JUDGMENT
S.K. Homchaudhuri, J.
1. The Income-tax Appellate Tribunal (hereinafter to be referred to as “the Appellate Tribunal”) under Section 256(1) of the Income-tax Act, 1961 (hereinafter to be referred to as “the Act”), has referred the following question of law, which arose out of the order of the Appellate Tribunal to this court for opinion :
“Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in upholding the penalty levied against Smt. Shibani Dutta alone as legal representative of Bhutnath Dutta deceased for the default of six months from December 1, 1973, up to May 31, 1974, under Section 271(1)(a) of the Income-tax Act, 1961, relating to the assessment years 1972-73 and 1973-74 ?”
2. For answering the reference, it is necessary to state the material facts leading to refer this question of law to this court for opinion.
3. One Bhutnath Dutta died intestate on November 9, 1972, without filing the income-tax returns (hereinafter to be referred to as “the returns”). After his death, his widow, Smt. Shibani Dutta, filed the income-tax returns in respect of the income from the properties left by the deceased, Bhutnath Dutta, on June 29, 1974, in respect of the assessment years 1972-73 and 1973-74. Under Section 139(1) of the Act, the returns in respect of the aforesaid assessment years ought to have been filed on or before June 30, 1972, and June 30, 1973, respectively. No application in Form No. 6 for extension of time was also filed. No notice under Section 139(2) of the Act was also issued by the Income-tax Officer. The returns in respect of both the assessment years were filed voluntarily. The Income-tax Officer held that there was a delay of complete 23 months and complete 10 months in filing the returns for the assessment years 1972-73 and 1973-74, respectively. Smt. Shibani Dutta, the assessee (widow of the deceased Bhutnath Dutta) submitted before the Income-tax Officer that Bhutnath Dutta died on November 9, 1972, and after his death the business was managed by the employees and she was not at all conversant with the business affairs and had no idea regarding filing of the returns and there was reasonable cause for delay in submitting the returns. The assessee further contended that the onus lay on the Department to establish that the assessee failed to file the return within the time without any reasonable cause but the onus was not discharged. The Income-tax Officer took the view that the penalty under Section 271 of the Act could be levied against a legal representative and that Smt. Shibani Dutta was liable to penalty for not submitting the returns after the death of Bhutnath Dutta on November 9, 1972. The Income-tax Officer found that the default in submitting the said returns continued during the lifetime of the deceased Bhutnath Dutta and the delay in filing the said returns was without reasonable cause and accordingly passed orders imposing penalty of Rs. 14,037 and Rs. 2,887 against the assessee for defaults of 23 months and 10 months in filing the returns in respect of the assessment years 1972-73 and 1973-74, respectively.
4. The assessee preferred appeals against the orders of the Income-tax Officer imposing penalty, before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner found that the assessee filed the estate duty return on November 9, 1973, and for the delay in filing the estate duty return, there was reasonable cause and that there was also reasonable cause for the delay in filing the returns of income for the assessment years 1972-73 and 1973-74 up to November 30, 1973, and condoned the delay in filing the returns up to November 30, 1973. The Appellate Assistant Commissioner, however, found that there was no mitigating circumstance to condone the delay beyond November 30, 1973, and the Assistant Commissioner accordingly calculated the penalties at Rs. 4,272 for the delay in filing the return in respect of the assessment year 1972-73 and Rs. 2,021 in respect of the assessment year 1973-74 and allowed relief of Rs. 9,765 and Rs. 868 in respect of both the assessment years respectively.
