1985 PLP 574 (PTD)

7. Thereafter, by orders dated 28th February, 1973, the Income -tax Officer concerned completed fresh assessment of the petitioner under section 143 (3)/148/251 for the assessment years in question and computed the total income at Rs. 25,030 and Rs. 23,080 for the respective assessment years. It has been stated that in making such assessment, the Income‑tax Officer concerned adopted the fair rent at Re. 0.40 per sq. ft. and thereby the rent per month of the main building was increas ed to Rs. 2,200 per month. From such orders of assessment appeal before the Appellate Assistant Commissioner of Income‑tax, challenging the legality and validity of the determination of annual value of the premises in question viz. No. 3, Lord Sinha Road, Calcutta, was pre ferred and the said officer by a consolidated order dated 30th October, 1974, disposed of the appeals for the assessment years 1965‑66 and 1967‑68 alongwith the other appeals for the assessment years 1966‑67 and 1968‑69 to 1971‑

72. It has also been stated that in the said Appeals it has been held by the Appellate Assistant Commissioner concerned that as per settlement arrived at with the Commissioner of Income‑tax, the Income‑tax Officer should adopt Rs. 10,560 as annual letting value of the property in question and in that view of the matter, the petitioner has stated that its total income was reduced to Rs. 7,430 and Rs. 6,750 for the assessment years 1965‑66 and 1967‑68 respectively.

8. It was the case of the petitioner that from the assessment years it would appear that the assessing Income‑tax Officer initiated penalty proceedings under sections 271 (1) (a), 273 (1) (b) and 271 (1) (c) of the said Act on the basis of enhancement of notional income being annual value of the property. It was also the case of the petitioner that the concerned Income‑tax officer viz. Shri S. C. Dey who made fresh assessment from the years 1965‑66 to 1967‑68 in pursuance to the direc tions as aforesaid, bad no competence, jurisdiction or authority to initiate the penalty proceedings as no offence was committed by the petitioner in view of the fact that it was under bonafide and reasonable belief that no returns were to be filed for the loss suffered by it. It would appear that thereafter, orders dated 24th May, 1965, the Income‑tax Officer concerned imposed penalty of Rs. 11,871 and Rs. 263 for the assessment years 1965‑66 and 1967‑68 respectively under, section 271 (1) (a) of the said Act and that too according to the petitioner, in spite of objections raised by it. It would also appear that a further revision to the Appellate Assistant Commissioner of Income‑tax was filed under section 264 of the said Act, contending amongst others that the Income -tax Officer concerned, arbitrarily assessed the rent at a higher value against actual rent received as such income was nothing but a notional income. It was also claimed that as in the assessment years as involved, the petitioner actually suffered loss, so there was no statutory obliga tion to file any return. It was also contended that there was no gross or wilful neglect on the part of the petitioner. In such circumstances, it was claimed that imposition of penalty should be deduced. It should be noted that it was not argued or submitted by the petitioner that since it was the first default, due consideration to such facts should be given. By a consolidated order dated 6th July; 1976 and made under section 264 of the said Act, interference ‑with the imposition of penalty was refused as the amount of penalty as imposed, was found to be reasonable and it was also observed that the Authorities below were not wrong in holding that the penalty under section 271 (1) (a) of the said Act was leviable, It was also found that the belief that the petitioner might not be assessable to tax was no ground or was adequate justification or reasonable cause for which, the petitioner could claim that it was prevented by just, sufficient and reasonable cause in not filing the returns.

9. It has been stated that in making the determinations as mentioned above, the Commissioner of 'Income‑tax respondent No. 1 did not act judicially but he has acted arbitrarily in confirming the orders of penalty for the concerned assessment years. It has also been stated that penalty proceedings being quasi‑Criminal in nature, the burden lay upon the revenue to prove that be was obliged to file the return or had acted in deliberate defiance of law or was guilty of any dishonest conduct‑and acted in conscious disregard of the necessary obligation. It has also been stated that the said Commissioner further failed to exercise his discretion judicially to the effect whether penalty should be imposed for failure to perform statutory obligation and did not take into consideration all the relevant facts of the case i. e. the breach, if any, was due to bona fide belief that the petitioner was not liable to file any statutory return under the said Act. It has also been stated that the said Commissioner has further failed to take into con sideration that at time when the petitioner was required to file voluntary return no assessments were made against them and therefore, they were to be guided by what they believe to be their income and therefore, tile concerned order passed by the respondent Commissioner was also illegal, invalid and without jurisdiction. The petitioner has stated during the relevant assessment years that they suffered loss and their only source of income being the income from house property, was also notional and the Commissioner concerned in rejecting the revision petition failed to take into consideration that the determinations of the total income as made by the Income‑tax Officer concerned by enhancing the annual letting value was not the real income of the petitioner and as such also there was no statutory obligation on them to file returns for the assessment years in question. The order under section 264 of the said Act has also been claimed to be illegal, invalid and without jurisdiction in view of the fact that the respondent Commissioner failed to take into consideration that in imposing penalty under section 271 (1) (a) of the said Act the Department was required to prove that the petitioner had no reasonable cause for not filing the returns within time. It has been claimed further that the decision of the respondent Commissioner in refusing to interfere with the imposition of penalty under section 271 (1) (a) of the said Act was invalid, illegal and without jurisdiction as the said respondent merely rejected the explanation as given by the petitioner and failed to take into consideration that conditions precedent for imposition of penalty were not satisfied in the case and mere rejection of explanation would not automatically mean that the necessary ingredients of section 271 (1) (a) of the said Act were established.

