TMI Blog1980 (12) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... t under s. 144 of the Act on 28th February, 1974, on a total income of Rs. 26.50 lakhs which the AAC confirmed in appeal. The Tribunal, however, reduced the income to Rs. 24 lakhs subject to depreciation of the AAC's decision on the assessee's claim for sugarcane from loss of Rs. 5.46 lakhs (sic). On these facts, the ITO took a view that the assessee-company had failed to comply with the provisions of s. 212(3A) of the Act and for this default he initiated penalty proceedings under s. 273 of the Act by his show cause notice dated 26th February, 1974. This proceeding culminated in the levy of the impugned penalty which had been confirmed in appeal by the AAC. There was a further appeal to the Tribunal by the assessee. It was argued that a quasi-criminal proceeding like penalty had been dealt with by the ITO and the AAC in a light-hearted manner. It was further argued that no attempt at all had been made to establish mens rea on the part of the assessee. With reference to the AAC's observation that the assessee was a recalcitrant assessee it was argued that such observation was baseless and that the AAC in making such observation had ignored the facts which were placed before him t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for this purpose. It was further stated that the circumstances under which the failure had occurred were within the knowledge of the assessee, and, in law, therefore, it was for the assessee to state the relevant facts before the ITO so that he could consider whether reasonable cause existed which prevented the assessee from filing the requisite estimate. But the assessee-company did not do so. It was also pointed out that even though the audited accounts became available on 7th May, 1971 the assessee-company delayed the filing of the return of income till 1st April, 1972. He also pointed out that the previous year of the assessee-company having ended on 31st August, 1970, that is, more than three months prior to the last date for the filing of the estimate under s. 212(3A) of the Act, it was not only that the assessee could foresee that it was liable to make an estimate under s. 212(3A) of the Act but that it knew for certain, having in its possession the trading results of the entire year, that it was under an obligation to pay the advance tax in accordance with s. 212(3A) of the Act and yet it did not do so and did not also explain to the ITO the reasons for the failure. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he question of onus, the Tribunal, after having gone through s. 273(c) and the decisions referred to by both sides, observed that the provision of s. 273(a) and s. 273(b) differ materially. Whereas the former provides that the ITO is to be satisfied that an assessee " has furnished under section 212 an estimate of advance tax payable by him which he knew or had reason to believe to be untrue ", the latter merely requires that the ITO should be satisfied that the assessee has without reasonable cause, failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of s. 212(3A). Section 273(a) refers clearly to the filing of an untrue estimate of advance tax under s. 212 with full knowledge and intention and it, therefore, involves mens Yea in the same way as under s. 271(1)(c) if an assessee furnishes inaccurate particulars of income with the full knowledge and intention, but the same cannot be said about s. 273(c). The provisions of s. 273(c) are, in the opinion of the Tribunal, in pari materia with s. 271(1)(a), as, in both, the reference is to the occurrence of a default without a reasonable cause. In the former, such default is the failure to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC). In this case, it was held that though the questions referred to the High Court did not challenge the validity of the findings given by the Tribunal, as the Tribunal had, failed to take into account the relevant material on record in arriving at its findings and had further acted on inadmissible evidence and misread the evidence and based its conclusion on conjectures and surmises, the court could ignore the findings of the Tribunal and re-examine the issues arising for a decision on the basis of the material on record. In this case it was also held that the High Court and the Supreme Court have always the jurisdiction to interfere with the findings of the Appellate Tribunal if it appears that either the Tribunal has misunderstood the statutory language, because the proper construction of the statutory language is a matter of law or it has arrived at a finding based on no evidence or where the finding is inconsistent with the evidence or contradictory of it or it has acted on material partly relevant and partly irrelevant or where the Tribunal draws upon its own imagination and imports, facts and circumstances not apparent from the record or bases its conclusion on mere conjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed 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 its obligation. The penalty will not also be imposed merely because it is lawful to do so. Whether the 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 minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose a penalty, when there is 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. Next he refers to the decision of the Gujarat High Court in the case of Addl. CIT v. I. M. Patel and Co. [1977] 107 ITR 214 (Guj) [FB]. According to the Gujarat High Court, the penalty proceeding is a quasi-criminal proceeding. Whenever a statute defines an offence and provides a punishment for it, it is for the prosecution to prove all the ingredients of the offence. In penalty proceedings u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the department to prove that the assessee had without reasonable cause failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of s. 212(3A). We think that in the present case, the question of onus loses much of its importance as both the parties adduced evidence. Both parties having adduced evidence, the onus has, to a certain extent, been divided. Thus, entering into the question on whom the initial onus lay, we propose to examine the facts and circumstances of the case to find out whether the assessee was prevented by reasonable cause from complying with the provisions of s. 212(3A) of the I.T. Act, 1961. With regard to the profit on the increased turnover and the stocks, the assessee-company appears to have paid advance tax under s. 210 of the Act on an income of Rs. 5.44 lakhs. Huge profit had arisen from valuation of closing stock which, according to Dr. Pal, could not reasonably be estimated, because the audited books of account became available only on 7th May, 1971. He refers to p. 73 of the paper book, which runs as follows: Profit on the basis of G.P. Ratio Rs. Business profit for 1968-69 2,64,000 Rs. 2,64,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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