G.Pulla Reddy, Secunderabad v. JCIT, Kurnool

ITA 1/HYD/2007 | 1997-1998
Pronouncement Date: 11-02-2010 | Result: Partly Allowed

Appeal Details

RSA Number 122514 RSA 2007
Assessee PAN AAATG2992F
Bench Hyderabad
Appeal Number ITA 1/HYD/2007
Duration Of Justice 3 year(s) 1 month(s) 8 day(s)
Appellant G.Pulla Reddy, Secunderabad
Respondent JCIT, Kurnool
Appeal Type Income Tax Appeal
Pronouncement Date 11-02-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 11-02-2010
Date Of Final Hearing 02-02-2010
Next Hearing Date 02-02-2010
Assessment Year 1997-1998
Appeal Filed On 02-01-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI G.C. GUPTA VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO: 1/HYD/2007 ASSTT. YEAR 1997- 98 ITA NO: 2/HYD/2007 ASSTT. YEAR 1998- 99 ITA NO: 3/HYD/2007 ASSTT. YEAR 1999- 00 ITA NO: 4/HYD/2007 ASSTT. YEAR 2000- 01 ITA NO: 5/HYD/2007 ASSTT. YEAR 2001- 02 SHRI G. PULLA REDDY HYDERABAD (AAATG 2992F) VS JCIT KURNOOL RANGE KURNOOL (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.C. DEVADAS RESPONDENT BY : SHRI K.V.N. CHARYA DR O R D E R PER : CHANDRA POOJARI ACCOUNTANT MEMBER THESE FIVE APPEALS PREFERRED BY THE ASSESSEE ARE DIRECT ED AGAINST THE COMMON ORDERS PASSED BY THE CIT(A)-GUNTUR ( CAMP AT HYDERABAD) DATED 27/11/2006 AND PERTAINS TO THE ASSESSMEN T YEARS 1997-98 1998-99 1999-2000 2000-01 AND 2001-02 AG AINST THE CONFIRMATION OF PENALTY LEVIED U/S 272A (2) (E) OF TH E INCOME TAX ACT 1961. THE ISSUE IN ALL THESE APPEALS ARE COMMON AND ALSO RAISED COMMON GROUNDS WHICH ARE AS FOLLOWS: 1. THE ORDER OF THE CIT(A) GUNTUR IN SUSTAINING THE LE VY OF PENALTY IMPOSED U/S 272A(2)(E) OF THE IT ACT 1961 IS WHOLL Y UNSUSTAINABLE BOTH ON FACTS AND IN LAW. 2. THE CIT(A) GUNTUR FAILED TO NOTE THAT THE ASSESSEE WAS ASSESSED AT NIL INCOME FOR THE ASSESSMENT YEAR IN QUESTION AND THAT THEREFORE THERE WAS NO DELIBERATE INTENTION ON THE PART OF TH E ASSESSEE TO FILE THE RETURNS OF INCOME WITH THE TIME ALLOWED U/S 13 9 (4A) OF THE IT ACT 1961. 2 2 3. THE CIT(A) GUNTUR FAILED TO NOTE THAT THE INCOME OF THE ASSESSEE WAS ALSO EXEMPT U/S 10(22) OF THE IT ACT 1961 BEING A C HARITABLE TRUST PROMOTING THE CAUSE OF EDUCATION AND THEREFORE THER E WAS NO OBLIGATION TO SUBMIT A RETURN OF INCOME AT ITS INCO ME WAS EXEMPT FROM TAX. 4. THE CIT(A) GUNTUR FAILED TO NOTE THAT THE RETURNS O F INCOME FILED VOLUNTARILY FOR THE FIRST TIME WHICH WERE REGULARIZ ED BY ISSUE OF NOTICES U/S 148 OF THE IT ACT WAS A RETURN FILED U/ S 139 AND THE ASSESSMENT THEREON WAS CLOSED AS NA AND