it was held that the department was not obliged to establish means read in case of the default under section 27(1) (a) of the Act. To the same effect was the Full Bench decision of the Honble Andhra Pradesh High Court in the case of Dargapandarinath Tuljayya & Co. (supra. The case of S. B. electric Mart (P.) Ltd. (supra) was a case under section 273(1) (a) and since the estimate of advance tax was filed after expiry of the accounting period it was held that the assessed may or may not have full picture of the income earned. This decision is, therefore, not very relevant. In the case of H. H. Maharani Sharmishthabai Holkar (supra) again it was held that means read is not a necessary ingredient in case of default in filing of estimate of advance tax and that the onus is on the assessed to show reasonable cause for default. The case of Jeewan Lal (1929) Ltd. (supra) was again a case under section 273(1) (a) and is, therefore, not very relevant. So far as the case of Southern Publications (P.) Ltd. (supra) is concerned, it was held that penalty can be levied only if the delay was without reasonable cause and that the mere rejection of the explanation did not justify the levy of penalty. If there were no raid made and if there was no seizure of cash, ornaments, fixed deposit receipts and bank receipts necessitating settlement petition and settlement thereafter,, the position would have been different. In that case, the assessed could well have relied upon the fact that in the previous years either there was no taxable income or the taxable income was marginal. The plea of bona fide belief and reasonable causes could have been founded on those facts. But in the present case, the position was different. There was a substantial difference between the taxable limit of the income and the income finally assessed in the hands of the assessed for the assessment in question and that too on the basis of the return filed by the assessed himself on 14-5-1984. In fact it is only when the assessed felt concerned as a result of the raid and consequent seizure of substantial assets that the felt driven to the well. It is those circumstances that the assessed made the petition for settlement on 19-4-1984 offering income mentioned above and which resulted in the order of settlement made on 1-5-1984 passed by the learned Commissioner. In the background of all this, it could not be said by the assessed that all this income. The theory of reasonable cause and bona fide belief is too tall to accepted in the factual background mentioned above. We are, therefore, clearly of the opinion on the facts and in the circumstances of the present case that the learned AAC was in error when he accepted that there was reasonable cause for the assesseds default. In our view, both the defaults were without reasonable cause for the assesseds default. In our view, both the defaults were without reasonable cause. In the circumstances, the penalties imposed under the two provisions mentioned above, at the minimum prescribed, were quite justified. They are accordingly upheld. Therefore, the order of the learned AAC is reversed.

7. The appeals filed by the department are accordingly allowed.