TMI Blog2004 (4) TMI 281X X X X Extracts X X X X X X X X Extracts X X X X ..... in which I am a whole time director, for recovery of the above penalty. Consequently, the appeal and stay petitions were hurriedly filed on 4-6-2003. (iii) Thus the assessee is prevented by sufficient reasonable cause, for not filing the above additional ground, at the time of filing the original appeal. (iv) If this additional ground is not admitted, it would put irreparable loss and hardship, and the penalty liability of the appellant effects, in view of the Supreme Court judgment in National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383. 3. The facts of the case revolve in a narrow compass. All the appellants herein belong to one family and they were partners in Sri Rama Engg. Constructions, Hyderabad. They have received from the firm salary and interest for the assessment years under consideration. Lady partners have also earned property income in addition to the income from the firm. From the Profit Loss A/c and computation of the income of the firm, the Assessing Officer noticed that the partners, appellants herein, have earned substantial income. However, they have not filed the returns of income in their individual status. Therefore, notices were issued under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and issued notices under section 148 of the Act. (ii) Ignorance of law is not an excuse for failure to fulfil statutory obligation under any law. (iii) The claim of the assessee that he is under the bona fide impression that the returns of income was filed by the Tax Consultant himself is not tenable as the return of income has to be signed by the assessee himself and it cannot be filed without his knowledge. (iv) Assessee's explanation is general in nature and not supported by any documentary evidence. (v) The firm in the name of M/s. Sri Rama Engineering Constructions was formed in the year 1973 and the firm as well as its partners were filing return of income and were paying taxes thereon. Therefore, the claim of the assessee that refund of the firm would be adjusted against the advance-tax of the partners is not correct. (vi) As per the provisions of the Act, TDS is being deducted from the contract receipts of the firm. As income belongs to the firm, credit for TDS belong to the firm only. A perusal of the assessment folder of the firm for the assessment years 1993-94 to 1996-97 shows that the refund of the firm was either adjusted against the arrears of demand of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation on an imported Car was wrongly claimed but mere rejection of claim should not be considered as furnishing of wrong particulars inasmuch as the claim was based on a wrong advice. Reliance was placed on several case-laws. 8. The learned Commissioner of Income-tax (Appeals) rejected the contentions of the assessees and confirmed the penalties levied by the Assessing Officer. He observed that the returns of income were filed consequent to the notices issues under section 148 of the Act and thus the assessees had concealed the particulars of income within the meaning of section 271(1)(c) of the Act. He further observed that the claim of depreciation constitutes furnishing of inaccurate particulars of income. 9. Further aggrieved, assessees are in appeal before us. Learned counsel appearing on behalf of the assessees filed written submissions and also the relevant papers to submit that it is not a fit case for levy of penalty under section 271(1)(c) of the Act. In respect of three male partners, a preliminary objection was raised by the learned counsel i.e., the ITO who levied the penalty had no jurisdiction under section 120 of the Act to deal with the assessees and thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT [2001] 251 ITR 99 to submit that even if Explanation-1 is not invoked specifically, the main provisions include the Explanation and then it is the duty of the assessees to satisfy the Assessing Officer that the case do not fall within the Explanation-1 to section 271(1)(c) of the Act. Learned counsel submitted that three male partners having already declared income under the VDI Scheme, it cannot be said that they have any intention to conceal the income. Non-filing of returns or claiming depreciation on an imported Car is only on account of wrong advice and due to bona fide reasons. But for the judgment of Hon'ble Supreme Court in the case of Hemalatha Gargya v. CIT [2003] 259 ITR 1, the issue as to whether the time for payment of tax and interest fixed under the VDI Scheme is extendable or not is debatable and thus it cannot be said that the assessee has not intentionally filed the returns. The fact that the returns were filed under VDI Scheme shows that the income earned by the assessees are within the knowledge of the departmental officials and thus the assessees would not have taken improper step of non-filing the returns intentionally, to face the wrath of levy of interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that there is no evidence on record that non-filing of the returns was based on wrong advice. It was a deliberate default on the part of the assessees. In the light of the decision of Hon'ble Supreme Court in the case of K.P. Madhusudhnan, there is a deemed concealment. It was also submitted that the word 'deliberate' was deleted from section 271(1)(c) of the Act which implies that in order to levy penalty, it is not necessary to show that the concealment of income was deliberate. Since the returns were not filed voluntarily, penalty levied by the Assessing Officer and confirmed by the Commissioner of Income-tax (Appeals) deserve to be confirmed. He thus strongly relied upon the orders of the tax authorities. 12. We have carefully considered the rival submissions and perused the record. With regard to the additional grounds raised on behalf of three assessees (S/Sri V. Narayana, V. Vijaya Raghava Choudary and V. Vijaya Bhaskar Choudary), as regards jurisdiction of the Assessing Officer to levy penalties, we are of the firm view that the assessees above-mentioned have lost their right to raise the issue at this juncture in view of section 124(3) of the Act which reads a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that only those assessees who were not previously assessed to tax but filed the returns in response to section 148 of the Act would be attracted by Explanation-3 of the Act. The intention of the Legislature is further clear by the fact that the expression "who has not been previously assessed under the Act" was omitted from the statute book by the Finance Act, 2002 with prospective effect, i.e., w.e.f. 1-4-2003. Thus, it is only from 1-4-2003, Explanation-3 gets attracted even in a case where a person was previously assessed to tax. Since the amendment to Explanation-3 was not retrospective, it implies that prior to 1-4-2003, an assessee who has been previously assessed to tax but filed the returns of later years only in response to notices under section 148 would not be treated as an assessee who has concealed the particulars of his income. In the instant case, admittedly, the assessees herein were previously assessed to tax; therefore we hold that the Assessing Officer has wrongly invoked Explanation-3 to section 271(1)(c) of the Act to impose the penalties. 14. The conduct of the assessees would also go to show that they had no intention to conceal their income but for the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstant case, the facts and circumstances clearly and categorically proved that the assessees would not have committed the mistake of non-filing of the returns but for the bona fide impressions. Whether an assessee's action or inaction is based on bona fide impressions or not depends upon the facts and the circumstances of each case. We confine to the peculiar facts of the case to hold that the assessees herein have not concealed the particulars of income with any mala fide intention. Even in the case of Sri Narayana, the fact remains that depreciation on an imported Car is not permissible under law on the face of it and thus the assessees would not have intentionally claimed depreciation but for the wrong advice or on an improper understanding of the advice. The case of the revenue is that ignorance of law is not an excuse. It may be relevant here to appreciate the observations of various Courts on this issue. In the case of Evans v. Bartham [1937] AC 473, Lord Atkin observed as under: ".... the fact is that there is not and never has been a presumption that every one knows law. There is rule that ignorance of the law does not excuse, a maxim of very different scope and applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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