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TMI Blog1985 (7) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... itted a default and had no explanation for the same. Thus, the penalty of Rs. 20,000 was imposed vide order dated31-3-1980, passed under section 273(c). 3. Various arguments are made before the learned AAC on behalf of the assessee by Shri R. C. Sood, the learned authorised representative. The learned first appellate authority being convinced by the reasons mentioned, cancelled the penalty order, inter alia, with the following observation : "I have considered the above arguments and I am of the opinion that the reasoning advanced by the appellant has some force. I do feel that keeping in view the huge volume of business and various branches involved, the appellant could not estimate its correct profit by15-12-1974and, thus, was prevented by a reasonable cause for not filing the revised correct estimate of tax payable. In these circumstances penalty order is cancelled." 4. The revenue by the instant appeal contests the correctness of the said finding. The learned departmental representative, Shri M. M. Bharati, supported the penalty order and argued that before the learned first appellate authority, on behalf of the assessee, some sort of shifting stands were tried, some of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed income of Rs. 17,57,185 as is clear from the truncated copy of the assessment order dated28-3-1978placed in the paper book. In the given circumstances, the assessee's income had positively exceeded by more than 33 1/3 per cent of the tax mentioned under section 210. The penalty proceedings were initiated against this background. Before the learned ITO during the penalty proceedings, nothing was brought on record by the assessee. The learned ITO, therefore, had no occasion to be satisfied that no case was made out for either initiating the penalty proceedings or for that matter imposing the penalty. The penalty of Rs. 20,000 was imposed vide order dated31-3-1980, framed under section 273(c). 8. The learned AAC found that the default was definitely committed by the assessee but he considered that keeping in view the volume of the assessee's business, it was prevented by a reasonable cause from filing the revised correct estimate of tax payable in time. Thus, he cancelled the penalty order. 9. Before us, to start with, it was argued on behalf of the assessee that penalty proceedings were not initiated during the assessment proceedings. A copy of the assessment order as mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, rightly did what he has done. The learned AAC had no evidence before him to come to the conclusion that the assessee was prevented by a sufficient cause from filing the correct estimate. Thus, his conclusion is naturally against the facts on file. 12. Mention on behalf of the assessee was made of the case of Ramnagar Cane Sugar Co. Ltd. We have gone through the relevant portions of the judgment and are of the opinion that the facts being as they are in the two cases, the assessee did not get any support. The penalty in the case before us was imposed on the basis of the facts available on record. 13. On behalf of the revenue argument was made that in cases of such like defaults non-filing the revised estimate---existence of mens rea is not a pre-condition. The case laws relied upon by the learned departmental representative are clear on the point. 14. In the light of the preceding discussions, we are convinced that the penalty proceedings were correctly initiated and in fact penalty was rightly levied. The learned AAC had no justification for cancelling such correctly imposed penalty. We quash his finding and restore that of the learned ITO. 15. In the result, the appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AAC had cancelled those penalties and the matter had come up before the Tribunal. Our attention was drawn to the order of the Bench 'C' of the Tribunal in IT Appeal Nos. 4955 to 4958 (Delhi) of 1983 in the cases of four partners of the assessee-firm where under similar circumstances and for the same reasons as in the present case, the Tribunal upheld the cancellation of penalty under section 273(c). While doing so the Tribunal observed as under : "7. In the background of the said case laws, we have to consider the delay in finalisation of accounts of Siyaram Bros. by Shri H. C. Srivastava, company's chartered accountant, which was as late as on12-9-1975while the advance tax estimated by the partners was to be filed by15-12-1974. The sales of the firm for the accounting year ending30-6-1974were of Rs. 1.90 crores as against sales of Rs. 1.77 crores for the accounting year ending30-6-1973. However, the net profit for the year ending30-6-1974had gone up to Rs. 16.64 lakhs as against net profit of Rs. 9.29 lakhs for accounting year ending30-6-1973. The learned counsel for the assessee stated that the increase in net profit was due to increase in value of closing stocks and that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letion of accounts at the relevant time. The plea of the assessee is that his accounts were very much large and he was dealing in various types of motor parts and accessories and there was an accumulation of stocks for several years. Besides this there were branches at other places. Due to certain drawback in the finalisation there was delay in the finalisation of the accounts and in the valuation of the closing stock. The balance sheet has been prepared and signed only in September 1975. We have seen the copy of the balance sheet and the date thereon. There is no material brought before us to disprove this contention of the assessee. Thus, the contention of the assessee that the accounts of the firm had not been completed by15-12-1974, thus, making it impossible for the firm to file its revised estimate, has to be accepted. There might be some lack of efficiency in the organisation of the assessee which results in the delay in valuing the closing stock and in completing the pricing of the list of the closing stock. However, the assessee is not being penalised here for that default. 7. It is also clear that the profits have gone up in this year mainly due to increase in the margi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resident --- This is a case referred to me by the President under section 255(4) of the Act for my opinion as there was a difference of opinion between the Members of the Tribunal, who heard this appeal originally. The point of difference of opinion is : "Whether, on the facts and in the circumstances of the case, penalty under section 273(c) of the Income-tax Act, 1961, was leviable ?" 2. The assessee is a firm of five partners carrying on business on a very extensive scale in automobile spare parts. The turnover in the year was about Rs. 1.90 crores as against Rs. 1.77 crores in the previous year. The closing stock, the assessee carried, was of Rs. 36.15 lakhs as against Rs. 32.47 lakhs in the previous year. This will indicate the magnitude of the business carried on by the assessee. For the assessment year under appeal, on the ground that there was a failure to comply with the provisions of section 210, the ITO gave a notice calling upon the assessee to show cause why a penalty should not be imposed under section 273(c). The assessee did not offer any explanation to this notice. The ITO, therefore, levied a penalty of Rs. 20,000. There was then an appeal before the AAC, bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was guilty of concealment. As regards the point that the show-cause notice issued did not clearly point out the default committed by the assessee, he held that the copy of the assessment order was available on record and since that order clearly showed that penalty proceedings under section 273 were initiated, the assessee's objection that the default was not clearly mentioned was baseless and misconceived. He also relied upon section 292B to say that even if there is a defect in the show-cause notice, that would not be fatal to the levy of penalty. On the question of sudden increase in income, about which the assessee could not be aware of, the learned Judicial Member stated that the trading results were in the special knowledge of the assessee and after receiving notice under section 210 it was obligatory on his part to revise the estimate as required under section 212(3A) and if he had not done that, he must take the consequences. He held that the assessee could not prove that he was prevented by sufficient cause from complying with the statutory requirement of filing a revised estimate of the current income and that the AAC had no evidence before him to come to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee could not have any idea as to the actual profits at the time when it had paid the advance tax. Thus, while the learned Accountant Member agreed with the assessee's contention and supported the order of the AAC, the learned Judicial Member reversed that order. That is how the difference of opinion arose. 5. After hearing the parties at length and after perusing the records, I did not experience any difficulty in agreeing with the view expressed by the learned Accountant Member. The learned Accountant Member had very clearly pointed out that the notice issued by the ITO was very vague and indefinite as to the default that the assessee was supposed to have committed for which penalty was sought to be imposed. As rightly pointed out by him, reference to section 212(3A) was not at all made in the penalty notice although the penalty was imposed for non-compliance of the provisions of section 212(3A), i. e., for not filing an estimate of the current income. This, in my opinion, is not a light charge to be winked at. It is imperative on the part of the ITO to let the assessee know definitely and clearly the charge which he has to explain before a penalty could be imposed by ho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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