Shiv Chand Dalmia and Others vs Commissioner of Income Tax

P. Sathasivam, J.—Aggrieved against the order of the Commissioner of Income Tax, Coimbatore, the respondent herein, the petitioners

have filed the above four writ petitions on various grounds. One Shiv Chand Dalmia has filed W. P. No. 4419 of 1989, for the assessment year

1983-84 and W. P. No. 4416 of 1989 for the assessment year 1984-85. One Shiv Gopal Dalmia has filed W. P. No. 4417 of 1989 for the

assessment year 1985-84 and W. P. No. 4418 of 1989 for the assessment year 1984-85. Since the respondent-Commissioner of Income Tax,

Coimbatore, has passed identical orders confirming the penalty imposed by the Inspecting Assistant Commissioner of Income Tax, Coimbatore, all

the above four writ petitions may be disposed of by the following common order.

For convenience I shall refer to the case of the petitioner in W. P. No. 4416 of 1989. According to the petitioner, he is a partner in a registered

firm, Lakshmi Narayan Gowri Shankar. It is stated that for the purpose of filing his Income Tax and wealth-tax returns for the accounting year

ending on March 31, 1983, corresponding to the assessment year 1983-84, he forwarded the various documents and details regarding his other

income along with the receipts for payment of Life Insurance Corporation premium, compulsory deposit, advance tax, etc., together with the

relevant return forms duly signed to the auditor of the firm, A. R. Jaganriathan, Chartered Accountant, Coimbatore, under cover of his letter dated

December 3, 1983, with a request that the returns may be filed early. It is also stated that he had sought for time for filing the return till December

51, 1983, by filing necessary applications in Form No. 6. It is further stated that his assessment for the assessment year 1983-84 was duly

completed by the Income Tax Officer by his order dated October 16, 1985. He also received a notice for levy of penalty u/s 271(1)(a) of the

Income Tax Act, 1961, on the ground that there was a delay in the furnishing of his return of income for the said year. On his instruction, the

chartered accountant replied to the said penalty notice by his letter dated December 20, 1985, and pointed out that in view of the sudden increase

in the brokerage amounts received by the firm in the last quarter of the accounting year, the accounts of the firm could not be finalised in time and

accordingly the firm after obtaining time for furnishing the return, filed its return only on January 21, 1984, and thereafter the chartered accountant

appears to have prepared his return of income and filed the same. The Inspecting Assistant Commissioner of Income Tax (Assessment) Range II,

Coimbatore, overruled the various submissions made on his behalf for the non-levy of penalty and by his order dated January 14, 1988, levied

penalty of Rs. 9,554 for the delay in the filing of the return for the period from February, 1984 to June, 1985, holding that there was no reasonable

cause for not filing the return up to January 21, 1984, on which date the firm had filed its return of income, there was no reasonable cause for the

delay subsequent thereto. Similar order was passed for the next assessment year 1984-85.

Against the orders of the Inspecting Assistant Commissioner levying penalty, the petitioner filed a revision petition u/s 264 of the Income Tax

Act, 1961, before the Commissioner of Income Tax, Coimbatore. Following the earlier orders, the Commissioner of Income Tax confirmed the

order passed by the Inspecting Assistant Commissioner and confirmed the levy of penalty and dismissed the revision. Against the order of the

Commissioner as well as the Inspecting Assistant Commissioner levying penalty, the petitioner has filed the present writ petition. Similar averments

have been made in the other writ petitions.

I have heard Mr. R. Sivaraman, learned counsel for the petitioner, in all the writ petitions and Mrs. Kala Ramesh, learned counsel for the

respondent in all the writ petitions.

