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TMI Blog1991 (12) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee for such failure was not acceptable. It is for this reason that the ITO imposed the minimum penalty of Rs. 14,945 Under section 273, obviously sub-section (b) of section 273 of the Act. The CIT (A) confirmed this penalty by pointing out that paucity of funds was not a reasonable cause for non-payment of advance tax and that it was a case of sheer negligence on the part of the assessee in paying Government dues. 4. Before me, Shri S.N. Rotho, the learned Counsel for the assessee raised three objections. His first line of attack was that the present penalty levied by the ITO was unsustainable in law as there was no satisfaction on the part of the ITO while completing the assessment of the assessee on 28-3-1990, pursuant to the appellate order of the CIT (A) setting aside the earlier assessment made by the ITO on 20-9-1985 with directions to make a fresh assessment. The learned Counsel referred me to page 1 of his paper book which contained the final assessment order passed by the ITO on 28-3-1990 under section 143(3)/251 of the Act and pointed out that this order did not record any satisfaction on the part of the ITO before completing the assessment for initiating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed on 10-12-1987 and in this order he had set aside the assessment, (which was completed on a total income of Rs. 3,23,810 on 20-9-85), with directions to make a fresh assessment after due enquiry and after giving the assessee a reasonable opportunity of being heard. Pursuant to this appellate order, the ITO had issued notices under sections 143(2) and 142(1) of the Act and passed a fresh assessment order on 28-3-1990 under section 143(3)/251 of the Act determining the assessee's total income at Rs. 1,07,960. There is no dispute that in this assessment order dated 28-3-1990 there is no recording of satisfaction on the part of the Assessing Officer in regard to the defaults alleged to have been committed by the assessee under sections 273 and 271(1)(a) of the Act. It is also not the case of the Department that before completing the assessment on 28-3-1990 the ITO had recorded his satisfaction in this regard in his order sheet and directed the initiation of penalty proceedings against the assessee under sections 273 and 271(1)(a) of the Act. In fact, the two penalty orders passed by the ITO refer to the initiation of penalty proceedings at the time of completion of the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... good ground exists for launching penalty proceedings and that it is this satisfaction which is the foundation of action under section 22A(1). 8. I am of the view that these two decisions relied on by the assessee's learned Counsel fully support his contentions against the validity of the penalties levied by the ITO. There is no material to establish the satisfaction of the assessing authority in the course of the fresh assessment proceedings made on 28-3-1990. The assessing authority cannot fall back on the penalty proceedings initiated by his predecessor at the time of the assessment made on 20-9-1985 since the said assessment no longer exists in the eye of law as it has been set aside. I, therefore, accept the contentions of the learned Counsel for the assessee that the penalties levied both under section 273 and under section 271(1)(a) of the Act without recording the satisfaction of the ITO in the course of assessment proceedings made on 28-3-1990 are clearly bad in law and hence unsustainable. This itself is sufficient to dispose of both the appeals. However, for the sake of completeness I will deal with the other contentions raised by the assessee's learned Counsel in both t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party aggrieved, in a proceeding before the High Court or this Court, has the authority to demonstrate that the reasons which persuaded the authority to reject his case were erroneous; the other, that the obligation to record reasons operates as a deterrent against possible arbitrary action by the executive authority invested with the judicial power. " This passage is quoted by the Delhi High Court in the case of Bharat Nidhi Ltd. v. Union of India [1973] 92 ITR 1 at page 4. Respectfully following these two decisions of the Supreme Court, I accept the contentions of the assessee's learned Counsel on this issue also. 11. This takes me to the last contention of the assessee which is on the merits in this appeal. The learned Counsel submitted that the penalty in question had been levied for non-payment of advance tax by the assessee, and not for any default under section 273(b) of the Act. He pointed out that the Income-tax Officer had levied a penalty of Rs. 9,170 under section 221/210 of the Act on 16-12-1980. He further pointed out that the facts mentioned in the penalty order showed that there was no default committed by the assessee under section 273(b) of the Act as he had fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer, while completing the present assessment, was satisfied that there was no case for initiating penal action against the assessee for a default under section 273 of the Act when he completed the assessment on 28-3-1990. I, therefore, hold that there was no default committed by the assessee within the meaning of section 273(b) of the Act as he had admittedly filed an estimate of advance tax on 15-3-1980, as accepted by the ITO in the penalty order. Therefore, the penalty levied is clearly unsustainable. Accordingly, I cancel the penalty levied under section 273(b) of the Act and direct that the amount of penalty shall be refunded to the assessee, if already collected from him. In this view of the matter, it is not necessary to consider the alternative plea of the appellant on the quantum of minimum penalty leviable in this case, as the entire penalty itself is deleted. 14. Now, I shall deal with the other appeal in ITA No. 3030 (Cal.)/89 against the levy of penalty under section 271(1)(a) of the Act. This penalty has been levied by the ITO for an alleged default on the part of the assessee in the submission of the return of income for the assessment year 1980-81 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conduct of the assessee showed that another application would have been filed as there was no reason as to why the assessee would have ignored to do so, particularly when he had filed applications for extension of time earlier, till 31-12-1981. However, the assessee's Counsel pleaded his inability to produce any evidence that any such application was made in form No. 6 praying for extension of time till 30-9-1982. Alternatively, the learned Counsel pleaded that having regard to the conduct of the assessee, it could only be a case of technical or venial breach of the provisions of the Act for which no penalty need be levied. In support of his contentions, the learned Counsel relied on the decision of the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26. He submitted that there was no contumacious conduct on the part of the assessee and, therefore, the penalty should be cancelled. Without prejudice to the above submissions, the learned Counsel submitted in the alternative, that the penalty levied was highly excessive in the light of the final amount of tax determined as a result of the final assessment order passed by the ITO on 28-3-1990 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the applications for extension of time constituted 'reasonable cause' for the delay in the submission of the return. The default on the part of the assessee is for a period of 7 months from 1-1-1982 to 31-7-1982. The reason for the delay has been explained by the assessee in his reply to the penalty notice dated 30-9-1987 wherein he had clearly stated that his main source of income is his share of income from a registered partnership firm, R. Sen & Co. (Metal Division) and that as the accounts of the said firm were incomplete it was not possible for him to ascertain his share of income nor was it possible for him to estimate his income for the purpose of filing his return. He had also stated that on account of illness of his Accountant, Shri Kamal Ghosh, who had kept his papers and files and was attending to his income-tax matters, there was some delay in the filing of the return. None of these reasons stated by the assessee have been found to be incorrect either by the ITO or the CIT (A). On the contrary, the conduct of the assessee in applying for extension of time on two occasions shows his anxiety to be on the right side of law and to comply with his statutory obligations. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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