Rajasthan H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the order passed by the AO imposing penalty under s. 273 of the IT Act, 1961 ?

Counsel Appeared

Sandeep Bhandawat, for the Applicant

JUDGMENT

DR. AR. LAKSHMANAN, C.J. :

This reference application has been filed against the order dt. 24th March, 1999, passed by the Tribunal, Jaipur, in R.A. No. 2(Jp) of 1999 arising out of IT Appeal No. 1647 (Jp) of 1992 for the asst. yr. 1986-87.

2. The brief facts giving rise to this reference application are : that the assessee had furnished statement of advance of tax on 9th Sept., 1985, showing advance tax payable at Rs. 15,167 on the income of Rs. 1,21,530. However, the assessment was completed on the income of Rs. 14,64,730 on which the assessed tax came to Rs. 3,37,535. In view of these facts, the AO imposed penalty under s. 273(2)(a) of the IT Act, 1961 (‘the Act’) at Rs. 20,000.

3. Being aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A), who upheld the order of the AO vide his order (Annexure 2) dt. 2nd June, 1992. Thereafter the assessee preferred a second appeal before the Tribunal and the Tribunal vide its order (Annexure 3) dt. 29th Sept., 1998 allowed the appeal filed by the assessee and opined that having accepted the reasonableness of the cause by which the assessee was prevented to file the return of income in time, it was not proper is not accepting the same circumstances, so far as penalty proceedings under s. 273 of the Act are concerned. Accordingly, the penalty order passed by the AO was set aside.

4. Aggrieved with the order (Annexure 3) dt. 29th Sept., 1998, passed by the learned Tribunal the Department preferred a reference application under s. 256(1) of the Act for a direction to the Tribunal, Jaipur, to refer the following question of law for the opinion of this Court : “Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the order passed by the AO imposing penalty under s. 273 of the IT Act, 1961 ?”

5. The Tribunal vide its order (Annexure 4) dt. 24th Feb., 1999, rejected the reference application filed by the Department under s. 256(1) stating it to be a question of fact. This appeal has been filed by the appellant-State of Rajasthan along with an application under s. 5 of the Limitation Act for condoning the delay of 19 days in preferring this appeal. Thus, the Department has preferred this reference application under s. 256(2).

6. Mr. Sandeep Bhandawat, the learned counsel appearing for the Revenue, submits that the Tribunal was not justified in importing the reasons given for not filing the return of income in time to the default under s. 273. According to the Department, the books of account were seized on 9th Jan., 1986, whereas the assessee had already filed the statement of advance tax on 9th Sept., 1985. Hence, the reasons, whatever for not filing return of income are not applicable to default under s. 273A. He has, therefore, submitted that this reference application under s. 256(2) deserves to be allowed and the Tribunal may be directed to refer the above question of law for the opinion of this Court.

7. In this case, the return was due to be filed on 31st July, 1986. It was filed on 13th April, 1988. Thus, it was late by 20 months. The Form No. 6 was filed on 31st July, 1986, requesting for extension of time up to 30th Sept., 1986. The AO, thereafter, issued a notice under s. 139(2) which was not complied within time and the return was, thus, late. There was a search in the business premises of the assessee and the books of account relevant to the year under consideration were seized by the Department. The assessee requested inspection of books so as to reconcile various statements and also to get the account books audited. The AO allowed the appellant-firm an opportunity for inspection of the books. The appellant requested the Department to get the books audited on behalf of the firm as per the provisions of s. 44AB of the Act. The audit report was to be enclosed with the return but, however, on account of delay in permission to get the audit work done by nominated auditor under s. 142(2A) of the Act, the audit of the firm was held up. Ultimately, no permission was granted. The AO issued a letter dt. 22nd July, 1986, requiring the party to inform the convenience of the chartered accountant to go through the books in the first or second week of September, 1986. The audit of the accounts could be completed only in April, 1988 and the appellant-firm furnished the return enclosing the audit report on 13th April, 1988.

The Tribunal, after examining the above facts and circumstances of the case, was of the opinion that in the given circumstances, the assessee was prevented by reasonable cause which was accepted by the CIT(A). The Tribunal has further held that CIT(A) was reasonable and justified in allowing the appeal of the assessee and dismissed the appeal filed by the Revenue.

The authorised representative appearing for the assessee before the Tribunal submitted that since all the books of account were lying with the Department and the assessee was not allowed to inspect the books of account within the time for filing the estimates, the assessee cannot be held responsible for the default in terms of the provisions of s. 273. The assessee filed the estimates on the basis of the last assessed income, which was further revised on estimating the current income.

The Department, in fact, supported the order passed by the CIT(A). The Tribunal on a consideration of the rival submissions was of the opinion that having accepted the reasonableness of the cause by which the assessee was prevented to file the return in time, i.e., seizure of the books of account by the Department in March, 1986 and not providing copy of the books of account. The first appellate authority has refused to accept the same circumstances so far as the penalty proceedings under s. 273 of the Act are concerned. In this view of the matter, the Tribunal has held that the first appellate authority was not justified in not accepting the above contention made by the learned counsel for the assessee.

We have perused the order under reference passed by the Tribunal rejecting the application filed by the Department under s. 256(1) for referring the above question for determination to this Court. The Tribunal has held that in regard to the proceedings under s. 273, the assessee furnished advance tax statement on 9th Sept., 1995, and after the search neither it furnished any revised statement nor paid any tax and, therefore, the AO imposed penalty under s. 273(2)(a) which was upheld by the CIT(A) but set aside by the Tribunal, after considering the reasonableness by which the assessee was prevented to file the return. Since all the appeals were decided on the basis of the appreciation of facts, in our opinion, no referable question of law arises from the order passed by the Tribunal. Therefore, the Tribunal has rightly dismissed the reference application filed by the Department under s. 256(1).

This reference application is, therefore, dismissed.

[Citation : 252 ITR 721]