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TMI Blog1998 (3) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee could not be filed earlier and was filed on 10-3-1988. Accordingly it was submitted that no penalty was leviable in the cases of the partners as the late filing of return in the case of the firm was itself a reasonable cause for late submission of returns by the partners. The Assessing Officer, however, rejected the explanation and levied the penalties of Rs. 48,475, Rs. 6,441, Rs. 29,529 and Rs. 16,448 respectively. The assessees appealed to the ld. CIT(A) and pleaded that there was no justification for the impugned penalties as the main source of the assessees' income in all the four cases was share from M/s. Mangal Engg. Works, Patiala besides rent or interest. It was submitted that there was search and seizure operation in the case of M/s. Mangal Engg. Works under section 132 on 25-8-1984 and various books of account had been seized. Accordingly it was submitted that M/s. Mangal Engg. Works had filed an application under section 245C(1) for settlement of its tax liability in the office of the Settlement Commission and that such application in respect of assessment years 1982-83 to 1985-86 was admitted by the Settlement Commission. It was pleaded before the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi High Court in the case of Madan Lamba v. CIT [1983] 139 ITR 849/[1982] 9 Taxman 47, the delay in the furnishing of the return in the case of the firm was a reasonable cause for late filing of returns in the cases of the partners. It was pleaded that it was altogether a different matter that the Settlement Commission did not levy any penalty in the case of the firm in its discretion. However, the assessees could file the returns only if the return in the case of the firm was filed wherein additional income was surrendered on the basis of application furnished before the Settlement Commission. He accordingly submitted that since the return in the case of the firm was filed on 9-2-1988, all the partners took some time in preparing their returns which were filed on 10-3-1988. As such it was pleaded that the CIT(A) was not justified even in retaining the penalty for a default of one month in each case. 5. We have considered the rival submissions. A perusal of the assessment order indicates that in the case of Shri Jai Parkash, besides share income, the assessee was having income from house property of Rs. 2,000. In the case of Smt. Harwant Kaur, besides share income, she was ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Member?" Per Bedi - I have carefully read the proposed order of my learned brother, the Accountant Member, which is very elaborate but despite much of pursuation, I have not been able to agree with his findings and conclusions and reasons for the same are given as below. 2. As regards facts, details and arguments of both the parties, these are very well recorded in the proposed order and need not be repeated again. The order impugned has been passed by learned CIT (Appeals), the first appellate authority, mainly taking support of the authorities of jurisdictional High Court in Pratap Chand Meheshwari's case and Delhi High Court in Madan Lamba's case, in the cases of Pratap Chand Makesh wart and Madan Lamba respectively, and treating delay in filing of return of the firm from which assessees have share income, besides other income, to be reasonable cause for delay in filing of returns of partners, has deleted the penalty in each of the partner's cases, up to the date of filing return in firm case and upholding penalty for rest of the period. In the case decided by the jurisdictional High Court, referred to supra, penalty was imposed for filing of incorrect particulars of adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he partner filing a return is attributed to a delay on the part of the firm in finalizing its accounts. The statute does not expressly or impliedly bar proceedings against both the firm and the partners. The only statutory requirement for the imposition of a penalty on an assessee - whether he be a firm or a partner - is that contained in section 271(1). All we have to see is whether there was a reasonable cause for the default or delay in filing a return. While the considerations above indicated could be relevant in most cases, they cannot be conclusive in all cases, for answering this question." 3. In the instant cases, accounts accompanying the firm's return were audit one and audit report was dated 30-7-1985. There were other sources of income of the assessee besides share income and share income from this firm was taken as per audited profit and loss account of the firm, with little increase in percentage as per surrender made before the Settlement Commission but still share income was subject to rectification on final decision of the Settlement Commission. Returns were filed after considerable delay even without waiting for the final outcome of case before the Settlement Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the course of which books of account had been seized. It was also submitted that the firm had filed an application before the Settlement Commission for the assessment years 1982-83 to 1985-86 and which was admitted by the Settlement Commission. It was the argument before the CIT (Appeals) that unless and until the share from the firm was not ascertained, it was neither possible nor advisable for the assessees to file their returns of income. On the ground that the partners filed their returns on 10-3-1988, i.e., soon after the filing of the return by the firm on 9-2-1988, it was pleaded that the penalties be cancelled as there was sufficient cause for the delay. The aforesaid submissions were substantially accepted by the CIT (Appeals) in the sense that he considered the delay in the filing of returns up to 9-2-1988 as reasonable and cancelling the penalty for the said period, he sustained the same for the balance period of one month. Being aggrieved with the order of the CIT (Appeals), the revenue came up in appeals before the Tribunal whereas the assessees filed cross objections against the action of the CIT (Appeals) in sustaining the penalty for a period of one month. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of the final decision of the Settlement Commission. (3) It was apparent that the main source of income of all the four assessees was the share from the firm M/s. Mangal Engg. Works in whose case a search took place on 25-8-1984 when books and documents were seized and consequent to which the firm had to approach the Settlement Commission under section 245C(1). (4) Once the return in the case of the firm had been filed, there was absolutely no justification for any further delay in the filing of the returns by the partners and therefore, the penalty for a period of one month was exigible. In conclusion the ld. Accountant Member held that the four assessees being partners in the firm M/s. Mangal Engg. Works had a reasonable cause for the delay in the filing of their income-tax returns up to 9-2-1988 that being the date on which the firm filed its return. The order of the CIT(A) was confirmed in respect of the sustenance of the penalties for a period of one month in each of the four cases. 7. The ld. Judicial Member differed with the view taken by the ld. Accountant Member although he agreed with the recording of the facts as also the arguments of the parties before the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12th Nov. 1987 and as soon as this was done the firm filing its return in Feb. 1988 followed by the returns of the partners in March 1988. It was reiterated that the non-levy of penalty under section 271(1)(a) on the firm as a result of the order of the Settlement Commission was not relevant for purposes of deciding whether the partners should be penalised or not. As regards the audit report dated 30-7-1985, the ld. counsel submitted that this was in respect of the books of account but not in respect of the additional income which had been offered by the firm pursuant to the search and seizure operations and which had a consequential effect insofar as the returns and the taxable income of the partners were concerned. The ld. counsel further pointed out that the search had taken place on 25-8-1984 which was a date relevant to the previous year under consideration. In conclusion it was urged that inasmuch as the partners had a reasonable cause for the delay in filing their returns, the view expressed by the ld. Accountant Member merited confirmation. The ld. counsel relied on the same two decisions which had been followed by the CIT(A) and thereafter discussed by the ld. Accountant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r own returns of income a month after the firm filed its return and as noted by the ld. Accountant Member, a note was clearly given that the additional income offered was subject to revision under section 154 on the basis of the final decision of the Settlement Commission. Then again it is quite clear that the main source of income of the assessees was the share income from the firm and the other incomes of some of the partners were very nominal. 11. Adverting once again to the decision of the Hon'ble Delhi High Court in the case of Madan Lamba (supra), it is to be noted that the assessees are partners in a registered firm and the filing of the returns on their part is quite dependent on the filing of the return by the firm. As regards the non-levy of penalty on the firm under section 271(1)(a) which was a fact highlighted before the Tribunal, I need only mention that this was waived by the Settlement Commission in view of the powers vested in it but by no stretch of imagination it can be held that since the firm was not penalised the penalties under section 271(1)(a) should be visited on the partners whose returns depended on the filing of the return initially by the firm. 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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