9911796707
TMI Blog1997 (7) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; 31-7-1979 31-3-1981 19 months ---------------------------------------------------------------------------- 3. In reply to a show-cause notice why penalties should not be levied for the delays, the assessee filed a common reply for the two years, extract of which is given in the penalty orders and is also reproduced below: "the assessee's first assessment was completed on 15-1-1983, which was subsequently cancelled and a fresh assessment was made on 6-2-1984 in the same status of individual although it was proposed to be made in the status of HUF in the protective assessment. No assessment order was issued to the assessee. Hence, there was no cause for imposition of penalty under that section." 4. It was also stated subsequently that the assessee's appeals for the two years were pending before the CIT(Appeals) and, therefore, the proceedings may be stayed till disposal of the appeals. 5. The Assessing Officer (A.O.) observed that the appeals before the CIT(Appeals) had been decided and no further reply was given in response to further show-ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalties could not be sustained because the assessment had been made on a protective basis. 12. The ld. Departmental Representative (D.R.), on the other hand, submitted that in the present case, there was a limitation for passing penalty orders for the two years under consideration and, therefore, they could not be kept pending indefinitely. The substantative assessments in case of the HUF had not become final even till date and, therefore, there was no option but to pass the penalty orders. He further emphasised that the penalties were only for delay in filing of returns, and this fact stood established, and not for concealment under section 271(1)(c) of the Act. The ld. D.R. further submitted that under the law, as it stood amended from 1-4-1971, both interest under section 139(8) and penalties under section 271(1)(a) could be levied. Lastly, he submitted that there was no material on record to show family disputes, as contended before the Tribunal, and no such explanation had been given either before the Assessing Officer or before the CIT(Appeals). This explanation should, therefore, be rejected. 13. We have considered the rival submissions carefully. We will first deal with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order is not in the case of the assessee, who is an Individual, but in case of Shri Abhay Kumar (HUF). The facts in that case are not available and certainly the decision in that case has no application to the case before us. 15. We now come to the question whether penalty should have been levied where the assessment was on protective basis. For a proper appreciation, it may be the first seen what is the justification of a protective assessment itself. The following passage from the ld. Author Sampath Iyengar's "Law of Income Tax", Eighth edition, revised by Justice S. Ranganathan, former Judge, Supreme Court of India and former President, Income Tax Appellate Tribunal, may be usefully referred to: "It is no doubt true that the Income-tax Act nowhere provides that a protective or precautionary assessment can be raised in respect of one and the same income on two different persons. A departmental practice that has however gained judicial recognition is that, in certain circumstances, where it appears to the income-tax authorities that certain income has been received during the relevant assessment year but it is not clear who has received that income and prima facie it appears ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. In that case, the question was levy of penalty under section 271(1)(c) for concealment of income and also under sections 271(1)(b) and 273 of the Act. The assessee filed her return and the assessment was made ex parte under section 144 stating that investment made in business was made by her father. Assessment of the assessee was completed on protective basis by making addition of such investment amount. Penalties were also levied. It was held as under: "8. Looking from another angle also the penalties cannot survive, for the reason that ITO made the assessment on the assessee on a protective basis though the return was filed by her through her guardian claiming declared income to be her income. The finding given by the ITO in that protective assessment is that the income and investment made is not the income or investment by or of the assessee but that of her father and the ITO has specifically mentioned that the same will be assessed in the hands of the father only. Levy of penalty on such protective assessment is not sustainable at all because it tantamounts to levy of protective penalties. Admittedly there is no concept or warrant of levy of any protective penalties under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause in the case of an allegation of concealment a probe has to be carried out and a decision taken whether there has been any concealment. However, no probe is necessary in case of a penalty for delay in filing of the return. It is an admitted fact by both the parties that the delay took place. The only question to be considered is whether there was a reasonable cause. 