Learned counsel appearing for the petitioner contended that as per Section 271(1)(a) of the Income Tax Act, 1961, there was a reasonable

cause for not furnishing the return in time ; hence the Inspecting Assistant Commissioner ought not to have levied penalty and furthermore the

Commissioner of Income Tax ought to have waived the penalty imposed by the Inspecting Assistant Commissioner. In support of his contention,

he also relied on the Full Bench decision of the Andhra Pradesh High Court in ADDL. COMMISSIONER OF Income Tax, A.P., AND

ANOTHER Vs. DARGAPANDARINATH TULJAYYA and CO., . On the other hand, learned counsel appearing for the Revenue after taking

me through the orders of both the authorities and in the light of the fact that there is no reasonable cause after filing of the return of the firm, namely,

January 21, 1984, the penalty imposed by the Inspecting Assistant Commissioner is perfectly in order and the Commissioner of Income Tax is also

right in confirming the same ; hence he prayed for dismissal of all the writ petitions.

I have carefully considered the rival submissions.

In support of the contention, learned counsel for the petitioner has filed a chart containing details regarding returns due, extension of time

granted, paper sent to the chartered accountant, further reminder, date of filing of the firm''s return as well as date of filing of the assessee''s return,

etc. Since those particulars are relevant for the disposal of the writ petitions, I am here extracting the same (page 6A).

Shiv Chand Dalmia Shiv Gopal Dalmia

W. P. No. W. P. No. W. P. No. W. P. No.

4419 4416 4417 4418

1983-84 1984-85 1983-84 1984-85

(1) (2) (3) (4) (5)

Returns due on 31-7-1983 31-7-1984 31-7-1983 31-7-1984

Extension for filing return sought up to 31-12-1983 31-12-1984 31-12-1983 31-12-1984

Papers including signed return sent to CA by assessee on 3-12-1983 19-11-1984 3-12-1983 19-11-1984

Reminded CA on 14-5-1985 14-3-1985 14 -3- 1985 14-3-1985

Firm''s return filed on 21-1-1984 24-1-1985 21-1-1984 24-1-1985

Assessee''s return filed on 30-7-1985 30-7-1985 30-7-1985 30-7-1985

Penalty levied 9,554 5,232 7,106 3,460

February, February, February, February,

Period for which penalty levied 1984 to July, 1985 to ]uly, 1984 to July, 1985 toJuly,

1985 1985 1985 1985

There is no dispute that for the assessment year 1983-84 in the case of Shiv Chand Dalmia and Shiv Gopal Dalmia returns have to be filed

before July 31, 1083, and for the assessment year 1984-85 before July 31, 1984. It is also not disputed that due to the inability the petitioners

sought for extension of lime and the Income tax Officer has also granted extension for filing return up to December 31, 1983, for the assessment

year 1983 84 and up to December 31, 1984, for the assessment year 1984-85. According to the petitioners, the relevant papers including the

signed return were sent to their chartered accountant on December 3, 1983, for the assessment year 1983-84 and on November 19, 1984, for the

assessment year 1984-85. It is also stated that their chartered accountant was reminded by them on March 14, 1985. Ultimately the firm''s return

was filed on January 21, 1984 for the assessment year 1983-84 and on January 24, 1985, for the assessment year 1984-85. Since the Inspecting

Assistant Commissioner has accepted the delay up to the filing of the firm''s return viz., on January 21, 1984 (1983-84) and January 24, 1985

(1984-85), there is no need to refer to the delay up to the said date. As a matter of fact, the said authority has accepted and found that there was a

reasonable cause for not filing the return till January 21, 1984. Admittedly, the assessees'' (petitioners) return was tiled only on July 30, 1985. As

rightly observed by the Inspecting Assistant Commissioner, there is no acceptable reason or reasons for the period between January 21, 1984 and

July 30, 1985. The only reason given by the petitioners is that they have entrusted all the papers including the signed return to their chartered

accountant and due to the fault of the chartered accountant the delay was occasioned. The petitioners also relied on the correspondence between

them and their previous chartered accountant. In this regard, it would be useful to refer to Section 271(1)(a) of the Income Tax Act, 1961, which

reads thus :

