Commissioner of Income Tax Vs. Chaudhry Cotton Ginning and Pressing Factory - Court Judgment

Excerpt:
- sections 80 (2) & 89 & punjab motor vehicles rules, 1989, rules 85 & 80: [t.s. thakur, cj, jasbir singh & surya kant, jj] appeal against orders of state or regional transport authority imitation held, a stipulation regarding the period of limitation available for invoking the remedy shall have to be strictly construed. that is because any provision by way of limitation is in the nature of a restraint on the remedy provided under the act. so viewed two inferences are clear viz., (1) sections 80 and 89 of the act read with rule 85 of the rules make it obligatory for the authorities making the order to communicate it to the applicant concerned and (2) the period of limitation for any appeal against the order is reckonable from the date of such communication of the reasons would imply communication of a copy of the written order itself, a party who knows about the making of an order cannot ignore the same and allow grass to grow under its feet and do nothing except waiting for a formal communication of the order or to choose a tenuous plea that even though he knew about the order, he was waiting for its formal communication to seek redress against the same in appeal. if a party does not know about the making of the order either actually or constructively it may claim that the period of limitation would start running from the date it acquires knowledge of the making of an order but one cannot understand how a party, who has acquired knowledge of the making an order either directly or constructively can ignore the same and belatedly seek redress just because the authority making the order had made a default in formally communicating the order to him. allowing a party to do so would amount to placing a premium on the lack of diligence of a party, who is remiss in seeking a remedy that was available to it. therefore, knowledge whether actual or construction of the order passed by the state or regional transport authority should result in commencement of the period of limitation. thus,. in cases where the state or regional transport authority has not communicated the order of refusal passed to the persons concerned, the period of limitation for filing an appeal would commence from the date when the parties concerned acquire knowledge of passing of the said order. - to say that assessee could not foresee it, is just like trying to avoid the inevitable. ' 4. on appeal, cit(a), faridabad, deleted the penalty by assigning the following reasons :it is relevant to point out here that while the penalty imposable under clause (b) and clause (c) of section 273, is for failure to furnish the required estimate of advance tax, the penalty imposable under clause (a) of section 273(1), as it then, stood, is for furnishing an estimate which the assessee knows or believes to be untrue. section 273(1)(a), which was invoked by the ao for levy of penalty reads as under :273. (1) if the ao, in the course of any proceedings in connection with the regular assessment for any assessment year, is satisfied that any assessee--(a) has furnished under clause (a) of sub-section (1) of section 209a a statement of the advance tax payable by him which he knew or had reason to believe to be untrue, or' 7. the above quoted provision was interpreted in cit v.1. at the instance of the revenue, the income-tax appellate tribunal, chandigarh bench (for short, 'the tribunal'), has referred the following question of law for the opinion of this court :'whether, on the facts and in the circumstances of the case, the tribunal was right in law in upholding the recomputation of penalty imposed under section 273(1)(a) of the it act after excluding the addition made to the assessee's income on account of cessation of liability under section 41(1) of the it act ?'2. the assessee is engaged in the manufacture of cotton. it filed the estimate of advance tax for the asst. yr. 1977-78 on 3rd july, 1976 showing the tax liability at rs. 6,050. tax deducted at source was rs. 1,090. later on, it filed return of income declaring a total income of rs. 88,800. the ao made addition of rs. 5,80,078 and determined the tax liability of the assessee at rs. 1,62,738.3. for the asst. yr. 1978-79, the assessee filed the estimate of advance tax on 11th nov., 1977 at an income of rs. 50,000. advance tax deducted at source was rs. 2,750. in the return of income, the assessee declared its income at rs. 66,320. the ao made addition of rs. 1,30,393 and assessed the total income of the assessee at rs. 2,10,830. the ao also issued notices to the assessee proposing to impose penalty under section 273(1)(a) of the act on the premise that it had furnished an estimate of advance tax which it knew or had reasons to believe to be untrue. in reply, the assessee pleaded that it could not foresee the impending additions at the time of filing the estimate of advance tax and that additions subsequently made by the ao by adopting a particular interpretation of section 41(1) of the act could not be made basis for imposing penalty under section 273(1)(a). the ao rejected the reply of the assessee and imposed penalty of rs. 12,205 for the asst. yr. 1977-78 and rs. 2,880 for the asst. yr. 1978-79 by recording the following reasons :'it is relevant to point out that in addition to routine additions in the income of the assessee-firm, main additions were made on account of unsupported credits in the name of one shri ved parkash and unsupported credits in palle khatas account. the major addition came under section 41(1) for remission of assessee's liability. to take the major issues one by one, it is not correct to say that the assessee could not foresee the impending additions. now, since the assessee has an unsupported credit, what else can be the result than an addition which is rightly called for. similarly, in 'palle khata' where the assessee has unsupported amounts as credits, the natural result is an addition. to say that assessee could not foresee it, is just like trying to avoid the inevitable. the addition under section 41(1) is such which was made by the ito and upheld till the level of tribunal. the remission of liability was income of the assessee and there was no other alternative possible. now if the assessee wants to make issues where none exists, it is not anybody else's doing but assessee's own. what i feel is that it was nothing but a device used by the assessee to postpone its liability. there is no denying the fact that assessee did furnish an estimate of advance tax payable by it which it knew or had reasons to believe to be