10. The petitioner has further claimed that the mens rea being an essential ingredient to be proved by the revenue before imposition of penalty, the orders as made were irregular and void as the respondent Commissioner failed to take into consideration that not only such criminal intentions but the conditions precedent and necessary were not fulfilled in the instant case. In that view of the matter it was claimed that the order as made under section 264 of the said Act by the respon dent Commissioner was also illegal, invalid and without jurisdiction and that too in view of the fact that there was no finding by any of the authorities to the effect that the petitioner acted in defiance of law or was guilty of a conduct which was dishonest and could be deemed to be shirking the obligations. It has been categorically claimed that the authorities concerned or the authorities below failed to apply their minds to the principles as mentioned hereinbefore and as such, they and each of them committed gross error of law and jurisdiction for which the orders as made, must be set aside and quashed. It has been categorically claimed that the respondent Commissioner misdirected himself in holding that the filing of return was a statutory obligation under the said Act in spite of the fact that the petitioner suffered losses in the assessment years in question and be erred in holding that the provisions of section 271 (1) (a) of the said Act were clearly attracted in the facts and circumstances of the present case.

11. Since there was no opposition filed to this proceeding and that too in the circumstances as recorded hereinbefore, I shall have to deal with the submissions as made for and on behalf of the petitioner by Mr. Ganguly. It was firstly claimed by him that since the assessments, in question, were the first assessment of the petitioner so the onus in the instant case was on the Income‑tax Officer concerned or the revenue to establish that no reasonable cause for the default by the petitioner did establish. Such submissions were made by him on the basis of the langu age of sections 271 (1) (a) and 273 (1)(b) of the said tact. As submissions were made by Mr. Ganguly on the language of the sections as mentioned above, those provisions are quoted hereunder (I) If the Income‑tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act, is satisfied that any person :‑ (a) has without reasonable cause failed to furnish the return of total income which he. was required to furnish under subsection (1) of section 139 or by notice given under subsection (2) of sec tion 139 or section 148 or has without reasonable cause failed to furnish it within the time allowed and in the .manner required by subsection (1) of section 139 or by such notice, as the case may be, or (b) has without reasonable cause failed to comply with a notice under subsection (1) of section 142 or subsection (2) of section 143 on by such notice as the case may be or .. He, secondly claimed that penalty should not ordinarily be imposed unless there has been a finding that the assessee has acted in-deliberate violations or in actual defiance of law and since there has been no such finding or there was no finding that there was no reasonable cause for delay the determinations as made, were improper. In support of such submissions reference was made by Mr. Ganguly to the Bench decision of the Madras High Court in the case of V.L. Dutt v. Commissioner of Income‑tax Madras II, (1976) 103 I T R 634 : (166) 973 T L R 966). In that case it has been observed that the penalty under section 271(1)(a) of the Income‑tax Act, 1961, 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 his obligations. The language of this provision is not consistent with the view that there is any presumption that that the assessee who submits a belated return has committed an offence so that it would be necessary for him to establish that he had reasonable cause. As the same expression "without reasonable cause" appears in section 276 (b), the same meaning will have to be given in both the provisions so that the mental element which is relevant for the provisions under section 276 (b) would also have to be established in applying section 271 (1) (b). The mental element can be established by circumstantial evidence in the shape of contumacious conduct or dishonest or persistent disregard of the statutory obligation. The levy of penalty under section 271 (1) (a) is not a mere concomitant of a delay in filing the return. If Parliament intended that this was the position, then it would have omitted the expression "without reasonable cause" in the substantive part of section 271 (1) (a) and would have provided for the assessee to get out the operation of the provisions by establishing reasonable cause as has been provided in section