5. Being aggrieved by the order of the Appellate Assistant Commissioner, the assessee filed appeals registered as I. T. A. Nos. 1012 and 1013/(Pat) of 1977-78, before the Income-tax Appellate Tribunal. The Appellate Tribunal by the judgment passed in the said appeals held that there was no reasonable cause for the delay in filing the said returns from December 1, 1973, and in respect of both the assessment years 1972-73 and 1973-74, the assessee, Smt. Shibani Dutta, committed default in not filing the returns by December 1, 1973, and penalty was leviable against her in respect of both the assessment years and dismissed the appeal. The assessee thereafter made an application under Section 256(1) of the Act before the Appellate Tribunal for referring two questions of law, which according to the assessee arose out of the appellate order passed by the Appellate Tribunal, to this court for its opinion. The Appellate Tribunal by the order dated November 25, 1978, allowed the application to the extent of referring the aforesaid question of law to this court for its opinion as stated above.
6. We have heard Mr. Moitra, learned counsel for the assessee, and Mr. Vidyarthi, for the Income-tax Department (opposite party herein).
7. Learned counsel for the assessee submitted that some of the children of Bhutnath Dutta having become major, Shibani Dutta, the widow, was not the only legal representative and no notice of the proposed penalty having been issued and served on the other heirs and legal representatives of the late Bhutnath Dutta, who became major, the entire proceeding of imposing penalty was vitiated. Learned counsel for the assessee further submitted that Bhutnath Dutta died after a protracted illness on November 9, 1992, having remained bedridden for several months and he died leaving behind his widow, Smt. Shibani Dutta, the assessee, and eight minor children. The business affairs of Bhutnath Dutta were being carried on as a proprietary business and there are no other male members in the family to look after the affairs of the business of the late Bhutnath Dutta. The assessee came from an orthodox Hindu family and she did not take any interest in the business of her husband during his lifetime. She also did not possess the necessary educational and technical qualifications to participate in the business venture of her husband and she was not conversant with the business of her husband and after the death of her husband the business was managed by the employees. Since no regular accounts were maintained and she had no knowledge about the business affairs, accounts and other matters necessary for preparing the accounts for submitting returns she could not file return immediately after she came to know that the returns were due. As such, there was reasonable cause for the delay in filing the returns. The delay in filing the returns was not caused due to her deliberate negligence but due to lack of knowledge and experience and there is nothing on record which discloses that the assessee acted deliberately in defiance of law and/or acted in conscious disregard of her obligation to file the return. Learned counsel for the assessee further submitted that the proceeding for imposition of penalty is a quasi-criminal proceeding. Because of the fact that the assessee submitted the estate duty returns on November 9, 1975, it could not give rise to a presumption that the assessee has full knowledge about the affairs of the business and had up to date accounts of the business of her husband, late Bhutnath Dutta, within November 50, 1973, which was necessary for the filing the returns. As such, there was reasonable cause for the delay in filing the return and the imposition of penalty on the assessee is not justified. The reference should, therefore, be answered in the negative and against the Revenue.
8. In support of the contention, learned counsel for the assessee has placed reliance on the decision of the Madras High Court in the case of CIT v. P.S. Mohideen Abdul Khader [1994] 210 ITR 735, the decision of the Delhi High Court in the case of CIT v. Shanta Electrical Industries [1986] 160 ITR 774 and the decision of the Gujarat High Court in the case of Addl. CIT v. I. M. Patel and Co. [1977] 107 ITR 214 [FB].
9. Learned counsel for the Income-tax Department, on the other hand, submitted that in paragraph 27 of the judgment, the Tribunal has given cogent reasons in detail for holding that there was no reasonable cause for the delay in filing the returns by the assessee after December 1, 1973, and the Appellate Tribunal is justified in upholding the penalty levied against the assessee alone as the legal representative of the late Bhutnath Dutta under Section 271(1)(a) of the Act, and as such, the question referred should be answered in the affirmative and in favour of the Department.
10. I have considered the submissions made on behalf of the assessee as well as on behalf of the Revenue and perused the materials on record.
