Commissioner of Income Tax vs S.R. Parmanand Chichar

A.P. Misra, J.—In the present applications u/s 256(2) of the Income Tax Act, 1961, preferred by the Department the only question sought to be referred is :

"Whether, on the facts and in the circumstances of the case, the Tribunal was, in law, justified in cancelling the penalty imposed u/s 271(1)(a) of the Income Tax Act, 1961 ?"

The brief facts of the case are that the assessee contested the levy of penalty u/s 271(1)(a) of the Income Tax Act, 1961, for the years 1978-79, 1979-80 and 1980-81. It is not being disputed that the returns were filed after some delay. The Department had issued notice u/s 148 of the Act for the assessment years 1978-79 and 1979-80. The assessing authority did not find the explanation of the assessee to be satisfactory for the delayed return and hence imposed penalties, which were confirmed by the first appellate authority. The Tribunal delated the penalty imposed for the assessment years 1978-79 and 1979-80, but maintained the penalty for the assessment years 1980-81 by treating the assessee as a defaulter only for a period of 20 months instead of 29 months as found by the assessing authority. The Department being aggrieved as against this order of the Tribunal sought for a reference to this court by way of the aforesaid question.

We find that for the assessment year 1978-79, the return was filed on March 2, 1981, that is to say, within two days of filing of the return for the previous year, namely, 1977-78. The Tribunal found that the accounts for the earlier year have to be completed before the accounts for the subsequent year could be taken up. It is on these facts that the Tribunal further found that the delay in completing the accounts for this year shows reasonable cause. Hence, the penalty imposed by the assessing authority was cancelled. We find no error in the order.

Similarly, for the assessment year 1979-80, it is found that advance tax paid was more than the tax payable as per assessment. The assessee has stated that Rs. 8,050 was paid as advance tax as per demand notice for only Rs. 6,860. It is on this ground that the penalty imposed was deleted as it was found that the assessee has paid more than the demand in the form of advance tax.

So far as the question raised for this year is concerned, learned standing counsel for the Revenue strongly relied on the decision of Commissioner of Income Tax, Poona Vs. Janata Trading Co., and Jamunadas Mannalal Vs. Commissioner of Income Tax, , to contend that penalty should not have been deleted. The facts of Commissioner of Income Tax, Poona Vs. Janata Trading Co., has no application to the question raised in the present cases. No doubt, in that case also there was delay in filing the return and that default resulted in issuance of notice for penalty u/s 271(1)(a) of the Income Tax Act. In the said decision, the question whether when an assessee pays as advance tax more than the tax liability, it could constitute a ground for initiating proceedings for penalty u/s 271(1)(a) of the Income Tax Act was not raised. Hence, this decision will have no application to the present case.

Similarly, the Full Bench decision of the Patna High Court also has no application to the question raised in the present case. In that case, there was delay in filing the return and the question raised was, whether when interest is paid for the delayed filing of return, it would constitute a ground for initiating penalty proceedings. Again, this is not a case where the advance payment made is more than the demand as against the assessee. On the other hand, we find the decision of the Andhra Pradesh High Court in P. Venkata Krishnayya Naidu and Sons Vs. Commissioner of Income Tax, Andhra Pradesh, Hyderabad, , the facts of which are similar to the facts of the present case, held that (headnote) :

"Where a registered firm failed to furnish its returns in time but had paid advance tax which was, admittedly, larger than the amount of tax payable on its total income, the Income Tax Officer was not empowered to levy penalty u/s 271(1)(a)."

It is significant that in the case of Ganesh Dass Sreeram Vs. Income Tax Officer, ''A'' Ward, Shillong and Others, , the Supreme Court held (headnote) :

" Where the advance tax duly paid covers the entire amount Of tax assessed, there is no question of charging the registered firm with interest even though the return is filed by it beyond the time allowed, regard being had to the fact that payment of interest is only compensatory in nature. As the entire amount of tax is paid by way of advance tax, the question of payment of any compensation does not arise."

The decision, no doubt, is not the same as raised in this case, but this lends support to the principle as laid down in the Andhra Pradesh High Court decision ( P. Venkata Krishnayya Naidu and Son v. CIT [1984] 150 ITR 545).

We, accordingly, hold that the Tribunal rightly deleted the imposition of penalty as against the application for the assessment years 1978-79 and 1979-80.

For the assessment year 1980-81, we direct the Tribunal to refer 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 reducing the period of default for imposing penalty from 29 to 20 months ?"

Accordingly, Income Tax Applications Nos. 137 and 139 of 1992 are rejected. Costs on parties.

Income Tax Application No. 138 of 1992 is accordingly allowed and the Income Tax Appellate Tribunal is directed to draw up a statement of the case accordingly.