M/S VEENA THEATER V. THE COMMISSIONER OF INCOME TAX

MA/205/2002

AI Insights

M/s Veena Theater, represented by its partner Birendra Kr. Sinha, appealed against the penalty imposed for late filing of a tax return for the assessment year 1998-99. The firm filed its return 183 days late, citing legal issues involving a creditor and an ex-partner, which allegedly distracted the managing partner from his duties. The Income Tax Appellate Tribunal and the Patna High Court both rejected the firm's pleas, affirming the penalty. The High Court's decision was based on the absence of a reasonable cause for the delay, as the legal troubles did not commence until after the deadline for filing the return.

• Counselvise Citation: [2008] 140 COUNSELVISE.COM (IT) 687072 (HC-PATNA)
• Appeal Type: Others
• Pronouncement Date: 22-12-2008
• Assessment Year: misc
• Other Referred Cases: Union of India vs. Paras Laminates Pvt. Ltd. 186 ITR 722 (SC), Superintending Engineer vs. ITO [1996]86 TAXMAN 40 (JP) (MAG.)
• Laws Referred To: Income-tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: HARSHWARDHAN PRASAD; RISHI RAJ SINHA
• Assessee Lawyers: AJAY RASTOGI
• Keywords: Anticipatory bail; Criminal Case; Income Tax Return; Penalty for Late Filing; Reasonable cause
• Section: 273B; 272A; 206

