1979 (12) TMI 2 - SC - Income Tax

Taxpayer not penalized for late tax filing as Supreme Court rules non-resident status.

Commissioner of Income-Tax, Madras Versus KS Ratnaswamy

The Supreme Court upheld the High Court's decision that the assessee was a non-resident under Section 4A(a)(ii) of the Indian Income-tax Act, 1922, and ... Assessee is member of HUF whose ancestral house is maintained in India by the karta. Assessee visits India casually and stays either in hotel or family house as a guest - whether the respondent-assessee was a resident in the taxable territories under s. 4A(a)(ii) - his stay in the family house has been found to be as a guest enjoying the hospitality of his kith and kin rather than as an inhabitant of his abode or home - the assessee, in our, view, was rightly regarded as a non-resident Issues Involved:1. Whether the assessee was a non-resident under Section 4A(a)(ii) of the Indian Income-tax Act, 1922.2. Whether there was liability to penalty under Section 28(1)(a) for not filing returns in time.Detailed Analysis:1. Non-Resident Status under Section 4A(a)(ii):The primary issue was whether the respondent-assessee was a resident in the taxable territories under Section 4A(a)(ii) of the Indian Income-tax Act, 1922, for the assessment years in question. The relevant facts were that the assessee, born and brought up in Ceylon, had his own business and properties in Ceylon and visited India occasionally. The family house in India was maintained by Ganesa, the manager of the Hindu Undivided Family (HUF), and was used by the assessee's step-mother, full brothers, and cousin.The Tribunal found that the assessee stayed in the family house as a guest and did not maintain or have maintained for him a dwelling place in India. The High Court upheld this view, stating that the cumulative effect of the facts did not lead to the inference that the assessee maintained or had maintained for him a dwelling place in the taxable territories. The High Court emphasized that the mere right to occupy the family house did not mean it was maintained for the assessee as his home.The Supreme Court agreed, noting that the term 'dwelling place' implies a sense of permanency and attachment, akin to a home. The Court found that the family house was maintained by Ganesa for the rest of the family and not at the instance or for the benefit of the assessee. Thus, the assessee was rightly regarded as a non-resident.2. Liability to Penalty under Section 28(1)(a):The second issue was whether the assessee was liable to penalty under Section 28(1)(a) for not filing returns in time. The Income Tax Officer (ITO) had initiated penalty proceedings and levied penalties on the assessee. However, the Appellate Assistant Commissioner (AAC) upheld the assessee's claim that he should be treated as a non-resident, thereby negating the penalty.The Tribunal, after a remand report and further examination, upheld the AAC's order, canceling the penalties. The High Court agreed, noting that since the assessee was a non-resident, he was not liable to penalty under Section 28(1)(a).The Supreme Court upheld the High Court's decision, concluding that the assessee was a non-resident and therefore not liable to penalty under Section 28(1)(a).Conclusion:The Supreme Court dismissed the revenue's appeal, affirming the High Court's decision that the assessee was a non-resident and not liable to penalty under Section 28(1)(a). The Court emphasized that the family house in India was not maintained for the assessee as his home, but for the rest of the family, and that the term 'dwelling place' implies a sense of permanency and attachment, akin to a home.