TMI Blog2001 (4) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier years, and in view of the transaction brought about with effect from April 1, 1989, the previous year of the assessee with reference to this assessment year comprised a larger period, namely, from July 1, 1987 up to March 31, 1989, i.e., a duration of 21 months. The subject-matter of dispute between the assessee and the respondent-Revenue is the levy of penalty in a sum of Rs. 1,00,517 levied under section 22(l)(d) of the Act. The subject-matter of this revision petition is also the legality or otherwise of this penalty. The assessee is a coffee planter in Mudigere Taluk and it appears he had been cultivating other cash crops like cardamom, pepper, etc., also. The extent of holding of agricultural land by the assessees is quite considerable. The assessee is a person required to file a return of its agricultural income under section 18 of the Act in the prescribed form verified in the prescribed manner and setting forth particulars of the total agricultural income, by furnishing the relevant material required for this purpose. It appears that for the relevant assessment year, the assessee filed a return on September 16, 1992, though in law the assessee was required to fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the notice or behind it as recited in the printed form of the notice. In response to this notice, it appears, the assessee's representative, namely, Sri C. S. Kote, chattered accountant of the assessee, appeared and submitted that the assessee was unable to produce the books of account of the firm since they were seized by the Central income-tax authorities, but nevertheless, produced a copy of the profit and loss account of the assessee which contained details of income and expenditure, etc. It appears, thereafter the Assessing Officer had issued a notice in Form No. 5, dated April 22, 1993, indicating therein that the return as had been filed by the assessee was not satisfactory nor gave full and true particulars and as such it was proposed to be rejected and the Assessing Officer further proposed to pass an assessment order to the best of his judgment as indicated in the notice issued. The assessee did respond to this proposition notice and by its reply dated April 28, 1993, amongst other things indicated that the expenditure incurred for the entire period of 21 months was at a sum of Rs. 8,73,942.50 as indicated in the profit and loss account and that may be considered. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee itself had come forward to disclose the correct amount of expenditure incurred as culled out from the profit and loss statements produced before the Assessing Officer and the initial claim towards the head of "cultivation expenditure" incurred for the period at a sum of Rs. 94,64,000 being merely based on estimation in the absence of any books of account with the assessee which had come to be seized by the income-tax authorities, held that there is no attempt on the part of the assessee to either suppress particulars of income or deliberately furnish inaccurate particulars. The revisional authority, namely, the Additional Commissioner of Commercial Taxes, Mysore Zone, Mysore, being of the view that this appellate order dated September 17, 1997, passed by Joint Commissioner of Commercial Taxes (Appeals) was erroneous and prejudicial to the interests of the Revenue, required to be set right by the exercise of his powers under section 35 of the Act, issued a show-cause notice in this regard. The assessee was afforded an opportunity of hearing and the assessee did file its objections and was also heard in person. Thereafter, the revisional authority passed an order dated April 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be attributed to the assessee to characterise the inaccurate figures furnished in its original return as either an act of conscious suppression of agricultural income or a deliberate intention to suppress the particulars. Learned senior counsel submits that in this view of the matter, there is absolutely no justification for levy of penalty and the levy of penalty being not a mere mechanical act, for any technical infraction of the provisions of the Act, but to be visited upon the assessee only for an act of conscious concealment and for an act of deliberate furnishing of inaccurate particulars of income, when the conduct of the assessee clearly did not indicate any attempt on the part of the assessee to evade payment of tax, no penalty could have been levied on the assessee, more so when the Department had not placed any other material justifying the levy of penalty pointing out any other compelling circumstances for the same. Learned senior counsel has relied upon the decision of the apex court in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 ; [1970] 25 STC 211. Sri Sarangan, learned senior counsels elaborating his submission on this aspect, has submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss account. Nevertheless, the assessee, though aware that it did not have its books of account, did not make any reference to this in t e statement o agricultural income appended to, the Form No. 3 return o income i e y it. The act of the assessee in furnishing the different figures towards agricultural expenses cannot also be construed as a voluntary act inasmuch as, the assessee came up with this information only after a notice was issued by the authorities calling upon the assessee to produce proper particulars with reference to the return that had been filed by the assessee. These aspects apart, what is more important is, the assessee never came forward to file a revised return of his income disclosing the true and correct particulars. The assessee cannot be oblivious of the implications of claiming an astronomically huge sum of Rs. 94,64,000 towards agricultural expenses as against a sum of Rs. 6,95,703.11 which came to be allowed towards agricultural expenses ultimately by the Assessing Officer. Under section 18(2B) of the Act, the assessee is entitled to file a return of its income, have the same determined by the Assessing Officer and it will enable the assessee to carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntended and as such there was no justification for levy of penalty. The High Court took this view following the ratio laid down by the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 ; [1970] 25 STC 211. The other decision relied on by learned senior counsel in this line of submission is the decision of a Division Bench of the High Court of Madras reported in CIT v. Sri Rajaram Cloth Stores [1995] 214 ITR 262. This again was a case where the assessee had filed a return of income initially disclosing an income of Rs. 8,274 which on the filing of a revised return by the assessee itself, got increased to Rs. 22,970. Pursuant to the firing of such revised return, the assessing authority imposed a penalty which came to be set aside by the Tribunal and on a reference to the High Court, the finding of the Tribunal was confirmed holding that there was no discovery by the Department of any act of suppression or concealment on the part of the assessee and, on the other hand, when the assessee himself had come forward with a voluntary return there was no justification for levying penalty. However, in the instant case before us, the assessee, initially had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee came forward with this figure only in response to a notice issued by the Department in the context of incorrectness of the return filed by the assessee. The difference between the two figures is also so very vast that it cannot be accepted that the initial claim was as a result of either innocence or inadvertence. Even applying the ratio laid down by the Division Bench of the High Court of Madras in the case of CIT v. Popular Lunghi Co. [1999] 238 ITR 229 the levy of penalty in the instant case has to be upheld. In that case, a Division Bench of the Madras High Court, held that if the facts as indicated and as admitted by the assessee on record were sufficient to come to the conclusion that there was concealment of income and having regard to the provisions of section 271(1)(c), proviso, the levy of penalty was justified and held that cancellation of the penalty by the Tribunal was wrong. In the instant case also, the material on record itself is sufficient to draw the inference that the assessee had knowingly furnished inaccurate particulars in its return of income particularly in claiming the quantum of agricultural expenses. In this view of the matter, we are unable to acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8(1)(c) of the Indian Income-tax Act, 1922, on a firm, subsequent to the dissolution of the firm and about the validity of such an order of penalty which had come to be passed not in the course of the assessment order, but much later. The debate in the said case revolved around the wording of section 28(1)(c) of the Indian Income-tax Act, 1922, whereunder the requirement of law was that the satisfaction of the officer levying penalty was one which should have been arrived at in the course of the assessment proceedings, justifying the levy of penalty. In that case, the Assessing officer had at the foot of the assessment order indicated that the action under section 28 had been taken for concealment of income, However, the levy of penalty was not immediately thereafter, but a little later. The High Court, being of the view that the actual initiation of penalty proceedings being not in the course of the assessment proceedings and as such was not permitted in law, it set aside the levy of penalty. The apex court, while reversing this order of the High Court, held that the High Court was in error in assuming that a penalty under section 28(1)(c) of the Act could not be imposed unless it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny person assessable as the agent of any person not resident in the State of Karnataka for failure to furnish the return required under section 18 unless a notice under sub-section (2) thereof or under section 35 has been served on him. (2) No order under sub-section (1) shall be made unless the assessee has been beard or has been given a reasonable opportunity of being heard. (3) No prosecution for an offence against this Act shall be instituted in respect of the same facts on which a penalty has been imposed under sub-section (1). (4) If the Commissioner or Joint Commissioner makes an order under sub-section (1) he shall forthwith send a copy of the same to the Assistant Commissioner of Agricultural Income-tax concerned." The opening words of sub-section (1) of section 22 of the Act indicate that if the Assistant commissioner of Agricultural Income-tax or the Joint Commissioner or the Commissioner is satisfied that any person (a) has without reasonable cause failed to furnish the return of his total agricultural income which he was required to furnish under sub-section (2) of section 18 ; or (b) has concealed the particulars of his agricultural income or has deliber ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the authority issuing the show-cause notice is totally obvious to the facts of the case nor can it be said that the show cause notice had been issued without the officer concerned being at all satisfied for issuance of the same. In this view of the matter, we are unable to accept the submissions made by Sri G. Sarangan, learned senior counsel with regard to the proposition that as there is a time-gap between the passing of the assessment order and issuing of the show-cause notice for levying penalty, the proceedings are vitiated. In this context, Sri G. Sarangan, learned senior counsel also brought to our notice another decision of the apex court rendered in the case of D. M. Manasvi v. CIT [1972] 86 ITR 557. In cur considered view, the law laid down by the apex court in this decision, in no way furthers the case of the petitioner and does not advance the case of the petitioner. The decision relied on in support of the pi-o position canvassed by learned senior counsels on the other hand, lends support to the action initiated by the Department in issuing the show cause notice for levy of penalty even subsequent to the passing of the assessment order. In fact, the apex court ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not the same as the corresponding penal provisions of the Indian Income-tax Act, 1922 or the Income-tax Act, 1961. Moreover, if a ruling is based on the interpretation of the wording in a particular section, that cannot be automatically made applicable in the context of the interpretation of the provisions of another enactment though both the provisions under the two enactments are meant for levying penalty. The penal provisions of section 22 of the Karnataka Agricultural Income-tax Act cannot be interpreted and understood in the context of the interpretation of the penal provisions of the Indian Income-tax Act having regard to the variance in the wording of the two sections. In this view of the matter, we are of the opinion that the decisions cited by learned senior counsel are not of any avail to seek interference with the order leveying penalty and to annual the same. Learned senior counsels Sri G. Sarangan has also contended that while under section 22 of the Act the power to levy penalty can be exercised either by the Assistant Commissioner or the Joint Commissioner or the Commissioner of Agricultural Income-tax and in the instant case the revisional authority himself had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue as there is no loss of revenue to the State. We are afraid we cannot accept this submission either. The concept of an order prejudicial to the interests of the Revenue cannot be restricted to cases where there is actually loss of revenue in the matter of quantification of the tax liability. The very object of levy of penalty is to ensure that there is compliance with the requirement of law and the object of the Act inevitably is the collection of revenue for the State. An order of penalty is an order which is passed as a deterrent to dissuade errant assessees from indulging in acts of suppression of income or furnishing of inaccurate or false particulars of income resulting in loss of revenue to the State. The levy of penalty under the Act has definitely a purpose to achieve namely to ensure compliance with the provisions of the Act and to discourage non-compliance. If an order of penalty is justified in the facts and circumstances of a given case, it is an order to be sustained and a later order setting aside levy of a justifiable penalty can definitely be said to be an order prejudicial to the interests of the Revenue in the proper sense of those words. Accordingly, we ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