Judgement Text

" MISC.APPEAL NO.205 OF 2002 (Appeal against the order dated 18.1.2002 passed by the Income Tax Appellate Tribunal, Patna Bench, Patna in ITA No.55/Pat/2001 for the assessment year 1998-99) --------- M/S Veena Theater, through its partner Birendra Kr.Sinha S/o Late Gajendra Narain Singh, resident of Rajendra Nagar, P.S.Kadamkuan, Distt. Patna …………..Appellant Versus 1. The Commissioner of Income Tax-II,Patna 2. The Income-tax Officer, Ward-6(1), Patna ……Respondents -------- For the appellants : Mr. Ajay Kumar Rastogi, Advocate For the Revenue : Mr. Harshwardhan Prasad Senior Standing Counsel Mr. Rishi Raj Sinha, Junior Standing Counsel -------- P R E S E N T THE HON'BLE ACTING CHIEF JUSTICE THE HON'BLE DR. JUSTICE RAVI RANJAN --------- Prasad, ACJ : Appellant M/s Veena Theater, Patna, hereinafter referred to as „the assessee‟, is a partnership firm. For the financial year 1997- 98, it failed to file return in Form No.26A as required under Section 206 of the Income-tax Act, for short „the Act‟. The assessee filed the return on 31.12.1998, whereas the last date for its filing was 30th of June, 1998. There being delay of 183 days in filing the return in the prescribed form, the Assessing Officer issued notice to it under Section 272A of the Act, calling upon the assessee to explain as to why penalty be not imposed upon it. The assessee filed its show cause, inter alia, contending that during period of filing return and issue of certificate, one of the creditors and family members of ex- partner filed criminal case against the existing and the managing partner and in the said criminal case, they were granted anticipatory 2 bail by the Sessions Judge, Patna by order dated 6.11.1998 and this delayed filing the return in prescribed form by 30th of June, 1998. This did not find favour with the Assessing Officer and he inflicted a penalty of Rs.22,875/- by order dated 24th of February, 1999. The asessee preferred appeal before the Commissioner of Income-Tax (Appeals), who reduced the penalty from Rs.22,875/- to Rs.18,300/- by order dated 14.11.2000, calculated at the rate of Rs.100/ per day for delay of 183 days. The assessee thereafter filed appeal before the Patna Bench of the Income Tax Appellate Tribunal, hereinafter referred to as „the Tribunal‟. It was contended before the Tribunal on behalf of the assessee that on account of dispute between old partner and a creditor, a warrant of arrest was issued against its managing partner and on account thereof, he was unable to perform his day to day work. It was further pointed out that the managing partner was granted anticipatory bail by order dated 6th of November, 1998 and only thereafter, the return in the prescribed form was filed on 31.12.1998. The Tribunal did not accept the plea of the assessee and observed that reasonable cause for failure to file the required return in prescribed form within time stipulated was not shown. The relevant portion of the observation of the Tribunal in this regard reads as follows: ”On the basis of a complaint, the Magistrate took cognizance of the offence and proceeded against them. Order dated 6th November, 1998 is reflective of the fact that in the month of November, 1998 Shri Sinha and Shri Singh were apprehending their arrest and detention on the orders of a judicial magistrate. It is not the case of the assessee that since April, 1998 and thereafter till the indulgence was granted by the Sessions Judge, working partners of the assessee firm were apprehending their arrest in the aforesaid complaint case. 3 Therefore, the reasons projected for delay in filing form No.16A nowhere stands on the standards of reasonable cause for failure to file the required information in the prescribed form, within the time stipulated.” (Underlining mine) It was also contended before the Tribunal that tax was not only deducted in time but was also deposited in the Government treasury within time. Accordingly, it was submitted that mere non-furnishing of the certificate in prescribed form would not attract any penalty. This submission also did not find favour with the Tribunal. The assessee thereafter has preferred this appeal under Section 260A of the Act. By order dated 11th October, 2006, appeal was admitted on the following substantial questions of law: “(1) Whether on the facts and in the circumstances of the case, the Tribunal while deciding the issue relating to penalty imposed u/s 272A(2)(C), erred in law in dissenting with an earlier decision in Superintending Engineer‟s case 86 Taxman 40 which had been passed by a Bench of co-ordinate jurisdiction of the Tribunal, instead of referring the matter for decision by a larger Bench? (2) Whether the action of the Tribunal in disagreeing with the earlier decision of another Bench of the Tribunal was contrary to the law enunciated by the Apex Court in Union of India vs. Paras Laminates Pvt. Ltd. 186 ITR 722 (SC)? (3) Whether in the facts and circumstances of the case, the Tribunal erred in confirming the imposition of penalty and thus rejecting the reasonable cause as shown by the petitioner for the delay in filing Form 26A?” Mr. Ajay Kumar Rastogi, appears on behalf of the appellant- assessee, whereas Mr. Harshwardhan Prasad, appears on behalf of the Commissioner Income-tax-Revenue. Mr.Rastogi submits that the matter being covered by the decision of the Jaipur Bench of the Income-tax Appellate Tribunal in the case of SUPERINTENDING ENGINEER vs. ITO [1996]86 TAXMAN 40 4 (JP) (MAG.), the Tribunal while passing the impugned order erred in law in dissenting with the said decision. He points out that the only option left to the Tribunal was to refer the matter to a larger Bench for decision, Mr.Prasad, however, contends that from the impugned order of the Tribunal, it does not appear that the attention of the Tribunal was drawn to the decision of the Jaipur Bench of the Tribunal in the case of Superintending Engineer (Supra) and, as such, Tribunal did not err in deciding the matter on its own merits. I find substance in the submission of Mr.Prasad. Mr.Rastogi has not been able to point out that the decision of the Jaipur Bench in the case of Superintending Engineer (Supra) was brought to the notice of the Tribunal. In such circumstance, I am of the opinion that there was no occasion for the Tribunal to refer the matter to a larger Bench. Accordingly, my answer to the first question is in the negative, against the assessee and there was no occasion to refer the matter to a larger Bench. Mr.Rastogi, then submits that in view of the judgment of the Supreme Court in the case of Union of India and others (and other petitions) vs. Paras Laminates Pvt. Limited [186 ITR 722 (SC)], the Tribunal ought not to have disagreed with the earlier decision of the co-ordinate Bench of the Tribunal and thus acted contrary to the law enunciated by the Apex Court in the case of Paras Laminates Pvt. Limited (Supra). I do not find any substance in this submission of Mr.Rastogi also. The very assumption that the Tribunal had disagreed with the earlier decision of another Bench of the Tribunal is itself misconceived and, therefore, the Tribunal did not act contrary to the law enunciated by the Apex Court in the case of Paras Laminates Pvt. Limited (Supra). 