271(1). If the Income tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act, is satisfied that any

person--

(a) has without reasonable cause failed to furnish the return of total income which he was required to furnish under Sub-section (1) of Section 139

or by notice given under Sub-section (2) of Section 139 or Section 148 or has without reasonable cause failed to furnish it within the time allowed

and in the manner required by Sub-section (1) of Section 139 or by such notice, as the case may be, or

A reading of the above provision would go to show that if then; is a reasonable cause for failure to furnish the return as required under the Act,

there is no need to impose any penalty. Learned counsel also very much relied on the Full Bench decision of the Andhra Pradesh High Court in

ADDL. COMMISSIONER OF Income Tax, A.P., AND ANOTHER Vs. DARGAPANDARINATH TULJAYYA and CO., . The judges in

the Full Bench while construing Section 271(1)(a) of the said Act have observed as under (headnote) :

The object of a taxation statute is not only to augment the revenue for the State but also bring about social justice and enable the State to

implement social welfare schemes undertaken by it. In order to avoid delay in recovery of tax, the taxation statutes have taken care to provide not

only for remedial course but also coercive course. Under the Income Tax Act, there are three modes of enforcement of the obligation to file the

return. One is by levying interest, second is by imposing penalty and third is by punishing the assessee, treating his failure to file the return as an

offence. While the absence of reasonable cause for failure to file return in time is sufficient for levy of penalty, the Act requires establishment of

element of ''wilful failure'' in order to make an offence punishable with imprisonment or fine. Further, u/s 271(1)(a), penalty is in addition to the tax

and is calculated in relation to the tax assessed. u/s 276C, for failure to file return, rigorous imprisonment to an extent of one year or fine ranging

between 4 and 10 rupees for every day during which default continues, is prescribed as punishment. Thus, it is wholly unrelated to the tax

assessed. The distinction maintained between Section 271(1)(a) and Section 276C brings out the intention of Parliament in providing for two

different machineries of different magnitude, where different considerations prevail.

A reading of the above Full Bench decision as well as the provision, namely, Section 271(1)(a) of the said Act, shows that if there is a

reasonable cause, it is not open to the Income tax Officer to impose a penalty. Here, in our case, except the statement that they have entrusted the

papers to their previous chartered accountant and due to the fault or mistake of the said chartered accountant, the filing of the return was delayed

no other material was there. As stated earlier, there is no dispute that the very same chartered accountant on the basis of the instructions given by

the petitioners filed the firm''s return even on January 21, 1984. It is the case of the petitioners that their major income is only the share income

from the other firms. If that is so, there is no acceptable reason for not filing their returns immediately or within a reasonable time. As rightly

observed by the Inspecting Assistant Commissioner, there is no acceptable reason for the delay beyond the filing of the return of the firm on April

21, 1984. As a matter of fact, admittedly, the petitioners did not seek for any further extension beyond December 31, 1983, by filing Form No. 6.

The said aspect was considered by the Commissioner of Income Tax in detail. It is not the case of the petitioners that they were out of station for

the entire period of delay. If some more efforts were taken by the assessees, it could have been possible for them to file their returns immediately

after filing of the firm''s return. Mere saying that the delay was due to the fault of their previous chartered accountant cannot be accepted. As rightly

observed, it is not the case of the assessees that they have to collect the larger amount of details from the other source of income other than the

share income of the firm. Considering the factual position narrated above, the Full Bench decision of the Andhra Pradesh High Court referred to by

learned counsel for the petitioners may not be useful for their case. Since both the authorities on the basis of the factual position came to the

conclusion that there was a gross negligence on the part of the petitioners, I do not find any acceptable reason to interfere in the order passed by

the respondent. I am satisfied that after considering the petitioner''s case, in the light of Section 271(1)(a) of the Income Tax Act, 1961, the

Inspecting Assistant Commissioner of Income Tax has rightly imposed the penalty and the same has been correctly confirmed by the

Commissioner of Income Tax.

Under these circumstances, I am unable to accept the argument of learned counsel for the petitioner, consequently, all the writ petitions fail and

are accordingly, dismissed. No costs.