11. On the question as to whether the levy of penalty has been vitiated without serving notice to the other heirs and legal representatives of the deceased, the Tribunal found that the assessee filed the returns as sole legal representative of the late Bhutnath Dutta and the assessee also did not raise the point before the assessing authority in the proceeding and the point was raised for the first time before the Appellate Assistant Commissioner and that the Income-tax Officer bona fide believed that the assessee was the sole legal representative of the late Bhutnath Dutta. As such, the imposition of penalty was not vitiated for non-service of notice to the other major children of the late Bhutnath Dutta. On a perusal of the materials on record, I find that the learned Appellate Tribunal committed no error of law in holding that non-service of notice on the other legal representatives who became major after filing the returns, has not vitiated the proceedings.”
12. On the question as to whether there was reasonable cause for the delay in filing the returns beyond November 30, 1973, up to June 29, 1974, the learned Appellate Tribunal, after taking into consideration the materials on record, found that the assessee filed the returns for estate duty on November 9, 1973, and in the estate duty return, the assessee disclosed cash-in-hand and investment in business including profit from the business and that the return disclosed the details of certain immovable properties and the value of the other properties like area of the land on which the petrol pump is situated, and the agricultural land and the residential house. All these facts led the learned Appellate Tribunal to hold that on November 9, 1973, the assessee had knowledge about the income from various properties which have been the subject of assessment excepting the house property income which was not shown either in the estate duty return or in the income-tax return and that after filing the estate duty return, the assessee required no other details for the filing of the income-tax returns for the assessment years 1972-73 and 1973-74 and the returns could have easily been filed by November 30, 1973, and as such, there was no reasonable cause for the delay in filing the return from December 1, 1973.
13. The question arises whether the learned Appellate Tribunal has adopted the correct legal approach in holding that there was no reasonable cause for the delay in filing the returns by the assessee after December 1, 1973.
14. In the case of Addl. CIT v. I. M. Patel and Co. [1977] 107 ITR 214 [FB], the Gujarat High Court held as follows (at page 235) :
“(1) Under Section 271(1)(a) of the Income-tax Act, 1961, failure without reasonable cause to furnish the return in question is an ingredient of the offence ;
(2) Section 271(1)(a) provides for penalty in cases where the assessee has either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of this obligation ;
(3) The legal burden is on the Department to establish by leading some evidence that, prima facie, the assessee has without reasonable cause failed to furnish the return within the time specified in Section 271(1)(a) read with the relevant other Section referred to in that Section. Once this initial burden, which may be slight, has been discharged by the Department, it is for the assessee to show as in a civil case on balance of probabilities that he had reasonable cause in failing to file the return within the time specified ;
(4) Mere falsity of the explanation furnished by the assessee cannot help the Department in establishing its case against the assessee at the time of imposition of penalty.”
15. In the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 ; AIR 1970 SC 253, the Supreme Court held as follows (at page 29 of 83 ITR).
“An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and 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. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for 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.”
16. Imposition of penalty as contemplated under Section 271(1)(a) of the Act is not compensatory but punitive and the proceeding to impose penalty is quasi-criminal. It is well-settled that the liability to pay penalty does not arise merely on proof of default in filing the return on time and the discretionary power of the authority to impose penalty for failure to file the return on time is to be exercised judicially and on a consideration of all the relevant circumstances. In the instant case, it is not the finding of the learned Appellate Tribunal that the explanation of the assessee for the delay in filing the return was fanciful. It is also not the finding of the learned Appellate Tribunal nor is there any material on record which discloses that the assessee acted in conscious disregard of her obligation to file the returns before December 1, 1973, and/or acted deliberately in defiance of law. On a perusal of the materials on record, I find that the learned Appellate Tribunal did not adopt the correct legal approach in holding that there was no reasonable cause for the delay in filing the returns by the assessee from December 1, 1973, and upholding the penalty levied against the assessee under Section 271(1)(a) of the Act.
17. For the reasons stated above, the learned Appellate Tribunal was not justified in upholding the penalties levied against the assessee under Section 271(1)(a) of the Act in respect of the assessment years 1972-73 and 1973-74.
18. The reference is, accordingly, answered in the negative and against the Revenue.
Gurusharan Sharma, J.
19. I agree.
