PRATAPRAO SHANKARRAO DESHMUKH v. INCOME TAX OFFICER
[Citation -1984-LL-0517-1]

Citation 1984-LL-0517-1
Appellant Name PRATAPRAO SHANKARRAO DESHMUKH
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 17/05/1984
Assessment Year 1972-73, 1973-74
Judgment View Judgment
Keyword Tags issue of notice • wealth-tax act • legal mistake • assessed tax
Bot Summary: On the facts and in the circumstances and as per the law, the learned AAC, Akola Range, Akola erred in bifurcating the penalties in two parts when the penalties are actually to be computed according to the unamended provisions of law before 1-4-1976. Penalty proceedings under section 271(1) for late submissions of the returns were also taken during the course of the assessment proceedings and penalties in the sums of Rs. 17,780 and Rs. 15,444 were levied by the ITO at the rate of 2 per cent of the tax for 91 months and 79 months respectively for 1972-73 and 1973-74. The cause of appeal was, that as per the provisions of section 271(1), sub-clause as was in force as on 31-7-1972 and 31-7-1973, being the last of the dates on which the returns for both the years were due, the penalty levied should not exceed in the aggregate 50 per cent of the assessed tax and the same would amount to only Rs. 4887 in each of the years under consideration whereas, by levying penalties of Rs. 17,780 and Rs. 15,444 thereagainst, the ITO has committed a serious legal mistake in this behalf. As regards the delay that ensued in the submission of the returns after the notices under section 148 were served on the assessee, he computed the delay at 35 months for each of the years and calculated the penalty at 70 per cent of the tax, as according to him, when the second default was committed, the amended provisions of section 271(1) had already come into force and the ceiling of 50 per cent of the assessed tax on the penalty was no longer in existence. The Hon'ble Supreme Court observed that since penalty was imposed on account of the commission of wrongful act, it was the law operating on the date on which the wrongful act was committed, which determined the levy of penalty and the provisions in force on the date of the commission of the wrongful act were applicable. Penalty proceedings under section 271(1) were instituted and the IAC levied a penalty equal to the income concealed. The Supreme Court's decision, that the default, once committed is not a continuing default also answers the argument of the AAC, that the period of default subsequent to 25-3- 1977 being the date on which the returns under section 148 were due, should be considered separately and penalty should be levied with reference thereto under the amended provisions.


These two appeals by assessee relating to assessment years 1972-73 and 1973-74 arise out of consolidated order of AAC, Akola Range, Akola in his Appeal Nos. 4 and 5 of 1982-83 dated 27-1-1983 upholding levy of penalty under section 271(1) (a) of Income-tax Act, 1961 ('the Act') to extent of Rs. 11,729 in each of years under appeal. common grounds of appeal for these years are reproduced hereunder: 1. On facts and in circumstances and as per law, learned AAC, Akola Range, Akola erred in bifurcating penalties in two parts when penalties are actually to be computed according to unamended provisions of law before 1-4-1976. 2. That learned AAC has accepted in principle that provisions before 1-4-1976 would be applicable for computing quantum of penalty, but only because of issue of notice under section 148 and filing of return late, he made computation of penalty for two periods, i.e., prior to 1-4-1976 and after 1-4-1976 and onwards, which is wrong and bad in law. 3. It is, therefore, prayed that penalty amount be kindly reduced as per unamended provisions of law, prior to 1-4-1876. fact relating to levy of penalties, rival submissions and out conclusion thereon are set out hereunder. 2. assessee was to have filed its returns of income for 1972-73 and 1973-74 under section 139(1) of Act, on 31-7-1972 and 31-7-1973, respectively. It actually filed returns on 5-3-1980 for both these years. There was, therefore, delay in terms of completed months of 91 months for first year and 79 months for second year. assessments were completed in due course and assessed tax thereon was Rs. 9,775 in each of years. Penalty proceedings under section 271(1) (a) for late submissions of returns were also taken during course of assessment proceedings and penalties in sums of Rs. 17,780 and Rs. 15,444 were levied by ITO at rate of 2 per cent of tax for 91 months and 79 months respectively for 1972-73 and 1973-74. 