146. The rigour of the principle applicable to criminal prosecution will not apply to proceedings under section 271 (1) (a) so that even in a case where the assessee fails to extend co‑operation and withholds any explanation for the delay in filing the return, he is not liable to be penalised unless the department established that he had acted in deliberate disregard of his statutory obligations. Where a person has no explanation to offer, it may be treated as circum stantial evidence to show that he had acted without reasonable cause. Also in a case where the explanation is prima facie unreasonable, it would be open to the Income‑tax Officer to levy penalty on the ground that the assessee had no reasonable cause for the delay in submission of the return. It would be difficult to lay down how or in what manner the onus to establish the absence of a reasonable cause can be discharged. It would depend on the facts and circumstances of the particular case. The pro vision is not intended to penalise a technical or venial breach of the provisions of the Act or where the breaches suffer from a bona fide belief that the offender is not liable to act in the manner prescribed in the statute and on the facts of that case it had been held that there was no conscious or deliberate disregard of the statutory obligation on the part of the assessee in submitting his returns and that there was no material to come to the conclusion that the assessee had no reasonable cause for the delay. It was claimed by Mr. Ganguly on the basis of the decision of the Madras High Court that thus the view as taken by the Revenue in. this case would be attracted under section 271 (1) (a) of the said Act and in any event, the Authorities below under the provisions of the sections as mentioned above, were under the obligation to hold acrd find out as to when actually the liability of the petitioner in this case arose. It was claimed by Mr. Ganguly further that discretion, if any, as left in section 271 (1) (a) of the said Act, is also required to be exercised after considering relevant factors or those factors as indicated hereinbefore.

12. On a reference to the assessment year (Annexure "C") at age 20 of the petitioner and more particularly to the opening words of the same, Mr. Ganguly wanted to establish and contend that there was compliance by the petitioner, so prior delay, if any, was required to be condoned. In support of such submissions he referred to the determinations of the Patna High Court in the case of Additional Commissioner of Income‑tax v. Bihar Textiles (1975) 100 I T R 253: (1975) T L R 804). In that case it has been observed that once notice under subsection (2) of section 139 of the Income‑tax Act, 1961, has been issued to an assessee during the relevant assessment year, there cannot be any penalty under section 271 (1)(a) for failure to furnish the return as required by subsection (1) of section

139. In that case it has also been ob served that where return is filed beyond the time given in the notice under section 139 (2), penalty will have to be calculated only for the expiry of the time fixed for filing the return in the notice under section 139 (2),

13. Mr. Ganguly also claimed that the impugned orders being without any or due reasons, are liable to be set aside on due interference by this Court. In support of such submissions he referred to the observations in the case of the Siemens Engineering and Manufacturing Co. of India Ltd. v. Union of India (A I R 1976 S C 1785) where it has been laid down that it is, now settled law that where authorities makes order in exercise of quasi‑judicial function, it must record its reasons in respect of the order it makes. Every quasi‑judicial order must be supported by reasons. It has also been observed in that case that the rule requiring reasons to be given in support of an order, like principle of Audi Alteram Partem, a basic principle of natural justice which must conform every quasi‑judicial process and this rule must be observed in its proper spirit and the mere pretence of com pliance with it would not specify the requirements of law. In this, after referring to the order by the respondent Commissioner Mr. Ganguly claimed that he has not in fact, dealt with or decided the case on its merits or its true perspective and he has not in fact, dealt with the reasons as given by his subordinate Tribunal and the submissions which were advanced against those findings. While on the question of imposition of penalty Mr. Ganguly also claimed that in the instant case penalty was not imposed judiciously. To establish that penalty, if any, has got to be imposed judiciously, he referred to the determinations in the case of Hindustan Steel Ltd. v. State of Orissa (1972) 83 I T R 26 : A I R 1970 S C 253). In that case, on facts, it has been observed that 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 dis honest 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. While on the question of Tribunal's power and authority and obligation to address the bona fide of an. assessee while dealing with the case under section 271 (1) (a) of the said Act reference was also made to the decision of the Punjab and Haryana High Court in the case of Commissioner of Income‑tax, Amritsar I v. Mangatram Hazorimal Kuthiala (1980) 125 I T R 91), where it has been observed that it is clear from the language of section 271 (1) (a) that the authority determining the question of imposition of penalty has to address itself to the question whether the delay in filing the return has been or has not been without reasonable cause. In determining this question, all relevant facts appearing on the record of the case have to be taken into consideration.

