| SooperKanoon Citation | sooperkanoon.com/63788 |
| Court | Income Tax Appellate Tribunal ITAT Chandigarh |
| Decided On | Mar-17-1989 |
| Reported in | (1989)30ITD221(Chd.) |
| Appellant | Smt Ram Rakhi |
| Respondent | income-tax Officer. |
2. In this case, an action under section 133A of the Act was taken on 16-2- 1978 and certain books of account and documents were impounded under section 131 of the Act on the same day. During the course of survey under section 133A, the value of stock found in the shop at that time was estimated at Rs. 1,20,000. A sum of Rs. 3,325 in cash was also found at the business premises of the assessee.
3. The scrutiny of the impounded documents and books of account indicated that the assessee had the following assets and investments on the date of survey :- (ii) Cost of immovable properties purchased from time to time standing in the name of the assessee, his wife and son : These figures were apparently arrived at after not only taking into account the books of account and document but after consultation with the assessee.
4. On 27-3-1978, a settlement petition was filed for settling the affairs in the case of Arjan Dass, prop. of M/s. Arjan Dass Ranjit Kumar, Cloth Merchants, Sohana, Tehsil Kharar, Distt. Ropar. In this settlement petition, the preamble requested the Commissioner of Income-tax to consider the settlement petition with, "kind and sympathetic consideration and compassionate adjudication". The petition narrates that the petitioner migrated to India at the time of partition in 1947 from District Sargodha in Pakistan. For the first time, he submitted his return of income for the assessment year 1975-76 and started maintaining books of account in respect of cloth business w.e.f. 1-4-1974. In addition to income from cloth business, the petitioners main source of income, it was claimed, in the past years had been income from agricultural lands. It was submitted in the petition that certain investments made in the past on purchase of agricultural lands came out of income from agricultural lands. This petition projected that the petitioner was not an educated person and, therefore, the books of account regarding his business etc. were maintained by a Munim, since deceased. The returns for the purposes of income-tax were prepared and submitted on the basis which were known only to the Munim.
5. The petition then records that there was an action under section 133A as mentioned above and projects that the petitioner was a simple minded person not conversant with various technicalities of law and was keen to avoid litigation and to purchase peace of mind and to straighten away his tax matters, he wanted a settlement. Thereafter it is recorded that he had prepared a chart showing all his assets and this may be taken and spread over for the period commencing from the assessment year 1969-70 be allowed. Thereafter, there is a prayer that the petitioner "may kindly be saved from litigation as well as economic stringency by allowing him a credit for about Rs. 1 lakh for the period ending 31-3-1968." It is then pointed out that he was keeping in different helth, constant strain and worry which may result in delay in the settlement of his tax affairs, and is likely to do him and his family incalculable harm. Therefore, the settlement may be made at an early date.
6. At the end of the petition, the petitioner specifically requested that he, "may kindly be granted immunity from any penalties, charge of interest and prosecution " because he had no contumacious conduct.
7. The Commissioner of Income-tax, Patiala, considered this settlement petition and apparently discussed it with the petitioner and his counsel. The Commissioner determined the total income of the petitioner for the assessment years 1969-70 to 1978-79 at Rs. 3,20,935. He noted that the assessee also had a self-occupied property from which notional income had to be worked out. He estimated this at the rate of Rs. 100 per annum and arrived at Rs. 1,000 to be added to the sum of Rs. 3,20,935 mentioned supra. having so arrived at the figure of Rs. 3,21,935 the Commissioner of Income-tax bifurcated this into agricultural and non-agricultural income belonging to the petitioner.
Agricultural income was estimated at Rs. 35,000 and non-agricultural income was taken at Rs. 2,86,935 (Rs. 3,21,935-Rs. 35,000). The Commissioner of Income-tax recorded in the settlement petition the spread over to be allowed to the assessee of the above sum over the period of 10 years for the assessment years 1969-70 to 1978-79.
8. Having indicated the total amount inclusive of agricultural estimated income in para 7 of the order of settlement dated 30th March, 1978, the Commissioner of Income-tax recorded that the penalties and interest under various sections are to be levied and charged as per the provisions of the Act to which the assessee has agreed.