3. assessee filed appeals before AAC being aggrieved only with quantum of penalty levied for both these years. cause of appeal was, that as per provisions of section 271(1) (a), sub-clause (i) as was in force as on 31-7-1972 and 31-7-1973, being last of dates on which returns for both years were due, penalty levied should not exceed in aggregate 50 per cent of assessed tax and same would amount to only Rs. 4887 in each of years under consideration whereas, by levying penalties of Rs. 17,780 and Rs. 15,444 thereagainst, ITO has committed serious legal mistake in this behalf. provisions of section 271(1) (a) (i) prior to amendment with effect from 1-4-1976 restricted penalty leviable under section to 50 per cent of tax. In present case, ITO has calculated penalty at 2 per cent for every month of default for whole period of default without restricting same to 50 per cent of assessed tax. 50 per cent of assessed tax for both years in only Rs. 4,887, whereas ITO had levied penalties of Rs. 17,780 for 1972-73 and Rs. 15,444 for 1973-74. Obviously, he had calculated penalty with reference to amended provisions in this behalf which removed ceiling on penalty of 50 per cent of assessed tax with effect from 1-4-1976. 4. AAC while agreeing with submission, that old provisions of law in this behalf prior to amendment with effect from 1-4-1976 would apply for computing penalty, however, held that position in present case stood altered to extent of period covered by default with reference to notice under section 148 of Act issued to assessee. He found that assessee had been served notices under section 148 on 26-2-1977 requiring it to file returns by 25-3-1980 for both years. He, therefore, bifurcated periods of default with reference to period of non-compliance under provisions of section 139(1) and subsequent delay that ensued in filing of returns, after service of notices under section 148 on assessee. Since returns with reference to section 148 notices were due by 25-3-1977, he calculated default with reference to section 139(1) as 55 months for 1972-73 and 43 months for 1973-74 up to 25-3-1972 being date on which returns were due under section 148. For these periods, he restricted penalty to 50 per cent of assessed tax namely, Rs. 4,887, for both years. As regards delay that ensued in submission of returns after notices under section 148 were served on assessee, he computed delay at 35 months for each of years and calculated penalty at 70 per cent of tax, as according to him, when second default was committed, amended provisions of section 271(1) (a) (i) had already come into force and, therefore, ceiling of 50 per cent of assessed tax on penalty was no longer in existence. In this manner, he ascertained penalty at Rs. 11,729 for each of years under appeal as against penalties actually levied by ITO. As result thereof, he allowed relief of Rs. 6,061 in first year and Rs. 3,715 in second year. 5. Aggrieved with this order, assessee has filed these appeals before us. appellant's representative made following submissions before us. returns of income for both years being due on 31-7-1972 and 31-7- 1973, provisions relating to levy of penalty for late submission of returns as in force on those dates alone would be attracted in present cases. change made therein by subsequent amendment with effect from 1-4-1976, removing ceiling of 50 per cent of tax on penalty, is of no consequence as defaults as far as late submission of returns was concerned had already occurred on relevant due dates and moreover, such defaults were not continuing defaults. He further submitted, that though AAC admitted in his order, that only old provisions of law before their amendment on 1-4- 1976 would apply for computing penalty in these cases, he went wrong in making distinction in present case, merely on ground, that returns of income were due by 25-3-1977 in response to notice under section 148 served on assessee and, therefore, penalty for subsequent delay which ensued after 25-3-1977 would be leviable with reference to amended provisions in this behalf, inasmuch as, those provisions had come into force on 25-3-1977, being due date for submission of returns under section 148. In other words, he submitted, that AAC should not have bifurcated period of default into two periods, one relating to period up to 25-3-1977, being period of default under section 139(1) and second relating to period after 25- 3-1977 as default relating to section 148 notices and thereby calculated penalties in respect of first period under unamended provisions. He submitted, in fine, that view taken by ITO in this behalf is diametrically submitted, in fine, that view taken by ITO in this behalf is diametrically opposed to law laid down in this behalf by Supreme Court in cases of Brij Mohan v. CIT [1979] 120 ITR 1 and CWT v. Suresh Seth [1981] 129 ITR 328. first case deals with penalty leviable under section 271(1) (c) for concealment of income. Hon'ble Supreme Court observed that since penalty was imposed on account of commission of wrongful act, it was law operating on date on which wrongful act was committed, which determined levy of penalty and, therefore, provisions in force on date of commission of wrongful act were applicable. In this case, assessee who was partner in two firms did not disclose his share in profits of one of firms in return filed by him on 24-4-1968. Penalty proceedings under section 271(1) (c) were instituted and IAC levied penalty equal to income concealed. On appeal, Tribunal rejected assessee's contention in this