1985 PLP 523 (PTD)

2. The assessee was a firm carrying on business as Excise contractors during the accounting years relevant to the assessment years 1957‑58 and 1959‑

60. For the accounting year relevant to the assessment year 1957‑58, the assessee was granted licenses in respect of a large number of shops, about 100 in number, spread over Telengana and Karnataka areas of the former Hyderabad State. For this assessment year, the assessee filed a return; voluntarily, on 3rd April, 1958 showing a loss of Rs. 20,

005. No action wag taken upon this return until 19th April, 1961 when a notice under section 34 was issued. In response to the notice under section 34, the assessee filed a return, again showing loss in the same amount. The I. T. O., however, assessed the income at 'Rs. 4,81,974, which war appealed against. Ultimately, the Tribunal reduced the amount to Rs. 1,79,995.

3. For the assessment year 1959‑60, the assessee filed a return showing an income of Rs. 7,

704. The I.T.O. determined the income at Rs. 5,10,916, which on appeal to the Tribunal came to be reduced to Rs. 1, 37, 704.

4. Having made the assessments, the I.‑T. O. issued notices under had come into force calling upon the assessee to show‑cause why penalty should not be levied for failure to furnish the estimate of advance‑tax as required under section 18‑A (3) of the 1922 Act. The assessee filed an explanation stating that since its income, according to its books of accounts was less than Rs. 4,000 and was thus below the limit attracting advance tax liability, it did not file the estimates of advance‑tax. In this explana tion, the assessee made a request that until his assessment appeals are disposed of, penalty proceedings should be kept pending. The I. T.O. did not accede to this request, and disagreeing with the explanation offered, levied penalties for both the years. On appeal, the Appellate Assistant Commissioner reduced the penalties to Rs. 25,000 and Rs. 7,500, res pectively. On further appeal, the Tribunal held that no penalty whatsoever is leviable in the facts and circumstances of the case inasmuch as the explanation offered by the assessee for not filing the estimate of advance tax was acceptable. Thereupon, the Revenue asked for and obtained this reference to this Court.

5. We may mention at this stage that at an earlier stage of penalty proceedings, a controversy had arisen whether penalty proceedings under section 273 of the 1961 Act can be taken in respect of the assessment years in question. That was concluded by this Court on a reference. It was held that proceedings under section 273 of the 1961 Act are competent. The Tribunal was directed to examine the question of the assessee's liability to penalty, keeping in mind the relevant facts and circumstances of the case. In pursuance of the said order, the Tribunal heard the appeals again and allowed the same holding that no penalty is leviable.

6. Section 273(1), in so far as it is relevant, read as follows on the date the notices there-under were issued :‑ "(1) If the Income‑tax Officer, in the course of any proceedings in connection with the regular assessment is satisfied that any assessee :‑ (a) ... (b) has without reasonable cause failed to furnish an estimate of the advance‑tax payable by him in accordance with the provisions of subsection (3) of section 212. he may direct that such person shall, in addition to the amount of tax, if any, payable by him, pay by way of penalty a sum ‑ (i) .................... .. (1) & (2) (ii) which, in the case referred to in clause (b), shall not be less than ten per cent but shall not exceed one and a half times the amount on which interest is payable under section 217."

7. It is evident that the language of section 273 (I) (b) is similar to section 271 (1) (a) which language is totally different and distinct from the language employed in clause (a) of section 273(1), and clause (c) of section 271(1). Under section 273 (1) (b), penalty is leviable if the assessee fails to furnish a statement of the advance‑tax payable by him, without reasonable cause. The burden of proving` reasonable cause lies upon the assessee . If the reasonable cause assigned by the assessee is not accepted, then, it becomes open to the Income‑tax Officer to levy a penalty as contemplated by section 273 (1)(ii). Of course, mere rejection of the explanation is not enough the I. T. O. must record a finding that there was no reasonable cause for not filing the estimate then alone, he gets the power to impose penalty. Even there, the I. T. O. has to exercise his discretion and determine, having regard to the facts and circumstances of the case, including the conduct of the assessee, whether penalty should be levied and if so, in what measure. In such a case, there is no question of any other or further burden of proof lying upon the department. The decisions rendered under section 271 (1) (c) which speak of initial burden and ultimate burden have no application to a situation under section 273 (1) (b) or section 271 (1) (a).