9. In pursuance of the order of settlement made by the Commissioner of Income-tax, the Income-tax Officer proceeded to give effect to it. For the assessment year 1969-70, assessment was made on 29-2-1980 accepting the total income of the assessee for that year at Rs. 13,000 declared in the return on the basis of the order of settlement. On the basis of the said settlement for the assessment years 1970-71 to 1974-75, a common order was made on 29-3-1980 on the lines of the assessment completed for the base assessment year 1969-70. Similarly for the assessment years 1975-76 and 1977-78, assessment was by a common order on 29-2-1980 and on 3-4-1979 assessment for the assessment year 1976-77 had been made. In these orders, the Income-tax Officer directed that notices to show cause why penalty need not be levied under sections 271(1) (a), 273(b), 271(1) (c) and section 140A of the Income-tax Act, etc. be issued. These notices were issued and the impugned penalties imposed.
10. The petitioner apparently received these assessment orders and hastened to place before the Commissioner of Income-tax on 19-5-1980 a petition under section 273(A) of the Act with the prayer that all the penalties and interest etc. leviable or levied under various sections of various statutes like Income-tax Act, Wealth-tax Act, Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 may be waived. The Commissioner of Income-tax considered this waiver petition and made an order under section 273(b) of the Act on 3-6-1981 dismissing the petition. The result was that the Income-tax Officer levied penalties under sections 271(1) (a), 271(1) (c) and 273(b) etc. accordingly, it appears on 8-3-1982. But before that, the petitioner had moved the Honble High Court of Punjab and Haryana at Chandigarh having civil writ jurisdiction by filing a writ petition under Article 226 of the Constitution of India, 1950 making the Commissioner of Income-tax Patiala as the respondent with the following prayer : "(a) That the respondent herein be commanded by appropriate writ, order or direction to transmit the entire material and relevant records in his possession and control having a bearing upon or relating to the case in question in order to enable this Honble Court to scrutinise the entire matter with a view to judging the legality and validity of the impugned order passed by the respondent herein; (b) that a writ in the nature of certiorari holding the impugned order passed by the respondent herein to be unlawful, illegal and invalid and quashing the said order Annexure P be issued to the respondent; and (c) That as a sequel thereto, a writ in the nature of mandamus commanding the respondent herein to decide afresh the petition of the petitioner herein under section 273A of the Act in accordance with law be also issued; (d) that the filing of the original/certified copies of the documents Annexures P1 to P8 to this writ petition be dispensed with; (e) that any other relief which may appear to this Honble Court to be just and proper on the facts and in the circumstances of the case be also granted; and (f) costs of this writ petition be also awarded to the petitioner against the respondent herein." On the above petition, the Honble Court made order bearing civil Misc.
order No. 1809 of 1985 on 7th August, 1985. The Honble Court recorded the facts relating to the settlement and recorded that, "no return has been filed on behalf of the respondent authorities to controvert this factual assertion on the part of the petitioner. In the absence of any denial on the part of the respondent authorities, the assertions made in this paragraph of the petition have obviously to be accepted for the purposes of this judgment. It is thus established that the factual premises on the basis of which the Income-tax Commissioner passed the impugned order Annexure P8 were not there. Besides this, the learned Counsel for the petitioner again appears to be right in submitting that the assessee had claimed waiver of penalties under three heads as specified under section 273A of the Act but the learned Commissioner has not even adverted to those claims while passing the impugned order.
" The Honble Court has thereafter in the light of the above, allowed the petition and set aside the order of the Commissioner of Income-tax dated 3-6-1981 rejecting the waiver petition filed on 19-5-1980.
11. When the waiver petition dated 19-5-1980 was thus revived, the Commissioner made order under section 273(A) on 24-1-199. He again held that the assessee is not entitled to any relief of waiver or penalties or reduction of penalties and waiver of interest or reduction of interest under sections 271(1) (a), 273(b), 271(1) (c), 139(8) and 217 for all the years.
12. In the meantime, the penalties levied by the Income-tax Officer had been challenged through normal appeal proceedings provided under the Income-tax Act. The penalties levied under section 273(b) for all the years under appeal were considered by the Appellate Assistant Commissioner. Patiala Range, Patiala. For the assessment years 1969-70 to 1975-76 the appeals were dismissed, but for the assessment year 1976-77 the appeal was allowed. Insofar as penalties under section 271(1) (a) are concerned, the Appellate Assistant Commissioner dismissed the appeals by his order dated 30-11-1982. The penalties levied under section 271(1) (v) had been challenged in appeal for the assessment years 1974-75 to 1977-78 and the Appellate Assistant Commissioner by his order dated 30-11-1982 dismissed the appeals. Hence the present proceedings.
