Smt. Jyoti Agarwal vs ITO

Dr. R.K. Yadav, J.M.

Penalty proceedings under the provisions of section 271B of the Income Tax Act, 1961 (hereinafter referred to as the Act) were initiated against the assessee, since she allegedly failed to file the audit report on or before the due date of filing the return for the assessment year 1997-98, that is, before 31-10-1997. In response to the show-cause notice issued, she filed her written explanation wherein she claimed that audit report was sent by her on 25-10-1997, by post under certificate of posting. This explanation did not find favours with the taxing authorities and a penalty of Rs. 41,768 was imposed on her vide order dated 25-3-1999. She assailed the said order before the Commissioner (Appeals), who declined her appeal vide his order dated 7-11-2000. Now the assessee seeks indulgence of this Tribunal by way of this second appeal, claiming that the orders of the learned lower authorities are not in consonance with the provisions of law.

When the appeal came up for hearing Shri R.M. Kumar, advocate had advanced arguments on behalf of the appellant. Shri P.C. Mishra, the learned Senior Departmental Representative presented his point of view on behalf of the revenue. We have given our careful considerations to the arguments advanced at the bar and cautiously perused the record. Our findings on the issue are as under:

The appellant was required to file the tax audit report on or before 31-10-1997, her claim has been that she received the audit report on 25-10-1997, at Patna. After receipt of the audit report, she rushed to Arrah to submit it before the taxing authorities, but could not do so since the offices were closed on account of being Saturday. She anticipated that 26-10-1996 was Sunday and 28th October was Dhantehrash and 30th October was Diwali festivals. On account of her engagement in business activities as well as Puja ceremony she thought it expedient to send the tax audit report by post. Accordingly, she reached post office Arrah and sent the tax audit report to the Income Tax Officer, Ward-Arrah under certificate of posting. She also filed her affidavit before the Income Tax Officer, swearing therein that tax audit report was sent by post under certificate of posting. As referred above, these facts were not appreciated by the lower authorities and it was found to be a fit case for imposition of penalty to the tune of Rs. 41,768.

The lower authorities proceeded on the assumption that the certificate of posting was manipulated by the appellant later on. No finding was recorded about the contents of her affidavit wherein she had sworn that tax audit report was sent by post under certificate of posting. The factum regarding the comments on certificate of posting was that on the back of it the appellant later on recorded, "audit report for the period ended on 31-3-1997". This writing over the back of the certificate of posting nowhere takes away the factum that a postal article was sent by the appellant to Income Tax Officer, Ward-Arrah on 25-10-1997, under certificate of posting. Any manipulation on its back will not lead to a conclusion that certificate of posting was not issued by the postal authorities, discharging their official duties correctly. When presumption as to the discharge of official duties by public authority is available, in that situation, it comes over the record that a postal article was sent by the appellant to Income Tax Officer, Ward Arrah. Her affidavit brings it over the record that through this postal article she had sent tax audit report for the period ended on 31-3-1997. No material was available either with the Income Tax Officer or with the Commissioner (Appeals) to discard the affidavit of the appellant. Therefore, it is obvious that the lower authorities have acted on wrong presumption and reached a wrong conclusion. Presumption lies in favour of the appellant that tax audit report was sent by her to the Income Tax authorities by post and it reached Income Tax Officer, Ward-Arrah in the ordinary course of post. In such a situation, it was not a case for imposition of penalty.

Even otherwise an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligations. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed the authority competent to impose the penalty will be justified in refusing to impose a penalty when there is a technical or venial breach of provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Such propositions were laid by the Apex Court in Hindustan Steel Ltd. Vs. State of Orissa,

It has not been shown that the appellant has acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. She could bring it over the record that the tax audit report was sent by post under certificate of posting. In such a situation, the order imposing penalty cannot be sustained. Orders of the lower authorities imposing penalty are set aside and appeal is accordingly granted.