Itta/47/2000 Of Cpmmissioner Of Incometax Karnataka Bang v. Smt.g.indira K.reddy

THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA ANDTHE HON’BLE Ms. JUSTICE G. ROHINI I.T.T.A. No.31 OF 1999ANDI.T.T.A. Nos.37, 38 & 47 OF2000 --Date: 20062013 Between:ITTA Nos. 31 of 1999 and 37 of 2000The Commissioner of Income Tax,Bangalore.AndSri Somanadri Bhupal,Hyderabad. ITTA Nos. 31 of 1999 and 37 of 2000 …. Appellant …Respondent I.T.T.A. No.38 OF 1999 Between:The Commissioner of Income Tax,Bangalore. ….Appellant AndSri Shalini Bhupal,Hyderabad. I.T.T.A. No.47 OF 1999 …Respondent Between:The Commissioner of Income Tax,Bangalore.….AppellantAnd Smt. G.Indira K.Reddy THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTAANDTHE HON’BLE Ms. JUSTICE G. ROHINI I.T.T.A. No.31 OF 1999 AND I.T.T.A. Nos.37, 38 & 47 OF2000 COMMON JUDGMENT:(Per the Hon’ble the Chief Justice Sri K.J. Sengupta) This batch of appeals are taken up for hearing altogether, as the factsand points of law involved are common. The appeals were admitted on the substantial questions of law beforethis Court and the same were not spelt out in the orders dated 24.07.2000,24.07.2000, 23.10.2000 and 20.10.2000. At the time of hearing, we thought itfit that the appeals should be heard only on two points, which are as follows: (1) Whether Tribunal was not justified in law in cancelling thepenalty levied under Section 271 (1) (a) of the Income Tax Acteven though there is no nexus between the assessmentproceedings of the firm and the obligation of the assessees tofile individual returns?penalty levied under Section 271 (1) (a) of the Income Tax Acteven though there is no nexus between the assessmentproceedings of the firm and the obligation of the assessees tofile individual returns? (2) Whether on the facts and in the circumstances of the casethe Tribunal is correct in law in presuming that an order ofwaiver passed in terms of Section 273-A of the Income Tax Actshould be regarded as a good reason for cancelling thepenalties levied under Section 271 (1) (a) and Section 271 (1)(c) of the Income Tax Act?the Tribunal is correct in law in presuming that an order ofwaiver passed in terms of Section 273-A of the Income Tax Actshould be regarded as a good reason for cancelling thepenalties levied under Section 271 (1) (a) and Section 271 (1)(c) of the Income Tax Act? The assessees filed returns in their individual capacity pursuant to theorder of Commissioner of Income Tax, and the assessing officer, after assessing the returns, found that there has been delay in filing the returns. Assuch, penalty was imposed along with other persons. These orders ofimposing penalty were taken to appeals before the Commissioner of IncomeTax (Appeals), who, however, sustained the orders of the assessing officerimposing penalty, but in some of the cases the Commissioner of Income Tax(Appeals) waived the penalty. Therefore the respondent-assesseesapproached the Tribunal against the orders of the Commissioner of IncomeTax (Appeals), who confirmed the order of imposition of penalty. TheTribunal, on fact, found that the pre-conditions for imposing penalty were notsubsisting, and hence the amount of penalty was deleted. The learned counsel for the appellant, though admitted that there wasa delay in filing the returns, contended that the imposition of penalty by theassessing officer was justified and the Commissioner of Income Tax(Appeals) also affirmed it, and therefore there is no justification for theTribunal to interfere with the orders of the Commissioner of Income Tax(Appeals). The learned counsel for the appellant, though admitted that there wasa delay in filing the returns, contended that the imposition of penalty by theassessing officer was justified and the Commissioner of Income Tax(Appeals) also affirmed it, and therefore there is no justification for theTribunal to interfere with the orders of the Commissioner of Income Tax(Appeals). The learned counsel for the respondents, on the other hand, submitsthat in these cases there is no delay in filing the returns at all. As, originally,the assesses, in the status of a firm itself filed the returns disclosing theincome from the business and in the returns it was found that thecompensation amount received on account of acquisition of one of theproperties of the firm was shown to be capital gains and that apart a portion ofthe assets transferred to other companies was also shown to be capitalgains. These returns filed by the firm were not accepted by the assessingofficer and it was held that there is