13. The learned Counsel for the assessee submitted that as apprehended by Shri Arjan Dass, who unfortunately is no more, he had a paralytic attack after the order of settlement that the deceased whose legal heirs are now facing these proceedings when he made the settlement petition had understood that he would not have to pay and other tax, penalty or liability arising out of the settlement other than what is quantified therein. This was his bona fide belief and he acted upon it on the presumption that no penalty would be levied for concealment etc.
On such facts, penalty could not be levied. He relied on the following judgment for this proposition :Jiwan Singh Amarjit Singh v. ITO [1985] 23 Taxman 33 (Chd. - Trib.); (iii) ITO v. R. B. G. M. Modi & Bros. (P.) Ltd. [1989] 28 ITR 349 (Delhi).
14. He further submitted that even if it may be accepted that there was an agreement, it was on mistaken belief of fact and law and such an agreement could not bind the assessee in not filing an appeal against the levy of penalties. The agreement with the assessee for not levy of penalty was apparently oral and in the settlement, the observations of the Commissioner of Income-tax that penalties have been agreed to were without any justification. For these submissions, he relied on the following judgment : The learned Counsel for the assessee further submitted that the assessee had bona fide belief that all that he had to pay, whatever the character of payments, would not exceed the amount of Rs. 1 lakh because otherwise he would not be left behind with any assets as the tax had been determined on estimated income. The extra penalties levied, therefore, violated this understanding and could be challenged.
He relied on the ratio of the Andhra Pradesh High Court judgment in the case of CIT v. Bombay Automobiles [1980] 123 ITR 582.
15. It was submitted by him that no concealment had been proved nor any furnishing of inaccurate particulars established as the assessments had been raised merely by taking the figures for each of the assessment years as per the order of settlement made by the Commissioner of Income-tax on the petition filed by the assessee. Hence penalties could not be levied. The learned Counsel for the assessee continued that evidence in the form of assessment may be good for consideration whether penalty has to be initiated but it cannot be taken as conclusive evidence for imposition of penalty. Reliance was placed for these propositions on the following judgments : It was submitted that admission of leviability of penalty or agreement thereto does not justify imposition of penalty for concealment unless concealment is established in view of the judgment of the Bombay High Court in the case of CIT v. Haji Gaffar Haji Dada Chini [1988] 169 ITR 33. Hence penalty could not be levied merely for additions made on the basis of order of settlement as done in the case of the assessee.
16. It was pointed out by the learned Counsel for the assessee that rejection of the waiver petition by the Commissioner of Income-tax under section 273(A) does not affect the assessees right of appeal against the imposition of penalty because the submission of waiver petition before the Commissioner of Income-tax and his order thereon and appeal on imposition of penalty are two different remedies for two different directions. Reliance was placed on the judgment as under : It was submitted that the law relating to appeal against the imposition of penalty in a case where there was a waiver petition filed has now been settled by the Honble Supreme Court by dismissal of Special Leave Petition filed by the Department against the judgment dated 23-11-1981 of the Madhya Pradesh High Court in MCC No. 406 of 1979 in the case of Tumbi Bai [1984] 150 ITR 78 (Statutes). It was thus argued that neither on facts nor in law, there was any justification for imposition of penalty under any of the sections which have been invoked by the authorities below to saddle the assessee with the burden which was never agreed to, anticipated by or even apprehended at the time of settlement petition. The penalties on the facts of the case are without justification because the assessee wanted to live in peace after offering a major chunk of his income which the department had not detected and which had not been proved to be belonging to any of the years in which additions had been made on the basis of which penalties have been levied. The penalties may, therefore, be cancelled.
17. Opposing these submissions, the learned Departmental Representative, Shri B. S. Sandhu, contended that the appeals filed by the assessee are not competent because there were waiver petitions filed before the Commissioner of Income-tax and these were rejected.
Reliance for this proposition was placed on the following judgments : 18. It was submitted by the learned Departmental Representative that even if it may be taken that the assessee had filed the returns and declared the income therein as per settlement, or the returns have been revised on the basis of the figures in the order of settlement, the assessee could not be absolved form penalty in view of the following judgments : (i) CIT v. P. B. Shah & co. (P.) Ltd. [1978] 113 ITR 587 (Cal.); (ii) India Sea Foods v. CIT [1978] 114 ITR 124 (ker.); (iii) CIT v. Krishna & Co. [1979] 120 ITR 144 (Mad.); (iv) CIT v. Ramdas Pharmacy [1970] 77 ITR 276 (Mad); (v) Jaswant Rai v. CBDT [1982] 133 ITR 19 (Delhi).
