TMI Blog2006 (11) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... n question. Respectfully adopting the reasoning of the Full Bench of this court in J. T. (India) Exports v. Union of India [ 2001 (9) TMI 10 - DELHI HIGH COURT] which was rendered in the context of the Imports and Exports (Control) Act, 1947, we are of the view that there is an implied requirement of the principles of natural justice that before imposing a penalty u/s 272A(2)(e) of the Act, notices are required to be both issued and served upon the assessee to enable it to defend itself in the penalty proceedings. It is trite that the imposition of any penalty has adverse civil consequences and has to be preceded by the affording of an opportunity of being heard to the assessee. Only then can the assessee urge factors relevant to the question of penalty and independent of the explanations offered during assessment proceedings. It affords a chance to the assessee to show why penalty should be either waived altogether or should be less than what is proposed by the Department. On the merits of the case, we find that the explanation offered by the appellant for not filing the returns within the time stipulated under the Act appears to be a plausible one. Thus, we are of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... going to municipal or public schools. 4. The appellant claimed that for the relevant assessment years its income was not taxable in view of the exemption under section 10(22) read with section 11 of the Act. According to the appellant, as per its audited account, its income for the relevant assessment years was as under : Assessment year Income Funds as on 31st March 1990-91 14,521 35,656 1991-92 1,097 35,753 1995-96 (-) 7,266 69,305 1996-97 13,364 82,689 1997-98 15,593 98,282 5. The appellant claimed that initially its chartered accountant advised that since the income of the appellant was below the taxable limit, it was not required to file any return of income for the above assessment years. Later, the chartered accountant reconsidered his opinion and advised that with a view to avoiding any complication arising under section 139(4A) of the Act, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce or convincing reasons to show that the appellant was prevented by sufficient rea sons from complying with the notices issued by the JDIT(E), I see no infirmity in the decision taken by the JDIT(E) in levying the aforesaid penalties which are hereby confirmed. The five appeals in question are thus dismissed. 9. The Commissioner of Income-tax (Appeals) nevertheless also dealt with the case on the merits and held as follows : In view of the admitted claim of exemption under sections 11 and 12 by the appellant (and not under section 10(22)) in the returns of income filed, the appellant' s case is squarely covered by the provisions of section 139(4A) read with section 139(1), infringement whereof is clearly covered by the penalty proceedings under section 272A(2)(e). It is also seen that the instant appeal has been argued by top notch chartered accountants/lawyers and as such, it is also not clear that if the appellant was in doubt regarding the filing of the returns why it could not consult the battery of legal luminaries whom it has consulted during the appellate proceedings. 10. The Tribunal noticed the appellant' s contention that it received no notice under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no question of equity in taxing statutes, Mr. Jolly submitted that the requirement of section 273B of the Act cannot be said to have been met in the present case and the penalty could not be waived. 14. The undisputed fact is that the appellant is a charitable trust. The Income-tax returns for the relevant assessment years were filed late. They were, however, nil returns and accepted as such by the Department. The only issue, therefore, is whether there was a justification for imposition of penalty on the appellant for its failure to file the returns within the time stipulated. 15. The provisions of the Act relevant for the present purposes are under : 139. Return of income. (4A) Every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes, or of income being voluntary contributions referred to in sub-clause (iia) of clause (24) of section 2, shall, if the total income in respect of which he is assessable as a representative assessee (the total income for this purpose being computed under this Act without giving effect to the provisions of sections 11 and 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalties were imposed. In our view, this by itself is sufficient to set aside the orders imposing the penalty on the appellant for the assessment years in question. 17. Respectfully adopting the reasoning of the Full Bench of this court in J.T. (India) Exports v. Union of India [2003] 262 ITR 269 which was rendered in the context of the Imports and Exports (Control) Act, 1947, we are of the view that there is an implied requirement of the principles of natural justice that before imposing a penalty under section 272A(2)(e) of the Act, notices are required to be both issued and served upon the assessee to enable it to defend itself in the penalty proceedings. It is trite that the imposition of any penalty has adverse civil consequences and has to be preceded by the affording of an opportunity of being heard to the assessee. Only then can the assessee urge factors relevant to the question of penalty and independent of the explanations offered during assessment proceedings. It affords a chance to the assessee to show why penalty should be either waived altogether or should be less than what is proposed by the Department. 18. On the merits of the case, we find that the explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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