8. Dealing with a similar obligation cast by the Orissa Sales tax Act, the Supreme Court held in Hindustan Steel Ltd. v. State of Orissa (1972) 83 I T R 26; A I R 1970 S C 253), that penalty proceedings being quasi‑criminal in nature, 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. The Supreme Court further observed that penalty will not also be imposed merely because it is lawful to do so and that levy of penalty is a matter of discretion to be exercised judicially and on a consideration of all the relevant circumstances. These observations can be treated as equally relevant under sections 273(1)(b) and 271 (1)(a).

9. Reliance was placed upon the decision of the Supreme Court in Commissioner of Income‑tax v. Anwar Ali (1970) 76 I T R 696; A I R 1970 S C 1782) by the counsel for the assessee. In our opinion, however, this decision has no relevance to cases arising under section 273(1)(b) or for that matter, section 271 (1) (a), since it is a case decided with reference to the language of section 28(1)(c) of 1922 Act which spoke at the relevant time, of concealment of income or deliberately furnishing inaccurate particulars of income. In such a case, it was held, the burden lies upon the department to establish that receipt of the amount in dispute constituted income of the assessee. This decision has to be understood with reference to the language of section 28(1)(c) and cannot be extended to a case under section 271 (1) (a) or section 273 (1) (b). The word "deliberately" in clause (c) of section 271 (1) has been deleted the Finance Act, 1964. We may in this connection refer to the decision of the Punjab and Haryana High Court in Additional C. I. T. v. Roshan Lal Kuthiala (1975) 100 I T R 329 (Pb & Har), where it is held that whether there is a reasonable cause for not filing the return or estimate within the prescribed time, is a pure question of fact. In other words, the I.‑T. O. and for the same reason, the Appellate Authorities have to examine the explanation and the material, if any, placed by the assessee in support of the explana tion, to determilte whether there was in fact reasonable cause for not filing the return or estimate within the prescribed time and if not satisfied about the explanation, then consider the facts and circumstances of the case whether to levy penalty and if so, in what measure. No other enquiry or investigation is called for, nor is the department under an obligation to prove any further facts in such a case. The decision of the Allahabad High Court in C. I. T. v. Co‑op. Cane Development Union (1975) 101.I T R 368 (All) : 1973 T L R 869) furnishes and example of the situation, where no penalty was held leviable, notwith standing the failure to file an estimate under section 273 (1) (b) of its income by the Co‑operative Society because it was held as a fact in that case that the Co‑operative Society was under the bona fide belief that its income was exempt from tax

10. Counsel for the assessee relied upon certain decisions to which a brief reference would be in order.

11. The first decision is Additional C.I.T, v. Bipanlal Kuthiala (1975) 98 I T R 343 (Punj & Har.) a decision of the Punjab and Haryana High Court. But that was a case of filing a false estimate which would fall under section 273 (1) (a). It was not a case of failure to file an estimate governea by section 273 (I)(b). Because it was a case falling under section 273 (1)(a), the principle of the decision of the C.I.T. v. Anwar Ali (A I R 1970 S C 1792) was applied and it was held that the burden of proving that estimate advance tax submitted by .the assessee was false to his knowledge or was believed by him to be inaccurate, is upon the depart ment. The next decision relied upon is C.I.T. v. Ramji Bhai Hirji Bhai & Sons (1977) 110 I T R). That was a case where a notice under section 139 (2) of the Act was served upon the assessee to file a return within a particular time which was subsequently extended. The assessee however, filed the return only after the expiry of the prescribed date. The I.T.O. completed the assess ment, but did not charge interest under section 139 for the late submission of the return, but later rectified his order under section 154 and levied penal interest. On appeal, the Appellate Assistant Commissioner accepted the contention of the assessee that the I.T.O. must be deemed to have exercised his discretion in favour of the assessee in not charging penal interest and accordingly allowed the appeal. The Tribunal dismissed the department's appeal no doubt on a different reason. However, on a reference, the Gujarat High Court held that on a plan reading of cl. (iii) of the proviso to section 139 (1) (b), it was clear that there was an obligation on the income tax Officer to levy penal interest in the manner stated in sub‑cls (a) and (b) of the clause if there is failure to furnish the return before the extended date. Inasmuch as in that case, the assessee had filed the return beyond the extended date, it was held that the I.T.O. had power to levy penal interest. We are unable to see how this decision rendered under section 139 is. of any help to the assessee, in this case.