19. Continuing his submissions, the learned Departmental Representative contended that the conduct of the assessee has to be examined in the background of the case as a whole. In this regard, he pointed to the action taken by the revenue for survey under section 133 A on the facts with it and the events that followed as narrated above. Reliance was placed upon the judgment of the Gujarat High Court in the case of CIT v. Vinaychand Harilal [1979] 120 ITR 752. It was submitted that all the submissions made by the learned Counsel for the assessee about the ignorance of the petitioner, his desire to buy peace and volition to come forward for settlement are of no avail because the settlement petition was not voluntary and, therefore, on the basis of the assessments realised, the penalty rightly ensued and were rightly levied. For this reliance was placed on the delhi High Court judgment in the case of Durga Timber Works v. CIT [1971] 79 ITR 63. Reliance was also placed on the judgment of the Bombay High Court in the case of Western Automobiles (India) v. CIT [1978] 112 ITR 1048 and the judgment of the Punjab and Haryana High Court in the case of Banta Singh Kartar Singh v. CIT [1980] 125 ITR 239.
20. The learned Departmental Representative submitted that without prejudice to the above submissions, it must be emphasised that applicability of section 271(1) (a), insofar as penalty for delay in submission of the returns is concerned, it does not depend upon the consent of the assessee as held by the Madras High Court in the case of A. K. Bashu Sahib v. CIT [1977] 108 ITR 736 and in the case of Addl.
CIT v. E. Bhoopathy [1978] 113 ITR 188. Insofar as the surrender of the income is concerned, reliance was placed upon the judgment of the Tribunal in ITA No. 37 of 1985 dated 16-2-1988.
21. The learned counsel for the assessee had placed upon our file a petition claiming that an additional ground of appeal was required to be raised that the quantum of penalty levied is bad in law because the same should not have been levied on the basis of provisions of law on the date when the returns were due but the relevant date to be considered for levy of penalty should either be the date of filing of the return or the date of initiation of the penalty proceedings. On this additional ground, the learned Departmental Representative submitted that this additional ground is not maintainable as this was no projected before the authorities below and the assessee in the guise of raising this ground of appeal as sought to introduce a new item and a new subject matter altogether into the proceedings.
22. In the rejoinder, the learned Counsel for the assessee submitted that insofar as the judgment of the Punjab and Haryana High Court in BantaSingh Kartar Singhs case (supra) is concerned, it is clearly distinguishable on facts. It was argued that the embargo provided under section 273(A) (5) that every order made under this section shall be final and shall not be called into question by any court or any other authority is with regard to the order made by the Commissioner of Income-tax but does not prohibit the assessee form challenging imposition of penalty by the Assessing Authority in independent proceedings even if those be related to the matters regarding which waiver petition was filed, in view of the judgments in the cases of Mirza Mohd. Ali Beg and Kashi Ram Lila mentioned supra. In nut shell, it was submitted that penalties were wrongly imposed on the facts and circumstances of the case and the authorities have erred in not accepting the claim of the assessee. The penalties levied may be cancelled.
23. We have carefully considered the rival submissions and also the decisions relied upon on behalf of both the sides. The first question for consideration is whether the appeals filed by the assessee could be said to be not competent on account of filing of the wager petitions under section 273A. The decisions relied upon on behalf of the department also do not assist it. In fact, the view taken by us was also taken by the Gujarat High Court in the case of Smt. Kherunissa Allibhai (supra). The assessee is right in pointing out that section 273A is independent and would not come in the way of the assessee against the levy of penalties under the sections mentioned above. The decision of the Honble Andhra Pradesh High Court in the case of Lt.
Col. Mirza Ali Baig (supra) is directly in point in this regard. It cannot also be said that just because the assessee moved application under section 273A for the waiver of penalties leviable or levied., he made any admission either to the effect that there was any concealment of income or that penalties were leviable under section 273(b) 271(1) (a).