THEREFORE THE CIT(A) GUNTUR OUGHT TO HAVE HELD THAT THERE WAS NO DEFAULT WHATSOEVER IN NOT SUBMITTING THE RETURN OF INCOME BY THE ASSESSEE AND THUS THE CIT(A) GUNTUR ERRED IN CONFIRMING THE LEVY OF PENAL TY. 5. THE CIT(A) GUNTUR HAVING FOUND AS A MATTER OF FACT THAT THE JCIT KURNOOL FOUND THAT ALL THE RETURNS OF INCOME FILED BY THE ASSESSEE WERE NON EST IN LAW FAILED TO NOTE THAT THE QUEST ION OF LEVY OF PENALTY OR THE MACHINERY PROVISIONS RELATING TO ITS CALCULA TION FAILED AS NO RETURNS OF INCOME WERE DEEMED TO BE FILED BY THE AS SESSEE. 6. THE CIT(A) GUNTUR FAILED TO NOTE THAT A VALID RETUR N OF INCOME U/S 139 (4) COULD BE FILED ONLY BY ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND THEREFORE THE DEFAULT IF ANY TE RMINATED ON THAT DATE AND THE CIT(A) GUNTUR OUGHT TO HAVE RESTRICTED THE LEVY OF PENALTY EACH YEAR UPTO THE PERIOD MENTIONED IN SECT ION 139 (4) OF THE IT ACT 1961. 7. THE CIT(A) GUNTUR HAVING FOUND AS A MATTER OF FACT THAT THE ASESSEE WAS RCOGNISED AS CHARITABLE TRUST WITH ITS REGISTER ED OFFICE AT HYDERABAD U/S 12A OF THE IT ACT 1961 BY CIT HYDER ABAD AND THAT THE RETURNS OF INCOME FROM 1992-93 ASSESSMENT YEARS TO 1996-97 ASSESSMENT YEAR WERE FILED AT HYDERABAD AND THUS FA ILED TO NOTE THAT THE JCIT KURNOOL ON 15.10.2004 DID NOT HAVE JURISD ICTION EITHER TO ASSESS THE ASSESSEE OR LEVY PENALTY U/S 272A(2)(E) OF THE IT ACT 1961 NOT WITHSTANDING THE FACT THAT THE ASSESSEE AT THE BEHEST OF THE DEPARTMENT SUBMITTED THE RETURNS OF INCOME FOR THE ASSESSMENT YEARS 1997-98 TO 2001-2002 AT KURNOOL AND THEREFORE OUGHT TO HAVE HELD THAT THE LEVY OF PENALTY WAS WITHOUT JURISDICTION A ND THUS CLEARLY UNSUSTAINABLE. 8. THE CIT(A) GUNTUR FAILED TO NOTE THAT THE OBJECTION TO JURISDICTION NOT BEING RAISED BEFORE COMPLETION OF ASSESSMENT PROCEE DINGS WAS NOT APPLICABLE TO PENALTY PROCEEDINGS WHICH WERE DIFFER ENT PROCEEDINGS AND THAT THE QUESTION RELATING TO JURISDICTION FOR LEVY OF PENALTY BEING A SUBSTANTIAL LEGAL GROUND COULD BE RAISED FOR THE FIRST TIME BEFORE THE CIT(A) GUNTUR AND THEREFORE THE CIT(A) GUNTUR OUGHT TO HAVE CLEARLY HELD THAT THE LEVY OF PENALTY WAS WITHOUT JURISDICT ION AND THAT THE LEVY OF PENALTY WAS THEREFORE WHOLLY UNSUSTAINABLE. 3 3 9. THE CIT(A) GUNTUR FAILED TO NOTE THAT THE ASSESSEE WAS PREVENTED BY REASONABLE AND SUFFICIENT CAUSE IN NOT FILING THE R ETURNS OF INCOME IN TIME. 10. THE CIT(A) GUNTUR FAILED TO NOTE THAT UNLESS THE RE TURNS OF INCOME FOR THE PREVIOUS YEARS WERE FILED THE RETURNS OF INCOME FOR THE ASSESSMENT YEARS IN QUESTION COULD NOT BE FILED AND THEREFORE OUGHT TO HAVE NOTE THE ASSESSEE WAS PREVENTED BY REASONABLE AND SUFFICIENT CAUSE IN NOT FILING THE RETURNS OF INCOME FOR THE Y EAR IN QUESTION IN TIME AND HENCE THE CIT(A) GUNTUR OUGHT TO HAVE CANC ELLED THE PENALTY. 