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TMI Blog2022 (2) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... gation u/s. 139(1), but section 148(1) is a para materia provision, casting, like-wise, an obligation to file the return of income, which is rather more compelling inasmuch as in such a case the Revenue has a reason to believe that the assessee s income chargeable to tax has escaped assessment. No wonder, then, that the AO refers to both the incidents while stating his reason for proceeding to issue the show cause notice for penalty u/s. 271F. The same is an allied and, to my mind, an important factor inasmuch as it is indicative of the assessee s conduct, which is, thus, of a conscious disregard of his statutory obligation/s. Bona fides , both of the assessee s explanation and conduct, is a prerequisite to save penalty. A compliance of the notice u/s. 148(1), furnishing a return of income, even if below the taxable limit, would have at once established the assessee s bona fides . Therefore, for the stated reasons, find the levy of impugned penalty as valid in law. Penalty u/s 271(1)(b) - non-compliance of notices u/s. 142(1) - in the assessee s words, blind faith in his local consultant who, for reasons best known to him, did not represent the assessee, as agreed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the main, for a small commission in lieu of his services, along with other such franchisees operating in the area of Sidhi. The cash collection, which amounted to ₹ 11.414 lacs for the year, was accordingly deposited in his bank account (PB pgs. 1-2), transferring the same directly to RTL (₹ 4.606 lacs), and to other franchisees, being M/s. Anoop Enterprises (₹ 3.045 lacs) and M/s R.K. Agency (₹ 96,384). How could the entire receipt be regarded as his income ? The commission allowed is at a mere 1% - 2%. Even assuming a commission rate of 8%, it would result in an income of ₹ 91,312, i.e., much below the taxable limit of ₹ 1.80 lacs for the current year. It is for this reason that the assessee did not file the return of income for this year as well. However, penalty stands levied at ₹ 5,000. Further, assessment was framed u/s. 144 read with section 147 of the Act on 05.12.2017, pursuant to a notice u/s. 148(1) on 22.3.2017. The said notice, as well as those following it, being u/s. 142(1), dated 31.8.2017 (for 12.9.2017) and 27.10.2017 (for 07.11.2017), were handed over by him to his local tax consultant for further necessary action. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the cash deposited on each date is immediately, or soon thereafter, transferred to the franchises for whom the assessee is stated to be working as a collecting agent for a commission, or to RTL (on their behalf). However, that does not explain the cash withdrawal of ₹ 55,500 between 15.4.2009 to 25.9.2009, as against the cash deposited in account during the said period at ₹ 4.54 lacs. This works to a ratio of 12.22% (of the cash deposit), which cannot be a rate of commission. How could, in any case, a commission rate be paid at that rate when the person selling the recharge voucher card itself gets a commission of, as stated, 1%-2%, which perhaps may not even cover the cost of collection, involve, presumably, transmuting ? There was, inexplicably, a cessation of cash deposit thereafter, which commenced only in January, 2010, with direct transfers to RTL. Though supported by an affidavit (dated 18/2/2021) by Shri Shivendra Singh (at PB pgs. 11-12), and which is the only cash collection (at ₹ 4.606 lacs) which is substantiated in any manner, it is difficult to believe that the franchisee/selling agent would allow payments to be made to the Principal (RTL) directl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee s income chargeable to tax has escaped assessment. No wonder, then, that the AO refers to both the incidents while stating his reason for proceeding to issue the show cause notice for penalty u/s. 271F, as under: As per the provisions laid down in the Act, the assessee was required to file the ITR by 31.03.2011, i.e. upto the end of the relevant Assessment Year. But, the assessee has failed to file the said ITR by the specified time. The assessee has neither filed his ITR voluntarily nor has he filed it in response to notice u/s 148 of the Act . Thus, penalty proceedings u/s 271F of the Act are being imposed (initiated) upon the assessee. (emphasis, supplied) In other words, the same is an allied and, to my mind, an important factor inasmuch as it is indicative of the assessee s conduct, which is, thus, of a conscious disregard of his statutory obligation/s. Bona fides , both of the assessee s explanation and conduct, is a prerequisite to save penalty. A compliance of the notice u/s. 148(1), furnishing a return of income, even if below the taxable limit, would have at once established the assessee s bona fides . I, therefore, for the stated reasons, find the levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase law relied upon by Shri Usrethe. The decision in Sanjay Shrivastava (supra) is distinguishable for more than one reason. As afore-explained (para 4.3), the commission rate, which could be different for different franchisees, is nowhere specified, and the maximum, stated rate of 8% is also inconsistent with the accretion of ₹ 2.14 lacs by the year-end, which is exclusive of ₹ 0.60 lacs withdrawn cash/expended during the year. Also, the non-compliance of notice u/s. 148(1) betrays a contumacious conduct. The second decision relied upon, i.e., Manju Kataruka (supra), was toward the deliberation of the concept of reasonable cause by the Tribunal therein (para 12 of its order), also read out during hearing. There is, however, no quarrel qua the said concept, which finds clear enunciation per judicial pronouncements, and the issue arising is one of its application in the facts and circumstances of the case. Shri Usrethe, on being called upon during hearing to show as to how the assessee s explanation can be said to demonstrate reasonable cause/s in view of the deficiencies therein (refer paras 4.3 4.4), could provide no answer. Reasonable cause is always a matt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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