9911796707
TMI Blog2004 (4) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... hat if two possible and reasonable constructions can be put upon a penal provision, the Court must lean towards that construction which exempts the subject from penalty rather than the one which imposes penalty. As already observed, the default as contemplated u/s 271F is not a continuing default nor it is quantified on the basis of tax ultimately determined to be payable by the assessee on completion of assessment under the provisions of IT Act. The amount of penalty prescribed u/s 271F is fixed and uniform one in all cases committing a default of a nature referred to in s. 271F. Sec. 271F provides for the penalty in case of a failure to file return as required u/s 139(1) before the end of the relevant assessment year. It speaks of an omission to do an act which is required by law to be performed by a person or the assessee and such omission is attracted penalty as contemplated u/s. 271F. Ordinarily, a failure to perform an act required by law to be done becomes a completed act of omission as soon as when the time prescribed by law to perform such an act expires, and the liability arising therefrom gets fastened as soon as the act of omission is completed. The extent of that liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Act) for the asst. yr. 2000-01. 2. Material facts, in brief, related to the issue involved in this appeal are as under : The AO noted that the assessee filed return of income on 20th March, 2002 for the asst. yr. 2000-01 showing total income at Rs. 89,980. The due date within the meaning of s. 139(1) was 31st Aug., 2000. The asst. yr. 2000-01 had ended on 31st March, 2001. The last date for filing return of income was 31st March, 2001 as contemplated under s. 271F of the Act. The assessee did not furnish the return of income before the end of the relevant assessment year. Penalty proceedings under s. 271F were initiated by the Act and a show-cause notice was issued to the assessee as to why penalty as provided under s. 271F should not be imposed. In response to the show-cause notice issued under s. 271F the assessee submitted written explanation stating that the entire tax liability was covered by TDS amount and ultimately there was a refund due to the assessee. The AO had referred to the provisions of s. 139(1)(a) of the Act and formed an opinion that the explanation as submitted by the assessee that the entire tax liability was covered by TDS is not acceptable and it was a deli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preferred this appeal before the Tribunal. 4. The learned counsel appearing for the assessee has submitted that there was the delay in submission of return as all the confirmations in respect of the transactions could not be obtained in time to be filed along with the return. It was furthermore submitted that the entire liability of tax was covered by TDS and ultimately there was a refund due to the assessee and in such circumstances the assessee would have gained nothing in not filing the return in time. He further contended that the delay in submission of the return was thus due to reasonable causes. He would further contended that there was no deliberate defiance of law. A reliance was placed on the decision of Hon'ble Supreme Court in the case of Hindustan Steel Ltd. vs. State of Orissa (1972) 83 ITR 26 (SC). 5. The learned Departmental Representative, on the other hand, supported the orders of the authorities below, and contended that the penalty under s. 271F was rightly imposed as the assessee failed to file her return of income before the expiry of relevant assessment year in spite of having total income chargeable to tax under the Act. 6. We have carefully considered the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty of a sum of five hundred rupees was provided under s. 271F for failure to furnish return on or before the due date as required by the proviso to s. 139(1). In other words, in s. 271F as inserted initially w.e.f. 1st April, 1997 a penalty of five hundred rupees was prescribed for failure to furnish return of income by those persons who come in the category of what is known as one out of six conditions as enumerated in the proviso to sub-s. (1) of s. 139. The scope and effect of s. 271F was extended w.e.f. 1st April, 1999 also to those persons who were required to file their return of income under sub-s. (1) of s. 139 i.e., whose total income exceeds maximum amount not chargeable to tax, and fail to file the same before the end of the relevant assessment year. The amount of penalty in such cases was prescribed at a uniform amount of one thousand rupees. Again, in view of the substituted s. 271F w.e.f. 1st June, 2001, failure to furnish return of income as required under sub-s. (1) of s. 139, before the end of the relevant assessment year or failure to furnish return on or before the due date as specified by proviso to s. 139(1) shall attract a uniform penalty of five thousand ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure. In other words, penalty under s. 271F is imposable only in the event the assessee fails to prove that there was reasonable cause for the said failure. It is, therefore, bounden duty of the AO to give due opportunity to the assessee to prove that there was reasonable cause for the failure and then to consider and appreciate in a judicious manner the explanation, if any, filed by the assessee before imposing any penalty under s. 271F. However, the burden to prove that there was reasonable cause for the failure specified in s. 271F lies on the assessee as would be clear from the language used in s. 271F and 273B. 11. Having said so that no penalty is imposable under s. 271F if the assessee proves that there was reasonable cause for the failure specified in s. 271F, it is now desirable to find out the meaning of "reasonable cause" having regard to the context in which it is used. 12. What would constitute reasonable cause cannot be laid down with precision. It would depend upon the factual background. Reasonable cause, as applied to human action, is that which would constrain a person of average intelligence and ordinary prudence. The word 'reasonable' has in law the prima facie m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty for failure to furnish return of income within due date only on those persons or assessee's who were covered by the first proviso to s. 139(1), i.e. persons who come in the category of what is known as one out of six conditions. No such penalty under s. 271F as inserted w.e.f. 1st April, 1997 was provided for failure to furnish return of income as required under main s. 139(1). Subsequently, by the Finance (No. 2) Act, 1998, a new s. 271F has been substituted w.e.f. 1st April, 1999 in place of the then existing s. 271F so as to provide also for penalty for failure to furnish return of income as required under main sub-s. (1) of s. 139. The scope and effect of the so substituted s. 271F w.e.f. 1st April, 1999 has been given in the following portion of the Departmental Circular No. 772, dt. 23rd Dec., 1998, as under: "63 Provision of penalty for non-filing of returns of income. 