14. Chapter XIV of the said Act lays down the procedure for assessment. The provisions under section 22 of the 1922 Act, dealt with the return of income and the present section, which is section 139 does not provide for the issue of a general or public notice and it is now amongst others, the express obligation of the assessee to file a return of the total income of any other person in respect of which he is assessable under the said Act. The section further fixes a date by which returns should be filed, with corresponding provision to have the date of filing the return extended up to a certain period without changing any interest and beyond that period, on payment of interest. The section does not allow a belated return to be filed after the expiry of the specified number of years from the end of the relevant assessment year. In terms of the requirements of section 139 and more particularly under subsections (1) and (2) thereunder, every person is thus bound to furnish voluntarily, a return of his total income or the total income of any other person in respect of which he is assessable, if such income during the previous year exceeded the maximum amount which is not chargeable to income‑tax. The Income‑tax Officer may in any case serve a. notice on an assessee or a representative assessee, whose total income, in his opinion, renders him liable to pay tax, requiring him to furnish within thirty days, such a return and such notice may be issued at any time in the course of the assessment year. If such a notice is not issued in the course of assessment year, and the assessee fails to submit return voluntarily and as a result thereof the income is not assessed in the normal course under section 143 of the said Act, the officer concerned should proceed under sections 147 and 148 of the said Act, if he wants to assess such income in a subsequent year. If an assessee, on whom no notice under section 139 (2) has been served, makes a return voluntarily, after the expiry of the assessment year but within the period as specified in section 139(4), the Income‑tax Officer concerned should proceed to make an assessment under section 143 of the said Act without any recourse to sections 147 and

148. When an assessee, without any reasonable cause, fails to furnish the return under section 139(1) or fails without such cause, to furnish the return within the time allowed or in the manner as required, he would be liable to pay a penalty under section 271(1), subject to certain exceptions as indicated in section 271 (3). Penalty under section 271 (1) will also be attracted for failure to comply with an individual notice issued under section 139(2). The return of total income which is to be furnished under the section must be in the form prescribed by rule 12 of the Income‑tax Rules, 1962 and should be duly verified. Failure to make a valid return would entitle the officer concerned to consider the assessee as in, default and to assess to the best of his judgment under section 144 of the said Act. A return, as observed in the case of Commissioner of Income‑tax v. Ranchhoddas Kassondas (1959) 36 I T R 569 : A I R 1959 S C 1154 ), filed without any notice under section 139 (2), would be a valid one even though the same may disclose an income below the taxable limit.

15. The said Act imposes a liability upon every assessee to submit of his own, a return of his income for each assessment year as it comes along or is due. By the said Act or the incorporation thereof, the procedure and practice under the Act of 1922, of publishing notice, calling upon the assessee to submit the return of income before a specified date, has been discarded. In keeping with the policy of throwing the responsibility, on the assessee to make a return of his income all by his own, the said Act levies interest upon an assessee, who defaults to file the return within the specified time. Subsections (1) and (2) of section 139 deal with two distinct and different aspects of the procedure for submitting returns. Thus, under section 139 (1) of the said Act, it is the duty and obligation of every person whose total income exceeds the maximum amount which is not chargeable to tax, to make a return in the prescribed form, verified in the prescribed manner and also to furnish .all the prescribed particulars and failure to make such a return, without reasonable and just cause, entails a liability to penalty under section 271(1) (a) of the said Act.

16. The only ground that was urged in support of the non-filing of the return all throughout was loss and nothing else and not the fact of the knowledge of liability to file return, as has been sought to be urged now, in this proceedings for the first time. Mr. Ganguly contended that such paucity or shallowness of knowledge being a reasonable ground and which would certainly come within the exceptions as included in section 139 of the said Act, so on due interpretation of the words "reasonable cause" as used in section 271 (1) (a) of the said Act, the Authorities below, should have taken such fact into consideration. Mr. Ganguly could not of course contend that such defence as indicated above and which incidentally was his only submission now, was not pleaded before any of the authorities below or at any time, but as mentioned earlier, he claimed that even if such ground was not taken or urged, the authorities below were bound to consider the same and in not doing so, they have acted illegally, irregularly and in improper use of their jurisdiction, competence and power. The cases on the Income‑tax Act as cited, other than the one in V. L. Dutt v. Commissioner of Income‑tax, Madras II (supra), in my view, have no application to the facts of this case. Even the said V. L. Dutt's case (supra), has not ruled out the statutory obligations as imposed on an assessee in the matter of submitting the return, but on facts, it was concluded that there was no material to come to the conclusion that the assessee had no reasonable cause for the delay. Thus, in that case, relevant facts were present or at least were available on record, which incidentally was not the position in this case. In fact, in this case, before the authorities below neither there was any relevant pleading, nor sub missions, or any grounds taken or any argument was advanced. Such being the position, the Madras case also will have no application. I further find that the order of the respondent No. 1 as claimed cannot be said to be devoid of any reasonings and as such the determinations in the case of D the Seimens Engineering and Manufacturing of India Ltd. v, Union of India (supra), will have no appropriate application to this case.

17. The above being the position, the submissions of Mr. Ganguly and so also this Rule should fail and the same is thus discharged. There will be no order as to costs.

18. It should be noted here that in respect of Civil Rule No. 943(W) of 1977, same submissions as in Civil Rule No. 944(W) of 1977, were made by Mr, Ganguly and for the reasons as I have indicated in the said Civil Rule No. 944(W) of 1977, I also discharge the said Civil Rule No. 943(W) of 1977. There also will be no order as to costs. M. B. A. Order accordingly.