no existence of partnership firm, and agroup of persons were assessees and moreover the income shown as capitalgains was not accepted and it was treated to be the income from business. On appeal being taken, the appellate authority heldthat the income shown in the returns should not be treated as income frombusiness and should be treated as the income on account of capital gains. It was, however, observed that the partnership firm was a sham arrangement tobe an assessee, and that a group of persons, who are the partners, were realassessees, and as such the matter was sent back to the assessing officer forproceeding afresh. On the basis of the said order of the appellate authority,the returns were filed and as such there was no delay at all and in fact thereis no concealment of income. Therefore, the question of invocation ofSection 271 (1) (a) or 271 (1) (c) of the Income Tax Act does not arise. It is,however, in order to impose penalty the conditions were mentioned inSection 271 (1) (a) and 271 (1) (c) of the Income Tax Act and they are sinequa non and unless the conditions are satisfied the penalty cannot beimposed. After hearing the learned counsel for both the parties, the only questionis whether in the facts and circumstances of the case the imposition ofpenalty under Section 271 (1) (a) or Section 271 (1) (c) of the Act was justifiedor not. The learned Tribunal on an analysis of fact found that there was nojustification for levying penalty. We record the relevant portion of the findingsof the learned Tribunal as follows: “On examination of totality of facts and circumstancesof the cases, discussed above, we find that the appellantshave made out a reasonable cause for not filing the returnsin time and therefore the penalties levied under Section271 (1) (a) and sustained in the cases of Somnadri Bhupalfor assessment years 1983-84 and 1985-86 and in thecase of Smt. Shalini Bhupal for assessment year 1983-84are liable to be cancelled.” In coming to the conclusion, the Tribunal found on fact as under: “In this case, the assessees have a strong reason. Penalties are levied with reference to the revised returns filed in the individual capacities and assessments thereon. Itis only after the order of the CIT (A) in the appellateproceedings on the assessment in the cases of the firm, thatthe appellants could file their individual returns. It is longafter the filing of the original return by the firm, its assessmentand subsequent order of the CIT (A) that the assessees could In coming to the conclusion, the Tribunal found on fact as under: “In this case, the assessees have a strong reason. Penalties are levied with reference to the revised returns filed in the individual capacities and assessments thereon. Itis only after the order of the CIT (A) in the appellateproceedings on the assessment in the cases of the firm, thatthe appellants could file their individual returns. It is longafter the filing of the original return by the firm, its assessmentand subsequent order of the CIT (A) that the assessees could file their individual returns. If the original assessmentcompleted in the hands of the firm, had not been set aside bythe CIT (A), the filing of the returns in the individual hands ofthe appellants would not have been warranted. Who has tofile the returns and in what status assessments were to becompleted were all debatable issues, till the CIT (A) upon theassessment in the case of the firm, set aside the assessmentwith certain directions, which prompted the appellants to filetheir returns in individual status. Further, the uncertaintyregarding the business and the projects of the erstwhile firm,frequent changes in the constitution and subsequentdissolution of the firm actual implementation of the projectthrough limited companies, and the long period involved inthe income tax proceedings upto the stage of the firstappellate authority setting aside the order of the assessmentin the case of the firm, etc., must have contributed to the delayin the filing of the returns by the appellants before us.” Thus, the Tribunal has found that the delay was sufficiently explainedand there was no reason to impose the penalty. We in exercise of jurisdictionunder Section 260A of the Income Tax Act cannot substitute our ownreasoning on appreciation of facts. Therefore, we do not find any reason tointerfere with the order of the learned Tribunal. These appeals, therefore, fail and hence the same are dismissed. Noorder as to costs. _____________________ K.J. SENGUPTA, C.J. ______________G. ROHINI, J.