5 Accordingly, my answer to the second question is also in the negative, against the assessee and in favour of the revenue. Now I proceed to consider the third substantial question of law. It is apt to consider the relevant provision in this connection. Section 272A (2)(c) of the Act, inter alia, provides for imposition of penalty of a sum of Rs.100 for every day, if the assessee fails to furnish a return as required by section 206 of the Act. Proviso (2) to section 272 (2) of the Act puts a limit to the amount of penalty. Section 272A (2)(c) and its proviso, which are relevant for the purpose, read as follows: Penalty for failure to answer questions, sign statements, furnish information, returns or statements, allow inspection, etc.- “272A. xxx xxx (2) If any person fails- xxx xxx xxx (c) to furnish in due time any of the returns, statements or particulars mentioned in section 133 or section 206 or section 285B; or xxx xxx xxx he shall pay, by way of penalty, a sum of One hundred rupees for every day during which the failure continues: Provided that the amount of penalty for failures in relation to a declaration mentioned in section 197A, a certificate as required by section 203 and returns under section 206C and statements under sub- section (3) of section 200 or the proviso to sub section (3) of section 206C shall not exceed the amount of tax deductible or collectible, as the case may be.” xxx xxx xxx Mr. Rastogi draws our attention to the aforesaid provision and contends that the assessee having filed the return, it cannot be said that it has failed to furnish the same. This submission has been noted 6 only to be rejected. Section 203 of the Act, inter alia, provides for filing of return in the prescribed form within a period prescribed. Undisputedly, the last date for filing the certificate was 30th of June, 1998, whereas it was filed on 31st of December, 1998. Simply because the assessee had filed the return later on, it can not be said that it has not failed to file the return. From the aforesaid fact, there is no escape from the conclusion that the assessee had failed to furnish the certificate in the prescribed form. Mr. Rastogi, then submits that in view of proviso to section 272A(2) of the Act, the assessee having furnished the return, penalty ought not to have been inflicted. This submission also does not need any serious consideration and deserves to be rejected out right. The proviso relied on by the counsel has been quoted in the preceding paragraph of the judgment and from a plain reading thereof, it is evident that it limits the amount of penalty and provides that the amount shall not exceed the amount of tax deductible or collectible. The proviso referred to above does not show that in case of late filing of the return, penalty shall not be inflicted. Mr. Rastogi, then submits that the assessee was prevented in filing the return within the time prescribed by reasonable cause and as such, the penalty as provided under Section 272(A)(2)(c) of the Act ought not to have been levied. In this connection, our attention has been drawn to Section 273B of the Act, which provides conditions under which penalty may not be imposed. Section 273B of the Act reads as follows: Penalty not to be imposed in certain cases. “273B:- Notwithstanding anything contained in the provisions of clause (b) of sub-section(1) of section 271, section 271A, section 271AA, section 271B, section 271BA, section 271BB, section 271C, section 271CA,section 271D, section 271E, section 271F, 7 section 271FA, section 271FB, section 271G, clause (c) or clause (d)of sub-section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA or section 272B or sub-section (1) or sub-section (1A) of section 272BB or sub-section (1) of section 272BBB or clause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.” From a plain reading of the aforesaid provision, it is evident that notwithstanding anything contained in sub-section (2) of section 272A of the Act, no penalty shall be imposable on the assessee for any failure on carrying out the obligation as contained therein, if it proves that there was reasonable cause for failure. However, the question in the present case is as to whether the cause shown by the assessee is a reasonable cause or not. The Assessing Officer, the Commissioner of Income-tax (Appeals) and the Tribunal have concurrently held that the assessee has not proved that there was reasonable cause for the failure. There is no reason, much less compelling reason to upset the aforesaid finding. As stated earlier, assessee plea was that as warrant was issued against its managing partner, he became irregular in day to day work and therefore, did not file the return within time stipulated. It is relevant here to state that a complaint petition was filed impleading the managing partner as accused and it was on 6th of November, 1998 the court passed the order for issuance of process for arrest of the managing partner and partners of the assessee. As observed earlier, last date for filing of certificate was 30th of June, 1998 and it is not the case of the assessee that from before till the anticipatory bail was granted to them by order dated 6th of November, 1998, they were apprehending arrest. 8 In my opinion, reasonable cause in section 273B of the Act would mean cause which has nexus to the failure of the assessee to comply with the requirement of law. In that view of the matter, I concur with the finding that the assessee was not prevented by reasonable cause for its failure to file the return. Accordingly, our answer to the third substantial questions of law formulated is in the affirmative and it is held that the assessee was not prevented by reasonable cause and therefore, the Tribunal was justified in affirming the penalty imposed under section 272A(2)(c) of the Act. In the result, I do not find any merit in the appeal and it is dismissed accordingly, but without any order as to costs. (Chandramauli Kr.Prasad, ACJ.) Dr. Ravi Ranjan, J : I agree. ( Dr. Ravi Ranjan, J.) Patna High Court, Dated, 22nd December, 2008. NAFR/ Narendra/ "