behalf though, however, it reduced quantum of penalty. In this context, Hon'ble Supreme Court made following observations: "... In case of penalty, however, we must remember that penalty is imposed on account of commission of wrongful act, and plainly it is law operating on date on which wrongful act is committed which determines penalty. Where penalty is imposed for concealment of particulars of income, it is law ruling on date when act of concealment takes place which is relevant. It is wholly immaterial that income concealed was to be assessed in relation to assessment year in past ** ** ** concealment of particulars of his income was effected by assessee when he filed return of total income on April 24, 1968. Accordingly, it is substituted clause (iii), brought in by Finance Act, 1968, which governs case. That clause came into effect from April 1, 1968." (p. 4) next case is under Wealth-tax Act, 1957 ('the 1957 Act') relating to levy of penalty under section 18(1) (a) of 1957 Act for delay submission of return of wealth. following head-note from this decision very relevant in this context is reproduced hereunder: "Where default complained of is one falling under section 18(1) (a) of W. T. Act, 1957 (e.g., failure to file return of wealth before due date without reasonable cause), penalty has to be computed in accordance with law in force on last date on which return in question had to be filed. Neither amendment made in 1964 nor one made in 1969 to clause (i) of section 18(1) has retrospective effect. Non-performance of any of acts mentioned in section 18(1) (a) gives rise to single default and to single penalty, measure of which, however, is geared up to time lag between last date on which return has to be filed and date on which it is filed. default, if any, committed, is committed on last date allowed to file return. default cannot be one committed every month thereafter. words 'for every month during which default continued' indicate only multiplier to be adopted in determining quantum of penalty and do not have effect of making default in question continuing one. Nor do they make amended provisions modifying penalty applicable to earlier defaults in absence of necessary provisions in amending Acts. distinctive nature of continuing wrong is that law that is violated makes wrong doer continuously liable for penalty. wrong or default which is complete but whose effect may continue to be felt even after its completion is, however, not continuing wrong or default." On behalf of revenue, reliance was placed on AAC's order. 6. We have considered relevant submission from either side and decisions cited before us. Having due regard to decision of Supreme Court in Suresh Seth's case (supra) head-note of which has been extracted above, we have absolutely no doubt in out mind, that this decision fully covers facts of this case which are identical. Two very important aspects have been brought out in Supreme Court's decision, namely, penalty for late submission of return will be governed by law in force on last date on which return in question had to be filed and amendment to provisions in question after that date being of no relevance. Second important aspect is, that default, if any, is committed on last date allowed to file return and default once committed, cannot be committed every month thereafter. In other words, Supreme Court held, that words 'for every month during which default continued' indicate only multiplier adopted in determining quantum of penalty and do not have effect of making default continuing one. In present case as well, defaults for both years were committed on 31-7-1972 and 31-7-1973 when restriction on quantum of penalty up to 50 per cent of assessed tax was in force. removal of this restriction took place only with effect from 1-4-1976 by which time, default had already been committed. Therefore, provisions prior to amendment from 1-4- 1976 alone are applicable in determining quantum of penalty, namely, subject to ceiling of 50 per cent of assessed tax. Moreover, Supreme Court's decision, that default, once committed is not continuing default also answers argument of AAC, that period of default subsequent to 25-3- 1977 being date on which returns under section 148 were due, should be considered separately and penalty should be levied with reference thereto under amended provisions. There is absolutely no warrant for bifurcating periods as done by AAC and calculating penalty under new provisions with reference to second period of default. provisions of law in this regard, both under 1957 Act and 1961 Act are more or less same mutatis mutandis. Hence, decision of Supreme Court is squarely applicable to facts of case. maximum penalty leviable being 50 per cent of assessed tax, namely, Rs. 4,887 in each year under consideration, w e reduce same to this figure. Accordingly, penalty is reduced to Rs. 4,887 in each of years under appeal. 7. appeals filed by assessee are accordingly allowed. *** PRATAPRAO SHANKARRAO DESHMUKH v. INCOME TAX OFFICER
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