12. The next decision relied upon is Ramnagar Cane and ,sugar Co. Ltd. v. C.I.T. (1982) 134 I T R 609: 1981 Tax L .R. 1080). in that case, it was held by the. Calcutta High Court on a consideration of the facts and circumstances of the case that it could be reasonably said that the assessee had no idea as to the actual profits at the time when it had paid advance tax on the basis of the profits earned in the immediately preceding year, and accordingly there was no failure on the part of the assessee to file the estimate of such tax in terms of section 212 (3‑A). 1t was further held that failure, if any, could not be said to have occurred without reasonable cause. This case really emphasises that the question whether reasonable cause exists or not, is a question of fact. Indeed, the learned Judges refused to go into the question of onus or the initial onus. The learned Judges observed that because in that case both parties had adduced evidence, the question of onus loses its importance. Instead of going into the question of whom the initial onus lay, they examined .the facts of the case and held that there was reasonable cause. This decision cannot be held to be an authority for the proposition that even in a case where the assessee's explanation is rejected, the depart ment must go further and prove that failure to furnish the estimate or return is deliberate or wilful.

13. It is unnecessary to refer to the decisions cited by the learned counsel under section 271 (1) (c) for the reasons pointed out by us hereinbefore.

14. Lastly, however, we may refer to P.V. Kurian v. I.T. O. Ernakulam ((1961) 43 I T R 432), a decision of the Kerala High Court relied upon by the Tribunal and also by the counsel for the assessee before us, In this decision, a learned single Judge of the Kerala High Court held, considering a case arising under section 28 (1) (c) that mere disparity between the estimate submitted by the assessee and the income returned by him or determined by the I.‑T.0, does not give rise to an inference of dishonesty. This decision also, it must be pointed out, was rendered with reference to section 28 (1) (c) and not with reference to section 28 (1) (a) which is the provision corresponding to the provision with which we are concerned herein. We need only reiterate that the existence or absence of reasonable cause is really a question of fact and that once the I.‑T.O. is satisfied that' there was no reasonable cause, he is entitled to levy penalty, of course taking into consideration the conduct and attitude of the assessee, as pointed out by the Supreme Court in Hindustan Steel Ltd. v, State of Orissa (1972 83 I T R 26 : AIR 1970 S C 253).

15. Now, coming to the facts of this case, the Tribunal held on a consideration of the facts and circumstances of the case that the assessee had reasonable cause for not furnishing the estimate of advance tax. In this connection, it has referred to the relevant facts and circumstances including the fact that for the assessment year 1958‑59, the assessee's income was assessed at Rs. 30,019 only. Though it may be that if we may have come to a different conclusion, yet reference under section 256, we cannot interfere with the finding of fact of the Tribunal unless it is shown that it is perverse or that there is no' evidence to sustain it. In this case, it is not possible for us to say either that the finding of the Tribunal is perverse or that there is no evidence to support it. If so, no interference is possible in this case.

16. For these reasons, we answer the question referred to us in the negative, that is, in favour of the assessee and against the department. M. B. A. Reference answered in the negative.