63.1 Under the existing provisions, no penalty is provided for failure to file return of income under sub-s. (1) of s. 139 (s. 271F provides for penalty of Rs. 500 only in case of failure to file return under the proviso to sub-s. (1) of s. 139). The, interest chargeable under s. 234A of the IT Act for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficient to attract the provisions of s. 271F of the Act. No provision has been made for marginal relief. In other words, what is significant is that an assessee having marginal delay in furnishing the return after the end of the relevant assessment year and an assessee having inordinate delay in furnishing the return after the end of the assessment year are made liable for the same penalty of rupees five thousand imposable under s. 271F. Having regard to the scheme of the penalty provided under s. 271F we may say that such a situation should be taken care of by the expression "reasonable cause" before imposing any penalty under s. 271F so that the case of an assessee filing return immediately after the end of the relevant assessment year or within few days thereafter is to be considered liberally as compared to the case of inordinate delay in filing the return even after the end of the relevant assessment year unless circumstances of a particular case warrants otherwise. 14. Further a critical analysis of s. 271F prescribing a fixed sum as penalty reveals that the assessees having no tax liability or having tax liability of say rupees two to five thousand and the assessees having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee who was certain about his obligation to file his return and was having tax payable by him even after adjustment of tax rebates admissible under the Act or of advance tax paid or tax deducted or collected at source but yet has not filed the return or paid the tax within required time and unless some other reasonable cause is shown, it may be treated as being without reasonable cause. However smallness of tax payable by the assessee would also be another factor to be considered liberally before imposing penalty under s. 271F. Further, failure to file return when no notice under s. 142(1) or 148 is issued may also be distinguished from failure to file return after a notice to file return is served upon him. 16. Thus when a reasonable man of ordinary prudence acting under normal circumstances has in his mind a belief that he is not required to file return within required time because of the fact that there being no amount of tax payable by him after the adjustment of tax rebates admissible under the Act or of advance tax paid or tax deducted or collected at source and thus fails to file the return within required time, the case of this assessee would be treated as for a reasonabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 395 was also allowed as interest payable to the assessee making total refundable amount at Rs. 4,450. The computation of income shown by the assessee has not been found to be false and non-bona fide. The claim of any deduction claimed by the assessee in the return of income has also not been found to be false, baseless and non-genuine. The Department had every chance to examine and verify the claim, if any, made by the assessee in the return of income. There was no loss to the Revenue as no tax was found due from the assessee after taking into account the amount of TDS. Rather, some amount was found refundable to the assessee. The assessee stood nothing to gain by filing return of income on 20th March, 2002, i.e., after the end of the relevant assessment year in view of the amount of tax ultimately found refundable to the assessee. Instead, the assessee has made herself deprived from receiving interest under s. 244A for the period immediately after the expiry of the due date of filing the return prescribed under s. 139(1) till the month of filing the return as there is no interest allowable for the period of delay attributable to the assessee as stated in sub-s. (2) of s. 244A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted once and for all is distinguishable from the continuing default. In the present case, the failure to file the return before the end of the relevant asst. yr. 2000-01 becomes a default at the end of 31st March, 2001, and as such a liability arising therefrom fastened on the expiry of 31st March, 2001. The question of imposition of fixed penalty has arisen as soon as the assessee had failed to furnish the return required under s. 139(1) by 31st March, 2001. The theory of continuing wrong or default is not applicable to the nature of default enumerated under s. 271F of the Act. The decision of Hon'ble Supreme Court in the case of Maya Rani Punj holding that penalty is imposable on the basis of law applicable at the time when the AO decided to initiate penalty proceedings is not applicable to the present case of penalty imposable under s. 271F inasmuch as that decision was rendered in the context of continuing default as prescribed under then s. 271(1)(a) of the IT Act. It is also pertinent to note that the question of imposition of penalty under then s. 271(1)(a) had arisen only after assessment of tax was made and the legislature intended to deem the non-filing of the return to ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