19. Further, we find merit in the contention of the ld. D.R. that in view of a statutory limitation of time for levying of penalties under section 271(1)(a), the proceedings could not be kept pending indefinitely. What would be an equitable procedure in such circumstances? Guidance is available in the judgment of the Hon'ble Supreme Court in the case of Lalji Haridas at pages 392 & 390 as under: "We would, however, like to add one direction in fairness to the appellants. The proceedings taken against both the appellants should continue and should be dealt with expeditiously having regard to the fact that the matter is fairly old. In the proceedings taken against Lalji, the Income-tax Officer should make an exhaustive enquiry and determine the question as to whether Lalji is liable to pay the tax on the income in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officers though the assessments were made protectively and not substantively on the assessee. I have also noticed that my ld. Brother in para 17 at page 6 has distinguished the order passed by Calcutta Bench 'D' of the Tribunal in the case of Miss Vasudha Bajoria to which I have been a party. With respect to my ld. Brother, I am unable to subscribe to the view taken by him. 2. The facts of no two cases, I agree, are identical. But there is a very thin distinction between facts of this case and the facts in the case of Miss Vasudha Bajoria which were in relation to the levy of protective penalties under sections 271(1)(b), 273 and 271(1)(c) of the Act whereas in this case the penalties are levied for late filing of the returns under section 271(1)(a) of the Act. But that does not make any difference as to the applicability of the ratio decidendi of the case of Miss Vasudha Bajoria to this case because the controversy is common, that is to say; whether or not protective penalties can be levied under the penal provisions of Income-tax Act, 1961. It is elementary and almost universally accepted that it is not the conclusion arrived at of an earlier case which is binding precedent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act and the same cannot be derived from the judgment of the Apex Court rendered in the case of Lalji Haridas relied by my ld. Brother or even from the comments of the Author Shri Sampath Iyengar's in his book "Law of Income-tax" Eighth Edition, relevant passage from which book has been reproduced by my ld. Brother at page 5 of his order. I do not with respect subscribe to such a view. 5. The plea of the Revenue that penal proceedings may get time barred under section 275 of the Act for delay in searching and assessing the correct person cannot be a ground to impose and/or sustain protective penalties. In such a situation, the Revenue authorities act at their own risk and peril, and for their laches, inaction and inordinate delays protective penalties cannot be imposed or sustained protectively. 6. There is one more reason why I do not agree with the imposition of protective penalties. As is known penalty in fiscal laws is a monetary punishment awarded to a person/assessee for the act of offending or contravening a statutory provision or mandate contained in an enactment. In addition to the penal provisions, several fiscal statutes like the Income-tax Act, 1961, also contain pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de to CIT(Appeals) as held by Accountant Member? THIRD MEMBER ORDER These two appeals were heard by a Division Bench. The learned Accountant Member had proposed his order in August 1995, with which the learned Judicial Member did not agree and wrote a dissenting order dated 19-9-1995. Thereupon, the following two points of difference were referred to the President for appointing a Third Member under section 255(4) of the Income-tax Act, 1961:-- "1. Whether, on the facts and circumstances of the case and in law, the Assessing Officer was justified in imposing penalties for assessment years 1978-79 and 1979-80 under section 271(1)(a), when the assessment had been made on a protective basis? 2 If so, whether, on the facts and circumstances and in law, penalties imposed under section 271(1)(a) of the Act for late filing of returns for assessment years 1978-79 and 1979-80, should be set aside to CIT(Appeals) as held by Accountant Member?" 2. As regards tracing of facts of the case, there is complete unanimity among the Members. Therefore, for the purpose of appreciating the main issue in the Third Member's case, it is enough if I highlight the bare minimum facts as follows. 3. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which were later compromised and the ultimate settlement by the elders took a very long time, the assessee could not file the returns in time and in fact it was the cause for the delay in filing the returns. It was also his case that substantive assessment was made in the hands of the HUF (Bishwanath Prasad) even for the impugned two assessment years also. On behalf of the HUF, petition was filed under section 139(8) read with rule 117A before the Assistant Commissioner of Income-tax , Inv. Circle 1, Dhanbad, under which the HUF sought for waiver of interest charged for the years 1976-1977, 1977-78, 1980-81, 1981-82 and 1982-83. An order was passed by the ACIT, Inv. Cir. 1, Dhanbad, on 21-5-1992 on the said application for waiver of interest in which it was held as follows: "Considering the facts of the case and in view of the evidences produced there seems to be a reasonable cause for the delay in furnishing the returns in time and thus the interest charged in all the above assessments are hereby waived." Copy of the order dated 21-5-1992 had been filed by the assessee and is kept on record. 6. Now, the main point of difference between the learned Members was that in view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efinite as to who earned the total income between the HUF and the individual, there is no basis to conclude that the individual member of the HUF has definitely earned the total income and also failed to return the said total income in the return filed either under section 139(1) or in pursuance of notice under section 139(2), etc. When there is no basis to conclude that the total income belongs to the assessee, the further question whether such an assessee committed default under section 271(1)(a) or not is not possible to determine. Therefore, for that reason, penalty cannot be levied. In fact, this is the purport of the decision relied upon by the learned Judicial Member which are already cited above and Which were ultimately followed in Miss Vasudha Bajoria's case The ld. Accountant Member had extracted from the "Law of Income-tax", Eighth Edition, Revised by Justice S. Ranganathan, Former Judge, Supreme Court of India. But, the portion extracted in para 15 of the ld. Accountant Member's order clearly confined itself only to the assessment proceedings and not at all to penalty proceedings. So also, the Hon'ble Supreme Court's judgment in Lalji Haridas'case lays down the law and ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