24. The next point is whether the assessees petition for settlement where in it was said that it was being made in order to purchase peace was accepted by the department in the same term and no penalties could be levied thereafter. No doubt the contention of the assessee in the petition for settlement was to that effect but the order of the CIT dated 30-3-1978 was to the following effect : "the penalties and interest under various sections are to be levied and charged as per the provisions of the Act, to which the assessee has agreed." We do not find any other material on the record to show that the penalty proceedings were not to be proceeded with. Therefore, all that can be said is that the penalty proceedings were to be disposed of in accordance with the provisions of the Income-tax Act, 1961 no doubt after taking into consideration the contention raised on behalf of the assessee in regard to the leviability of penalties. The learned Council for the assessee is no doubt right in submitting that the assessee had not agreed to the levy of penalties nor even to the quantum of penalties Even otherwise it is trite proposition that even though an addition can be made on agreed basis, there can be no levy of penalty even with the consent of the assessee and that penalty can only believed if the requirements of the relevant penal provisions are satisfied. It is in this context that the learned Departmental Representative had submitted before us that the applicability of section 271 did not depend upon the consent of the assessee.
25. Next point to be decided relates to the additional ground which was sought to be raised on behalf of the assessee. We are of the view that the additional ground is purely a legal ground and does not involve any investigation into the facts. Even otherwise, the additional ground is only an aspect of the ground which was originally raised in these appeals filed by the assessee and, therefore, the assessee could always argue as to under what provisions or law the quantum of penalties were required to be considered and levied. We, therefore, see no force in the objection, to the admission of the additional ground of appeal, raised on behalf of the revenue.
26. WE have set out above in detail the background under which the assessee came forward for settlement. The contents of the settlement petition of the assessee projected a desire to buy peace and keep the family free from litigation. The petitioner also indicated that the was not keeping good health an wanted to avoid stress and strain of the protracted proceedings. we have also recorded above that his apprehension came true and after suffering from paralysis, he expired on 1-11-1978. The assessee projected that a particular amount of tax be collected, whatever be its character i.e., he agreed to a particular amount to be paid and left it to the authorities concerned to determine under what particular provisions of the Act it had to be gathered. But the order of settlement apparently went beyond that and also recorded that the assessee agreed to the imposition of penalties. Therefore, this agreement has to be read in the context and it appears to us that the assessee understood that he would not have to pay anything more than what was envisaged in the petition.
27. The order of settlement indicates that there was no income detected that could be related to a particular assessment year. It was a case where total assets were determined and the liabilities of he assessee were considered. The order of settlement shows that most of these items were on estimate basis. On such facts it could not be said that when the assessments were completed in pursuance of the order of settlement, the income that was taxed had the attribute of income actually earned in the respective assessment years and taxable as such with all consequences provided under he statute.
28. The learned Counsel for the assessee projected that the assessee was not in a position to realise any amounts form the sundry debtors which were taken into consideration to arrive at the net assets of the assessee. All this shows that the desire of the assessee arose more out of the motive of avoidance of litigation and buying of peace. On such fats, the assessee apparently got a shook when assessment orders were made and therein it was mentioned that penalties will follow. The assessee filed a writ petition before the Honble High Court. It is pertinent to note that no return was filed before the Honble Court by the respondent. The Honble court has clearly recorded in the order that the facts asserted by the assessee, therefore, have to be taken as correct, penalties under any of provisions which have been invoked could not be levied upon the assessee. The learned Departmental Representative had laid grad stress on the conduct of the assessee and the fact that it was only when the assessee was concerned that he come forward with the settlement. In this connection, reliance was placed by him on the facts mentioned in the order dated 30-3-1978 of settlement.
The survey was made on 16-2-1978 whereas the assessment years involved before us are 1969-70 to 1978-79. The survey, if at all, was relevant for the assessment year 1978-79 only. We do not find any observations in the settlement over to support the contentions raised by the learned Departmental Representative. It is not as if the assessee had been cornered or that he felt driven to the wall that he came with the settlement petition. This is clear, as mentioned above, form the order of the Honble court where-in the factual date furnished by the assessee was was accepted, namely that the date of issue of notices 271(1) (c) or 27 (1) (c) could not arise for the assessment years in question, having regard to those provisions as they existed for the relevant assesment years.
29. So far as the levy of penalties us 27191) (a) is concerned, the circumstances in which the returns came to be failed by the assessee late are clear from the detailed narration of facts mentioned by us above. It becomes clear therefrom that there was a reasonable cause for the delay in the sense that the conduct of the assessee leading to the filing of he returns could not be said to be otherwise the an bona fide. Therefore, taking into account the facts as mentioned above. The levy of noneo he penalties for none of the years under consideration can be justified. In matter, the aspect projected in the additional ground became redundant.
30. however before parting, we would like to record the fact that on behalf of both the sides, the facts and points arising in these appeals were argued with great ability an precision which were of great assistance to us in disposing of these appeals.