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TMI Blog1982 (4) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... ars on September 14, 1973. He took the view that in spite of service of notice the assessee had not appeared on the date fixed nor he had filed any written explanation and, thus, he had nothing to say in his defence. In the result, he imposed penalties in the sums of Rs. 11,125 and Rs. 5,370 for these two years, respectively. The assessee appealed and contended before the AAC that he had not been given any opportunity of a hearing by the WTO before imposing the penalty and, hence, the orders passed by him were bad. This submission found favour with the AAC and he cancelled the penalty orders and allowed the appeals. Aggrieved, the department took up the matter in appeal before the Appellate Tribunal. The Appellate Tribunal took up the appeals for both these years together. The contention urged on behalf of the Department was that the notices had been served properly and the assessee had not put in any appearance on the date fixed and hence the view taken by the AAC was not justified. It was, on the contrary, contended on behalf of the assessee that the penalty order was passed about a year after the service of notice and in the meantime the officer had also changed and hence it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in deleting the penalties of Rs. 11,125 for the assessment year 1970-71 and of Rs. 5,370 for the assessment year 1971-72 imposed under section 18(1)(a) of the Wealth-tax Act ? " So far as the merits of the case are concerned, admittedly the assessee had been served with the show-cause notice on September 2, 1972. He did not appear on the date fixed nor did he file any explanation what so ever. That being so, we do not find any basis for the observation made by the Appellate Tribunal : " Apart from that when an assessee is being subjected to a penalty, further opportunity, if provided, would have obviated a lot of hardship." It is not possible to say what "hardship" the Tribunal had in its contemplation when making this observation. Similarly, though it may be correct to say that justice should be tempered with mercy and there should be no element of arbitrariness in imposing penalty and providing an opportunity to the assessee before imposing the penalty is the first desirable course, there was nothing on the record to suggest that the assessee had not been given an opportunit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasonable or not. Penalty can be imposed only when the officer finds that there was no reasonable cause which prevented the assessee from furnishing the return in time. It may be noted that the import of the element of mens rea to a case falling under s. 18(1)(a) is not called for. We may refer in this behalf to a Full Bench decision of the Kerala High Court in Commissioner of Income-tax v. Gujarat Travancore Agency [1976] 103 ITR 149. A Full Bench of the Orissa High Court also in Commissioner of Income-tax v. Gangaram Chapolia [1976] 103 ITR 1613 took the same view that the burden of proof of reasonable cause under s. 271(1)(a) of the I.T. Act, 1961, is on the assessee, as the matter is within his special knowledge. The provision contained in s. 18(1)(a) is in pari materia with that stated in s. 271(1)(a) of the I.T. Act and in our opinion the same principle would apply to a case falling under this provision. It is correct that this burden can be discharged by preponderance of probabilities as in a civil case and not necessarily by proof beyond reasonable doubt. In other words, unless the assessee comes forward with an explanation to explain the delay, its reasonableness or othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellate Tribunal was erroneous that it is incumbent on the succeeding authority to give another opportunity to the assessee and in case he fails to do so, it amounts to a breach of the principles of natural justice. In support of this contention, our attention has been invited to a number of decisions. On the contrary, on behalf of the assessee, it was submitted that the view taken by the Tribunal was perfectly legal and justified and reliance was placed on two decisions of the Andhra Pradesh High Court : Anantha Naganna Chetty v. CIT [1970] 78 ITR 743 and CWT v. Smt. Azizunnissa Begum [1979] 119 ITR 376. After carefully considering the submissions and going through the cases cited before us, we are of the opinion that the view taken by the Appellate Tribunal on the facts of the instant case was erroneous in law. We do not subscribe to the view that in all cases it is implicit in s. 39 that the succeeding authority should intimate to the assessee his intention to continue the proceeding from the stage at which it was left by his predecessor. In some cases such intimation would certainly be required. For instance if pursuant to a notice the assessee submitted his explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the ITO who had issued the notice to the assessee, after hearing the assessee, made a draft order for the imposition of a penalty. He was then transferred and his successor, after looking into the papers, concurred with the order of his predecessor and made an order imposing penalty after getting the sanction of the IAC. On a reference, the court held that the order of penalty was not invalid merely because the succeeding officer who made the order had not heard the assessee himself. Sinha J., speaking for the Bench, stated the legal position in this behalf as follows (at p. 268): " A hearing of a case may be of many kinds. It usually involves the calling of witnesses, their examination and cross-examination and then arguments are addressed to the Tribunal. Where witnesses have been called and examined, or where arguments have been advanced, it is clear that one man cannot hear the case and another man pass judgment. The reason is that much may depend on the view that the Tribunal takes as to the credibility of witnesses and his mind may be swayed one way or the other by the demeanour of witnesses and as a result of arguments. This is such an intangible and personal task, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point ". The Mysore High Court in Shop Siddegowda and Family v. CIT [1964] 53 ITR 57, under similar circumstances, followed the decision of the Patna High Court in Murlidhar Tejpal [1961] 42 ITR 129 and of the Calcutta High Court in Kanailal Gatani [1963] 48 ITR 262 but distinguished the decision of that court in Calcutta Tanneries case [1960] 40 ITR 178. The view taken in this case was that where one ITO issues a notice under s. 28(3) of the 1922 Act, to the assessee calling upon him to appear and show cause why penalty should not be levied and the assessee submits his explanation in writing, but does not choose to appear or ask for an opportunity to adduce evidence or address arguments, a successor officer has the authority to impose a penalty after considering the written representations of the assessee, without giving a fresh opportunity of being heard, if the assessee does not seek to reopen the proceedings as contemplated by the first proviso to s. 5(7C). The same view has been taken by the same court in Hulekar Sons v. CIT [1967] 63 ITR 130 (Mys). These decisions have been followed by the Rajasthan High Court and it has taken the same view in A. C. Metal Works v. CIT [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce under s. 28(3) of the 1922 Act was transferred and was succeeded by a new ITO. The succeeding ITO without issuing any notice or informing the assessee of his intention to continue the proceedings passed an order levying penalty on the assessee. The penalty order was challenged. The view taken by the court was that the power to continue the proceeding by the succeeding officer under s. 5(7C) is made expressly subject to the right of the assessee to reopen or rehear the case under the first proviso to s. 5(7C). It was held that even though s. 5(7C) does not in terms expressly provide for any notice by the succeeding officer to the assessee informing him of his intention to continue the proceedings from the stage at which his predecessor had left, by necessary implication it provided for such an intimation. Accordingly, the succeeding officer must give notice to the assessee before he decides to continue the proceedings from the stage where it was left by his predecessor. Following this decision, in Smt. Azizunnissa Begum's case [1979] 119 ITR 376 (AP) also the court has taken the same view. With respect we are not inclined to agree that it is implicit in the first proviso to s. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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