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TMI Blog1980 (9) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... tional statements on the following points, viz.: "(1)Whether the incomes said to have been derived from 'quota rights' in the assessment years were derived from sale and/or purchase of the quota rights alone ? If so, what are the quantum of the income derived from such sale and/or purchase in each assessment year ? If not, whether the quota rights for the three assessment years were derived from sale/purchase of green tea leaves or tea leaves or " any other product " which, having gone through the manufacturing process, had lost the character of being called or termed as 'tea leaves' and continued to remain as such substantially at the time of such sale/purchase ? (2) Whether the assessee purchased quota rights in any of the assessment years? If so, whether the purchases were only in respect of quota rights of green tea leaves or tea leaves or any other product which had lost the character of tea and continued to be as such substantially at the time of its purchase ?" Pursuant to the direction of the court, the Appellate Tribunal drew tip the additional statements of the case and referred the same to us. In the said additional statements, it was stated that the income derived b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, the above question has been referred under s. 256(2) of the Act. Mr. N. M. Lahiri, learned counsel for the assessee, urged that there were no materials for the ITO for his satisfaction that the assessee had furnished the estimates which it knew or had reason to believe to be untrue. Arguments advanced on behalf of the assessee were two-fold. The first was that during these years, the assessee dealt only in tea leaves and at the time when the estimates were filed, the assessee entertained a reasonable belief that the income from the sale of export quota rights was agricultural income not liable to be included for income-tax. The other contention was that the assessee honestly believed its business would not fetch more income than what had been estimated. Having so led by the circumstances prevailing there, it was stressed that the guilt of the assessee, the onus of proof of which lay on the revenue, has not been established. Accordingly, no penalty could be levied. Learned counsel for the revenue submitted that the findings of the Tribunal were based on adequate materials. It was urged that the Tribunal had rightly found, that there could have been no occasion for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proved that the assessee was guilty justifying penalty. Reliance was also placed on the case of Appavoo Pillai v. CIT [1965] 57 ITR 41 (Mad). We consider first the principle of law to be borne in mind in such case. It has been laid down by the Supreme Court that onus is on the revenue to show that the assessee had consciously disregarded the provisions of law to justify imposition of penalty ; an order imposing penalty for failure to carry out a statutory obligation is the result of quasi-criminal proceedings; penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. Failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. See Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC) and CIT v. Anwar Ali [1970] 76 ITR 696 (SC). Observation was also made by the Supreme Court in Khemka Co. (Agencies) Pvt. Ltd. v. State of Maharashtra [1975] 35 STC 571, that the I.T. Act, 1961, imposes penalty under ss. 270 and 271 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in the returns 40% of the income from the sale of the quota rights in the years 1956-57 and 1957-58. This previous conduct on the part of the assessee is also an unimpeachable piece of evidence relevant under s. 8 of the Evidence Act as to the mens rea of the assessee. Another circumstance appearing in the case which can be taken into account in the background of other factors in determining the state of mind of the assessee is its failure to file a revised estimate, though filing of such a revised estimate, under the proviso to s. 18A(2) of the Indian I.T. Act, 1922, was optional. There was no material on the record in the case before the ITO to show the spurt of its income from the known sources of income at the end to the financial year for all these years. It revealed that the assessee had not made an honest and fair estimate at the time of filing the estimate for these years. Having regard to the nature of the business, the income earned in the previous years derived from interest and declaration of dividends as discussed by the Tribunal in para. 8 of the order in appeal, annex. " C " coupled with the other factors pointed out above, there were materials in arriving at t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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