untrue.'4. on appeal, cit(a), faridabad, deleted the penalty by assigning the following reasons :'it is relevant to point out here that while the penalty imposable under clause (b) and clause (c) of section 273, is for failure to furnish the required estimate of advance tax, the penalty imposable under clause (a) of section 273(1), as it then, stood, is for furnishing an estimate which the assessee knows or believes to be untrue. thus, while imposing the penalty under section 273(a), mens rea becomes a relevant ingredient. filing an untrue estimate of advance tax knowingly and deliberately involves a guilty intent and a mala fide action on the part of the assessee. the question of taxability of the sum of rs. 5,80,800 in the year 1977-78 and of the sum of rs. 1,30,393 in the year 1978-79, by applying the provisions of section 41(1) of the it act involved an interpretation of law and although the assessee's appeal on this point had been dismissed by the cit(a) and also by the tribunal, the question had been admitted in reference by the punjab & haryana high court as one involving an important question of law. in the light of these facts, i hold that the assessee could not be expected to foresee the addition of rs. 5,80,800 and the addition of rs. 1,30,393 in the asst. yrs. 1977-78 and 1978-79 and, therefore, he could not be expected to take into account these amounts while making the estimate of advance tax. therefore, merely because the assessee did not include the sum of rs. 5,80,800 in the estimate of advance tax for the year 1977-78 and the sum of rs. 1,30,393 in the estimate of advance tax for the year 1978-79, it cannot be said that the assessee filed an untrue estimate knowingly and deliberately. therefore, i hold that no penalty under section 273(a) was imposable with reference to the addition of rs. 5,80,800 made in the year 1977-78 and with reference to the addition of rs. 1,30,393 made in the year 1978-79. reliance for this purpose is placed on the decision of supreme court in the case of hindustan steel ltd. v. state of orissa : [1972]83itr26(sc) . the iac (asst.) is, therefore, directed to recompute the penalty under section 273(a) for the asst. yrs. 1977-78 and 1978-79 after taking into account of relief allowed in appeal by the cit(a) and by the tribunal and after excluding the addition made in each of the two years by applying the provisions of section 41(1) of the it act, 1961. i also find that in the year 1977-78, while levying the penalty, the lac (asst.) has not given credit for the sum of rs. 6,050 paid by way of advance tax on 28th feb., 1977. since the payment of the sum of rs. 6,050 was made within the relevant financial year in pursuance of an estimate filed in time, the iac (asst.) is directed to take the sum of 6050 into account while recomputing the penalty imposable under section 273(a) for the year 1977-78.'5. the revenue went up in appeal but could not persuade the tribunal to sustain the penalty imposed by the ao. the tribunal dismissed the appeal and observed :'major addition appears to have been made under section 41(1) on account of cessation of liability. it is correct that the assessee could not anticipate or foresee that any such addition would be made by the ao under section 41(1). the assessee never wanted the liability as ceased in as much as in the assessee's favour the liability still subsisted. we, therefore, find that the cit(a) was correct in taking the view that the nature of the addition did not warrant the levy of penalty because at the time of filing of the estimate of advance tax, the assessee could not be said to have any knowledge that certain addition on the basis of cessation of liability could be made. similar is the case with respect to the credit entries. if the ao disbelieved the credits, it was another matter but the assessee cannot be held liable for the addition made so far as filing of estimate of advance tax is concerned. the cit(a) has upheld the levy of penalty and has directed the ao to recompute it after giving appeal effect and also after excluding the addition made under section 41(1).'6. we have heard shri rajesh bindal, learned counsel for the revenue, and shri h.s. hooda, senior advocate appearing for the assessee. section 273(1)(a), which was invoked by the ao for levy of penalty reads as under :'273. (1) if the ao, in the course of any proceedings in connection with the regular assessment for any assessment year, is satisfied that any assessee--(a) has furnished under clause (a) of sub-section (1) of section 209a a statement of the advance tax payable by him which he knew or had reason to believe to be untrue, or'7. the above quoted provision was interpreted in cit v. r.g. govan & company : [2000]246itr701(delhi) and sarabhai chemicals (p) ltd. v. cit (2002) 257 itr 355 . in cit v. r.g. govan & company (supra), a division bench of delhi high court held that burden was on the revenue to prove that the estimate furnished by the assessee for the purpose of advance tax was false and till that burden is discharged, penalty under section 237(a) of the act cannot be levied. similar view has been expressed by gujarat high court in the case of sarabhai chemicals (p) ltd. v. cit (supra).8. we respectfully agree with the views expressed by delhi and gujarat high courts and hold that in the absence of any cogent evidence having been adduced by the revenue that the assessee had deliberately filed the estimate of income for the purpose of advance tax for the asst. yrs. 1977-78 and 1979-80, the ao was not justified in imposing the penalty. the facts of the case in hand show that the assessee had filed estimate of advance tax before the due date indicating the amount of tax deducted at source. while making the regular assessment, the ao made additions on account of cessation of liability under section 41(1) of the act. till that time, the assessee could not possibly know that it will be liable for additions on account of cessation of liability under section 41(1) of the act. as a matter of fact, the assessee never wanted the liability to cease. therefore, it is not possible to accept the revenue's plea that the assessee knew or had reason to believe that the estimate of advance tax filed by it was untrue. as a corollary to this, it must be held that the ao had committed a serious illegality by imposing the penalty simply on the basis of additions made by him while finalising the regular assessment and the cit(a) did not commit any error by setting aside the same.9. for the reasons mentioned above, the question referred by the tribunal is answered in favour of the assessee and against the revenue.