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Judgment
Ratnam, J.—At the instance of the Revenue, u/s 256(2) of the Income Tax Act, 1961, and u/s 27(3) of the Wealth-tax Act, 1957, the
following questions of law have been referred to this court for its opinion :
income tax assessment year 1968-69 :
(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in cancelling the penalty levied u/s 271(1)(a) of the
Income Tax Act, 1961 ?
(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee''s addiction to alcohol
would constitute reasonable cause for not filing the return within the prescribed time ?
Wealth-tax assessment years 1966-67 to 1969-70 :
(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in cancelling the penalties levied u/s 18(1)(a) of the
Wealth-tax Act, 1957 ?
(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee''s addiction to alcohol
would constitute reasonable cause for not filing the return within the prescribed time ?
For the assessment year 1968-69, the income tax return was due from the assessee on September 22, 1968, and it was filed on January 15,
1970, after a delay of about 15 months. The returns under the Wealth-tax Act for the assessment years 1966-67 to 1969-70 were due on June
30, 1966; June 30, 1967; June 30, 1968 and June 30, 1969, respectively, but they were all filed on January 27, 1970, after a delay of 42 months,
30 months, 18 months and 5 months. In the course of the penalty proceedings initiated by the Income Tax Officer and the Wealth-tax Officer in
respect of the belated submission of the returns, the assessee maintained that he was in indifferent health and was not conscious of the delay in filing
of the returns and, therefore, no penalty should be levied. This, however, was not countenanced on the ground that the assessee had the benefit of
the services of a chartered accountant and he had also not applied for extension of time. u/s 271(1)(a) of the Income Tax Act, 1961, a penalty of
Rs. 1,225 was levied on the assessee. Similarly, for the belated submission of the wealth-tax returns, penalties of Rs. 19,727, Rs. 19,555, Rs.
19,040 and Rs. 10,364, respectively, were levied for the assessment years 1966-67 to 1969-70. In the course of the appeals preferred by the
assessee before the Appellate Assistant Commissioner, medical certificates were produced from four doctors, of whom three were also examined
and they deposed that the assessee was suffering from chronic alcoholism and that he was not in his senses during the period June 7, 1966, to
August 22, 1969, and was also continuously under treatment. Relying on this, it was contended by the assessee that his physical condition was
such that he was unable to attend to his normal duties and his failing health and pathetic physical condition constituted reasonable cause for the
belated submission of the income tax and wealth-tax returns. Considering the materials made available by the assessee, the Appellate Assistant
Commissioner took the view that they did not establish that the assessee was suffering from an ailment which prevented him from filing the returns
in time and that the payment of advance tax on three occasions and the signing of an application by the assessee in Form No. 6 for the assessment
year 1969-70 on August 17, 1969, and the signing of an Income Tax return by the assessee on January 7, 1969, established that the assessee was
fully aware of his obligation under the Income Tax and Wealth-tax Acts, and since the periods of drunkenness attributable to excessive
consumption of liquor were followed by intervals of normalcy, the assessee could have discharged his obligation of filing the returns under those
Acts during those intervals of normalcy and, therefore, there was no reasonable cause shown for belated submission of the Income Tax and
wealth-tax returns. On this conclusion, the Appellate Assistant Commissioner upheld the levy of penalty under the Income Tax as well as the
Wealth-tax Acts. On further appeal to the Tribunal, the Tribunal found that the medical evidence adduced by the assessee clearly established an
excessive indulgence in alcohol by the assessee and that the lucid intervals were one or two days in a period of 15 days and that the totality of the
circumstances established that the chronic alcoholism from which the assessee had suffered prevented him from fulfilling his statutory obligation in
the matter of filing the returns under the said Acts, constituting a reasonable cause for his failure to submit his returns within the prescribed time.
The Tribunal also pointed out that the payment of advance tax and the signing of an application in Form No. 6 for extension of time by the assessee
showed that such lucid intervals, as were there, had been utilised by the assessee and these acts, far from establishing any contumacious conduct
on the part of the assessee in filing the returns within time, made out that the assessee was not acting in defiance of the law or in disregard of his
obligation under the respective Acts and that he was trying to comply with the same to the best of his ability in his then state of health. On the
aforesaid conclusions, the Tribunal set aside the penalty levied on the assessee for the belated submission of the Income Tax return for the year
1968-69 and the wealth-tax returns for the assessment years 1966-67 to 1969-70. That has given rise to the questions of law set out earlier.
