1984 (5) TMI 15 - HC - Income Tax

Court rules assessee must file fresh returns under notice u/s 148, penalties u/s 271(1)(a) apply for non-compliance.

The court held in favor of the Revenue, ruling that the assessee was liable to submit fresh returns in compliance with the notice u/s 148 of the ... Obligation to file fresh return in compliance with a notice under section 148 - Penalty for failure to furnish return under section 271(1)(a) - failure without reasonable cause - Burden of proof on the Department to establish failure without reasonable cause and use of circumstantial evidence - Mens rea / wilful or deliberate failure as requisite for imposition of penalty under section 271(1)(a) - Presumption where grounds for failure are within special knowledge of the assesseeObligation to file fresh return in compliance with a notice under section 148 - Assessee's liability to submit fresh returns in compliance with notices issued under section 148 - HELD THAT: - Section 148 requires the ITO, before making assessment under section 147, to serve a notice which may contain the requirements of a notice under section 139(2), and the provisions of the Act apply to such notice as if it were issued under section 139(2). Where a notice under section 148 requires filing of a revised return, that notice carries an obligation on the assessee to file a fresh return. If the assessee elects not to file a fresh return, he may notify the ITO that the earlier return should be treated as the return in response to the section 148 notice; in that event the earlier return will be so treated. On the facts of this case the Tribunal found that the notices required revised returns and that the assessee was therefore liable to submit fresh returns in compliance with the section 148 notices.Assessee was liable to submit fresh returns of income in compliance with the notice under section 148.Penalty for failure to furnish return under section 271(1)(a) - failure without reasonable cause - Burden of proof on the Department to establish failure without reasonable cause and use of circumstantial evidence - Mens rea / wilful or deliberate failure as requisite for imposition of penalty under section 271(1)(a) - Presumption where grounds for failure are within special knowledge of the assessee - Attraction of penalty under section 271(1)(a) for failure to file the revised return required by the section 148 notice - HELD THAT: - Proceedings for imposition of penalty under section 271(1)(a) are quasicriminal and, as held by this court and some other authorities, penalty ordinarily requires a wilful or deliberate failure to comply (i.e., failure without reasonable cause). The Department bears the initial burden to prove that the assessee failed to furnish the return required by the section 148 notice without reasonable cause; this burden can be discharged by direct or circumstantial evidence and by relying on the presumption arising when the reason for failure is within the assessee's special knowledge and is not satisfactorily explained. The Tribunal found the two explanations offered by the assessee - improper service on an employee and inability to file because books were seized - to be unsustainable: evidence showed the employee acted as agent, the assessee participated in proceedings and did not challenge service, the assessee had access to seized books and the firm filed returns. Those findings establish a deliberate decision not to file the returns and discharge the Department's burden, permitting imposition of penalty under section 271(1)(a).Penalty under section 271(1)(a) was attracted for the failure to file revised returns in response to the section 147/148 notices.Final Conclusion: Questions referred are answered in the affirmative: the assessee was obliged to file fresh returns in compliance with the section 148 notices, and the facts found by the Tribunal establish that the failure to do so was without reasonable cause (wilful/deliberate), attracting penalty under section 271(1)(a); order affirmed against the assessee with no order as to costs. Issues Involved:1. Liability of the assessee to submit a fresh return of income in compliance with notice u/s 148 of the Income-tax Act, 1961.2. Applicability of penalty provisions u/s 271(1)(a) for failure to file a fresh return in compliance with notice u/s 147/148.Summary:Issue 1: Liability to Submit Fresh ReturnThe court examined whether the assessee was liable to submit a fresh return of income in compliance with the notice u/s 148 of the Income-tax Act, 1961. The court noted that the notice issued u/s 148 required the assessee to file revised returns of its income. It was held that a notice u/s 148 carries an obligation to file a fresh return in response to the said notice. If the assessee believes that the earlier return should suffice, they must inform the Income-tax Officer (ITO) of this decision. In the present case, the assessee was liable to submit fresh returns of income in compliance with the notice u/s 148.Issue 2: Applicability of Penalty Provisions u/s 271(1)(a)The court considered whether the penalty provisions u/s 271(1)(a) were attracted due to the assessee's failure to file a fresh return in compliance with the notice u/s 147/148. The court emphasized that the burden of proof lies on the Department to establish that the assessee failed to furnish the return without reasonable cause. The court noted that the reasons provided by the assessee for not filing the returns, such as improper service of notice and seizure of records, were found to be unsustainable by the Tribunal. The Tribunal's findings indicated that the assessee's failure to file the returns was a deliberate and wilful act. Consequently, the penalty provisions u/s 271(1)(a) were applicable.Conclusion:Both questions were answered in the affirmative, against the assessee and in favor of the Revenue. The court held that the assessee was liable to submit fresh returns in compliance with the notice u/s 148 and that the penalty provisions u/s 271(1)(a) were attracted due to the failure to file the returns.