INCOME TAX BANGALORE V. SHALINI BHUPAL

ITTA/38/2000

AI Insights

This case involves a series of appeals by the Commissioner of Income Tax, Bangalore, against several respondents, including Sri Somanadri Bhupal, Sri Shalini Bhupal, and Smt. G. Indira K. Reddy, concerning the imposition of penalties for alleged delays in filing income tax returns. The core legal issues revolved around the justification for penalties under Section 271(1)(a) and Section 271(1)(c) of the Income Tax Act, and whether an order of waiver under Section 273-A could be considered a valid reason for cancelling these penalties. The Tribunal found that the penalties were unjustified as the delays were adequately explained by the respondents, who filed their returns following the directions of the Commissioner of Income Tax after the assessments of their firm were set aside.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 681703 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 20-06-2013
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Appeal; Assessment; Capital Gains; Delay in filing; Income Tax; Penalty; Tribunal
• Section: 271(1)(c); 271(1)(a); 273-A

Judgement Text

"THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE Ms. JUSTICE G. ROHINI I.T.T.A. No.31 OF 1999 AND I.T.T.A. Nos.37, 38 & 47 OF 2000 Date: 20-06-2013 Between: ITTA Nos. 31 of 1999 and 37 of 2000 The Commissioner of Income Tax, Bangalore. …. Appellant And Sri Somanadri Bhupal, Hyderabad. …Respondent I.T.T.A. No.38 OF 1999 Between: The Commissioner of Income Tax, Bangalore. ….Appellant And Sri Shalini Bhupal, Hyderabad. …Respondent I.T.T.A. No.47 OF 1999 Between: The Commissioner of Income Tax, Bangalore. ….Appellant And Smt. G.Indira K.Reddy Hyderabad. …Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE Ms. JUSTICE G. ROHINI I.T.T.A. No.31 OF 1999 AND I.T.T.A. Nos.37, 38 & 47 OF 2000 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 facts and points of law involved are common. The appeals were admitted on the substantial questions of law before this 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 it fit that the appeals should be heard only on two points, which are as follows: (1) Whether Tribunal was not justified in law in cancelling the penalty levied under Section 271 (1) (a) of the Income Tax Act even though there is no nexus between the assessment proceedings of the firm and the obligation of the assessees to file individual returns? (2) Whether on the facts and in the circumstances of the case the Tribunal is correct in law in presuming that an order of waiver passed in terms of Section 273-A of the Income Tax Act should be regarded as a good reason for cancelling the penalties 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 the order of Commissioner of Income Tax, and the assessing officer, after assessing the returns, found that there has been delay in filing the returns. As such, penalty was imposed along with other persons. These orders of imposing penalty were taken to appeals before the Commissioner of Income Tax (Appeals), who, however, sustained the orders of the assessing officer imposing penalty, but in some of the cases the Commissioner of Income Tax (Appeals) waived the penalty. Therefore the respondent-assessees approached the Tribunal against the orders of the Commissioner of Income Tax (Appeals), who confirmed the order of imposition of penalty. The Tribunal, on fact, found that the pre-conditions for imposing penalty were not subsisting, and hence the amount of penalty was deleted. The learned counsel for the appellant, though admitted that there was a delay in filing the returns, contended that the imposition of penalty by the assessing officer was justified and the Commissioner of Income Tax (Appeals) also affirmed it, and therefore there is no justification for the Tribunal to interfere with the orders of the Commissioner of Income Tax (Appeals). The learned counsel for the respondents, on the other hand, submits that 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 the income from the business and in the returns it was found that the compensation amount received on account of acquisition of one of the properties of the firm was shown to be capital gains and that apart a portion of the assets transferred to other companies was also shown to be capital gains. These returns filed by the firm were not accepted by the assessing officer and it was held that there is no existence of partnership firm, and a group of persons were assessees and moreover the income shown as capital gains was not accepted and it was treated to be the income from business. On appeal being taken, the appellate authority held that the income shown in the returns should not be treated as income from business and should be treated as the income on account of capital gains. It was, however, observed that the partnership firm was a sham arrangement to be an assessee, and that a group of persons, who are the partners, were real assessees, and as such the matter was sent back to the assessing officer for proceeding 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 there is no concealment of income. Therefore, the question of invocation of Section 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 in Section 271 (1) (a) and 271 (1) (c) of the Income Tax Act and they are sine qua non and unless the conditions are satisfied the penalty cannot be imposed. After hearing the learned counsel for both the parties, the only question is whether in the facts and circumstances of the case the imposition of penalty under Section 271 (1) (a) or Section 271 (1) (c) of the Act was justified or not. The learned Tribunal on an analysis of fact found that there was no justification for levying penalty. We record the relevant portion of the findings of the learned Tribunal as follows: “On examination of totality of facts and circumstances of the cases, discussed above, we find that the appellants have made out a reasonable cause for not filing the returns in time and therefore the penalties levied under Section 271 (1) (a) and sustained in the cases of Somnadri Bhupal for assessment years 1983-84 and 1985-86 and in the case of Smt. Shalini Bhupal for assessment year 1983-84 are 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. It is only after the order of the CIT (A) in the appellate proceedings on the assessment in the cases of the firm, that the appellants could file their individual returns. It is long after the filing of the original return by the firm, its assessment and subsequent order of the CIT (A) that the assessees could file their individual returns. If the original assessment completed in the hands of the firm, had not been set aside by the CIT (A), the filing of the returns in the individual hands of the appellants would not have been warranted. Who has to file the returns and in what status assessments were to be completed were all debatable issues, till the CIT (A) upon the assessment in the case of the firm, set aside the assessment with certain directions, which prompted the appellants to file their returns in individual status. Further, the uncertainty regarding the business and the projects of the erstwhile firm, frequent changes in the constitution and subsequent dissolution of the firm actual implementation of the project through limited companies, and the long period involved in the income tax proceedings upto the stage of the first appellate authority setting aside the order of the assessment in the case of the firm, etc., must have contributed to the delay in the filing of the returns by the appellants before us.” Thus, the Tribunal has found that the delay was sufficiently explained and there was no reason to impose the penalty. We in exercise of jurisdiction under Section 260A of the Income Tax Act cannot substitute our own reasoning on appreciation of facts. Therefore, we do not find any reason to interfere with the order of the learned Tribunal. These appeals, therefore, fail and hence the same are dismissed. No order as to costs. _____________________ K.J. SENGUPTA, C.J. ______________ G. ROHINI, J. Date: 20.06.2013 GBS/KLP "