Drawing attention to the questions posed by the Tribunal for its decision, learned counsel for the Revenue contended that the Tribunal had
proceeded to deal with the question of the propriety of the levy of penalty, as pertaining to a matter of discharge of onus on the assessee and that
all that had been done is that the explanation offered by the assessee for the delayed submission of the returns had been considered and not
believed and that would not enable the explanation offered by the assessee for the delayed submission of the returns had been considered and not
believed and that would not enable the Tribunal to treat it as a matter relating to the discharge of onus, as has been done, and that would constitute
a misdirection in the order of the Tribunal. It was also pointed out that the materials on which the assessee had relied had not been dealt with by
the Tribunal while considering the propriety of the levy of penalty on the assessee and, therefore, there was no justification whatever for the
deletion of the penalty imposed on the assessee. On the other hand, learned counsel for the assessee submitted that the medical evidence made
available by the assessee clearly established that the assessee was a chronic alcoholic patient unable to attend to his matters owing to his
deteriorating physical and mental condition and the Tribunal, after considering the evidence placed by the assessee in support of his serious illness
and failing health, had found that reasonable cause existed for the delay in the filing of the returns and that finding of fact did not deserve to be
disturbed. Reliance was also placed upon some decisions to support the argument that findings of fact arrived at by the Tribunal on an appreciation
of evidence ought not to be lightly interfered with.
We have carefully considered the submissions made on behalf of the Revenue as well as the assessee. Though the criticism levelled against the
order of the Tribunal by learned counsel for the Revenue is justified to some extent, in that the Tribunal had approached the question as one of
onus of proof, we are of the view that on a consideration of the totality of the materials, the Tribunal cannot be stated to have committed any error
in its ultimate conclusion regarding the availability of reasonable cause for the delayed filing of the returns by the assessee. A careful consideration
of the medical evidence, in the light of the certificates issued by the medical practitioners, clearly established that the assessee was a total addict to
alcohol but had lucid intervals, perhaps only for a few hours once in a fortnight of so. The Tribunal has also found that the payment of advance tax
by the assessee on three occasions as well as the filing of an application in Form No. 6 for the assessment year 1969-70 would at best show that
during those days only the assessee had been a little aware of his obligations in the matter of filing of returns or otherwise complying with the
requirements of the taxing enactments. Though no attempt has been made by any of the authorities below to ascertain whether on the dates on
which the assessee had paid the advance tax or had applied for extension of time for filing the returns, he was in such a state of health to attend to
his routine work in discharging his responsibilities, yet the very fact that over a long number of years, the assessee has been able to attend to the
payment of advance tax and the extension of time for fining the returns of three of four occasions, shows that during the rest of the period, his
condition, both physical and mental, was such that he was totally oblivious to what was happening around him and that extended also to the
discharge of his obligations under the respective enactments in the matter of filing the returns. A careful consideration of the entire evidence
elaborately dealt with by the Tribunal in the course of its order clearly leaves us with the impression that there is absolutely nothing whatever to
discredit the evidence of the medical practitioners who had also issued certificates regarding the nature of the illness from which the assessee was
suffering and the treatment undertaken by him and the assessee was in such a physical and mental condition that he was unable to discharge his
statutory obligations cast on him in the matter of filling the returns. The prolonged hospitalisation and treatment undertaken by the assessee for quite
a long period and the fact that the assessee had been suffering from delirium tremens show that his mental state was one of confusion, agitation and
disturbance, rendering him totally unable to realise his obligations in the matter of filing the returns and reacting to it by filing them. The few
occasions on which the assessee had done something with a view to discharge his responsibilities show that whenever the assessee was in a
position to act in a normal and ordinary manner, he had done some acts to establish that he was not acting in defiance of the law or in utter
disregard of the same, but was trying his best to comply with the same even with the state of health in which he then found himself. The Tribunal
has considered the medical evidence and the certificates issued by the doctors as well as the other circumstances, inclusive of the death of the
assessee on November 26, 1971, to conclude that there was reasonable cause for the failure of the assessee to submit the returns within the time
prescribed. We are inclined to regard that finding as one of pure fact recorded by the Tribunal on an appreciation of the evidence and the totality
of the circumstances and we are not disposed to disturb that finding so arrived at by the Tribunal. We, therefore, answer the questions referred to
us in the affirmative and against the Revenue. There will be, however, no order as to costs in these references.