Commissioner of Income Tax vs P.C. Maheshwari

Heard on application u/s 260(1) of the Income Tax Act, 1961.

The Tribunal has referred the following question for the opinion of this court :

"Whether on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty of Rs. 40,565 levied u/s 10 of the Compulsory Deposit Scheme (Income Tax Payers) Act, 1974 ?"

The assessee was deriving individual income in the year under consideration from salary, share profit from M/s. Pratap Steels and dividend. He declared his total income at Rs. 9,32,161 and the assessment was completed on a total income of Rs. 9,73,320. As the assessee has not made any compulsory deposit as required under the Compulsory Deposit Scheme (Income Tax Payers) Act, 1974, the assessing officer has initiated penalty proceedings u/s 10 of the Compulsory Deposit Scheme Act, 1974. After considering the explanation, he levied the penalty of Rs. 40,565 which is 20 per cent of the amount of requisite under Act, 1974, which was required to be made by the assessee.

In appeal, the Commissioner (Appeals) has confirmed the penalty levied by the assessing officer. In appeal before the Tribunal, the Tribunal has considered that when assessee has estimated the ''Nil'' income and no direction was given for showing the correct estimate of income or deposit the amount required under the Compulsory Deposit Scheme, there is no justification to impose the penalty u/s 6 of the Compulsory Deposit Scheme Act, 1974.

Heard learned counsel for the parties. The Tribunal has considered the arguments and the explanation given by the assessee in para 3 of its order, which runs as under :

"3. We have considered the rival submissions. Section 4(1) of the said Act provides that where in relation to an assessment order (commencing on the first day of April, 1975 and every subsequent assessment year not being an assessment year commencing on or after 1-4-1986) the current income of any person exceeds 15 thousand rupees, such person shall make a compulsory deposit at the rates specified in the relevant paragraph of the schedule. Section 4(3)(b) provides that for the purposes of that section current income in relation to an assessment year in a case where an estimate is sent by the person u/s 209A of the Income Tax Act, means the total income as estimated by him of the period which would be the previous year for that assessment year as increased by the net agricultural income, if any, of that period as estimated by him. It appears that in the penalty order dated 19-12-1986 passed by the Inspecting Assistant CIT (Assessment) u/s 273(2), it was accepted that the assessee had filed an estimate in lieu of that statement u/s 209A(2) estimating his current income at Nil. This being the position the current income of the assessee in terms of section 4(3)(b) would also be Nil and, therefore, in terms of section 4(1) of the Compulsory Deposit Scheme (Income Tax Payers) Act, 1974 there were no liability on the part of the assessee to make a compulsory deposit. Section 10 which prescribes the penalty for failure to make a compulsory deposit opens with the words If in relation to an assessment year any person who is liable to make a compulsory deposit, has without reasonable cause failed to make the compulsory deposit within the time allowed u/s 5, such person may be directed by the Income Tax Officer in writing to pay by way of penalty the sum specified thereunder. Therefore, this section could not be attracted in the present case. Even if for the sake of argument, it were to be taken that the section is attracted, the assessee apparently had a reasonable cause for not making the deposit, the estimate filed by him being Nil It is another matter that in the return of income filed on 31-3-1984, the total income declared was Rs. 9,32,160 and that assessment had been completed by the assessing officer on 30-1-1985 on a total income of Rs. 9,73,320. The fact that in reply to the show-cause notice, the assessee did not file any reply, would not be material. The explanation that ''Nil'' estimate had been furnished before the learned Commissioner (Appeals) which was not accepted. We have not been told that any order must pass the Income Tax Officer u/s 6 of the Compulsory Deposit Scheme (Income Tax Payers) Act, 1974 directing him to make compulsory deposit with reference to his current income. The expression current income has been defined in section 6(2) as the total income returned by him as increased by the net agricultural income, if any, returned by him. Therefore, unless the assessing officer had taken action u/s 6, the returned income or the assessed income could not have been taken into consideration."

The submissions and the admitted fact that the assessee has estimated his ''Nil'' income and that has been filed his statement u/s 209A(2) of the Act, no direction was given by the assessing officer u/s 6 of the Compulsory Deposit Scheme Act, 1974 for deposit of any amount under the Compulsory Deposit Scheme Act. Considering these admitted facts, we are of the view that the Tribunal was justified in cancelling the penalty so imposed on the facts and circumstances of the case.

In the result, we answer the question in affirmative, i.e., in favour of the assessee and against the revenue.

The reference stands disposed of accordingly.