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TMI Blog1960 (1) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) of the Indian Income-tax Act, 1922? The facts of the case relevant for answering the above questions of law are as follows: The assessee firm was carrying on business in yarn, food-grains and manufacture and sale of groundnut oil. For the assessment year 1946-47, the assessee duly filed a return of income in September 19, 1946. The assessee also filed a return of income for the chargeable accounting period from March 15, 1945, to March 31, 1946, in respect of the assessment under the Excess Profits Tax Act. The Income-tax Officer who was also the Excess Profits Tax Officer, proceeded to take up both the income-tax and excess profits tax assessments together. As required by the Income-tax Officer, the firm produced accounts at various places and on various dates. But, on December 12, 1949, the date fixed by the Income-tax Officer (who is referred to as such in these proceedings in his capacity as Income-tax Officer as well as Excess Profits Tax Officer) for final hearing, no one appeared on behalf of the firm or produced accounts as required by the Income-tax Officer. Instead, the Income-tax Officer received a telegram from the assessee on that day as follows: Our hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 27 was absolutely identical with the evidence on which he had to pass the latter orders under section 28(1)(b) and the corresponding section of the Excess Profits Tax Act and that the evidence included the oral evidence of the two witnesses. For more complying with the terms of the statutory notices issued under section 23(2) and 22(4) of the Income-tax Act and the corresponding provisions of the Excess Profits Tax Act, the Income-tax Officer issued penalty notices under section 28(1)(b) of the Indian Income-tax Act and the corresponding section 16 of the Excess Profits Tax Act. In the course of those proceedings the assessee examined two witnesses, namely, one partner, R. Tharinayya, and one clerk, Kurmaiah, of the assessee. The Income-tax Officer after considering the material on record, held that there was no reasonable cause for the assessee not complying with the provisions of section 22(4) of the Income-tax Act or the corresponding provisions, section 16 of the Excess Profits Tax Act. Accordingly, the Income-tax Officer levied a penalty of ₹ 7,500 under the Income-tax Act and a further penalty of ₹ 25,000 under section 16 of the Excess Profits Tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him from attending to the tax matters. This, I am afraid, is not sufficient ground for the nonproduction of the accounts on the due date..... It is clear that the assessee has come under the charge, having wilfully defaulted . The Appellate Assistant Commissioner has given finding as follows: So, it is clear that the appellant had no justification for asking for a further adjournment. Section 28(1)(b) of the Act contains the following provision: 'has without reasonable cause failed to comply with a notice under sub-section (4) of section 22 or sub-section (2) of section 23.' So, it appears to me that the penalty under section 28 of the Act was called for in this case. The Tribunal in its order held as follows: Moreover, it was contended that there was no wilful default inasmuch as the assessee only prayed for time and did not withhold any books of account called for by the assessee. It is not for us to deal with the reason for not complying with the notice. That was dealt with by the Tribunal in an earlier order. What we are concerned with here is the quantum of penalties in relation to the offence committed by the assessee, viz., non-production of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lining to reopen the 'best judgment' assessment in this case is erroneous in law. For these reasons, the answer to the question referred to us is in the affirmative and against the assessee... In effect that finding is to the effect that the failure to comply with the Income-tax Officer's order was without reasonable cause . The finding in R.C. No. 9 of 1955 is binding on us and we respect fully agree with that finding. All the same, we are dealing below with the arguments advanced by the learned advocate for the assessee to the effect that the assessee's failure to comply with the notice under section 22(4) of the Income-tax Act was not without reasonable cause and that that phrase is distinct from the phrase sufficient cause . In Stroud's Judicial Dictionary it is stated as follows: The word 'reasonable' has in law the prima facie meaning of reasonable in regard to those circumstances of which the actor, called on to act reasonably, knows or ought to know. In the present case, their Lordships have arrived at that judgment in R.C. No. 9 of 1955 after considering the question with reference to the circumstance in which the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill...In this case, the Coastguard, the chief officer of whom was the receiver of wrecks for the district, had full knowledge of all that was going on. He thought that in the circumstances of the case the plaintiffs had 'reasonable cause' for their failure, if any, to comply with the terms of the section, which did not, he thought, in fact apply to this case. That decision does not apply to the facts of the present case. The learned advocate for the assessee has failed to convince us that, on the facts and circumstances of this particular case, there is a substantial difference between the words sufficient cause and reasonable cause , or that the assessee's failure to comply with the notice under section 22(4) was not without reasonable cause . It is clear as a matter of fact that, on the facts and in the circumstances of the case, the failure of the assessee to comply with the notices concerned was without reasonable cause and that, therefore, the imposition of the penalty in each case was justified. The Tribunal itself ought to have (in its order concerned) considered this question (as to whether the failure to comply with the notices was without reas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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