11. THE CIT(A) FAILED TO NOTE THAT THE LEVY OF PENALTY IF ANY SHOULD BE IMPOSED WITHIN A REASONABLE PERIOD FROM THE END OF THE ASSESSMENT YEAR AND THEREFORE THE LEVY OF PENALTY AFTER A LONG PERIOD OF TIME WAS WHOLLY UNSUSTAINABLE AND THUS THE LEVY OF PENALTY I S TO BE QUASHED. 12. THE PROCEEDINGS FOR THE ASSESSMENT YEAR 1997-98 WER E TIME BARRED BY 31.3.2004 AND THEREFORE THE QUESTION OF ASSESSME NT OR LEVY OF PENALTY WAS BARRED BY THE PERIOD OF LIMITATION AND THE LEVY OF PENALTY AT RS.2 62 700 FOR THE ASSESSMENT YEAR IS WHOLLY UN SUSTAINABLE AND IS TO BE CANCELLED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN IN STITUTION AND GOT ITS REGISTRATION U/S 12A OF THE IT ACT BY CI T-II HYDERABAD VIDE F.NO.HQ/CIT-II/12A/40/78-79 DATED 3.2.1981. IT HAS B EEN RUNNING MANY EDUCATIONAL INSTITUTIONS ALONG WITH A FEW CHARITAB LE ONES. SHRI G. PULLA REDDY ENGINEERING COLLEGE HAS BEEN IN THE FORE FRONT AMONG THE INSTITUTIONS RUN BY THE TRUST. THE G. P. ENGINEERING COLLEGE IS LOCATED IN KURNOOL TOWN. SEVERAL EMPLOYEES OF GPREC FILED RETU RNS OF INCOME ATTACHING TDS CERTIFICATES ISSUED BY GPREC ON WHICH THE PA N OF GPREC IS QUOTED AS AAAD0374R. ON VERIFICATION IT WAS FO UND THAT THE PAN DOES NOT BELONG TO GPREC /GPRCT BUT BELONGS TO M/S DOT A SOCIETY KURNOOL. IN VIEW OF THIS THE TDS INSPECTION WAS CONDU CTED BY THE ACIT CIRCLE-1 KURNOOL OF THIS RANGE WHO WAS HAVING TDS J URISDICTION OVER GPREC KURNOOL ON 30.9.2004. DURING THE TDS VERIFI CATION IT WAS GATHERED THAT GPREC IS RUN BY M/S G. PULLA REDDY CHAR ITABLE TRUST RED HILLS HYDERABAD WHICH RUNS SEVERAL OTHER EDUCATIONAL INSTI TUTIONS IN HYDERABAD. IT WAS ALSO FOUND THAT M/S GPRCT HAS NOT FI LED RETURNS OF INCOME FROM ASSESSMENT YEAR 1997-98 ONWARDS. 4 4 3. ACCORDINGLY PENALTY WAS LEVIED U/S 272A (2) (E) AS BELOW FOR THE FOLLOWING ASSESSMENT YEARS: ASSESSMENT YEAR DATE OF FILING OF RETURN RS.(PENA LTY) 1997-1998 6.10.2006 2 62 700 1998-1999 6.10.2004 2 26 200 1999-2000 6.10.2004 1 89 700 2000-2001 11.10.2004 1 53 200 2001-2002 11.10.2004 1 16 700 4. AGGRIEVED AGAINST THIS THE ASSESSEE CARRIED THE APP EAL BEFORE THE CIT(A). THE CIT(A) CONFIRMED THE ORDER O F THE ASSESSING OFFICER. HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 4.1. THE AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE (LE ARNED AR) SUBMITTED THAT THE RETURN OF INCOME UP TO ASSESSMENT YEAR 1996-97 WERE FILED AT HYDERABAD AND RETURNS OF INCOME FOR THE ASSESSMENT YEARS 1997-98 TO 2003-04 WERE FILED AT KURNOOL. CONSEQUEN T TO PROCEEDINGS U/S 133A AT ONE OF THE EDUCATIONAL INSTITUTIONS AT KURN OOL RETURN OF INCOME FROM ASSESSMENT YEARS 2004-05 AND ONWARDS WERE FIL ED AT HYDERABAD. THE JURISDICTION VESTS AT HYDERABAD AND FILES FROM KURNOOL HAD BEEN CALLED FOR BY IT DEPTT HYDERABAD. IT IS CONT ENDED THAT THE ASSESSEE GOT REGISTRATION U/S 12A OF THE IT ACT BY CIT-II HYDERABAD VIDE IN F.NO.HQ/CIT-II/12A/40/78-79 DATED 3.2.1981. HENCE IT IS SUBMITTED THAT THE JURISDICTION VESTED AT HYDERABAD AND THEREFO RE LEVY OF PENALTY U/S 272A(2)(E) BY THE JCIT KURNOOL RANGE IS WITHOUT JURISDICTION IS THEREFORE INVALID. HE RELIED ON UPON THE DECISION OF THE CALCUTTA HIGH COURT IN CASE OF WEST BENGAL ELECTRICITY BOARD VS. DCIT (278 ITR 218) WHEREIN IT WAS HELD THAT THE QUESTION REGARDING JURIS DICTION CAN BE RAISED FOR THE FIRST TIME BEFORE ITAT AND AS THIS ISSUES GOES TO THE ROUTE OF THE MATTER IS TO BE ENTERTAINED. HE ALSO RELIED ON IN THE CASE OF OMPRAKASH AGARWAL VS. ITO (102 ITR 432) (CAL.) WHER E IN IT WAS HELD THAT 5 5 THE RULE 32(2) OF THE IT RULES 1962 SPECIFIES THE INCOME TAX OFFICER TO WHOM AN EMPLOYER IS OBLIGED TO SEND ANNU AL RETURNS UNDER SECTION 206 OF THE ACT. IN A CASE WHERE THER E IS AN ORDER UNDER SECTION 126 OF THE ACT BY THE BOARD BY WHICH JURISDICTION OVER THE EMPLOYEES HAS BEEN VESTED IN ANY PARTICULA R ITO THE EMPLOYER IS UNDER AN OBLIGATION TO SEND THE RETURNS TO SUCH OFFICER. IN OTHER CASES THE RETURN IS TO BE SENT T O THE ITO WITHIN WHOSE AREA OR JURISDICTION THE OFFICER OF THE PERSO N PAYING THE SALARIES IS SITUATED. AN ORDER U/S 126 CAN BE MADE ONLY BY THE BOARD AND NOT BY THE CIT. WHEREAS A NOTICE CALLING ON THE ASSESSEE TO FILE RE TURNS U/S 206 WAS ISSUED BY AN ITO ACTING UNDER THE ORDER OF THE COMMISSIONER U/S 124 AND IT WAS FOUND THAT THE OFFICER OF THE AS SESSEE WAS NOT SITUATE WITHIN THE AREA ASSIGNED TO THAT INCOME TAX OFFICER. THAT THE NOTICE WAS NOT VALID AND WAS LIABLE TO BE QUASH ED. 4.2 HE RELIED ON THE JUDGEMENT IN THE CASE OF INDIA GLYCOLS LTD. VS. CIT (145 TAXMAN549) (CAL.) WHEREIN IT WAS HELD T HAT: SECTION 124 OF THE INCOME TAX ACT 1961 ASSESSING O FFICER JURISDICTION OF WHETHER PRINCIPAL PLACE OF BUSINESS OF A COMPANY IS TERMED AND/OR TREATED AS THAT PLACE WHEREFROM AL L CONTROL OVER BUSINESS ACTIVITIES IS EXERCISED OR WHERE CENTRE OF POWER OF CORPORATE BODY IS LOCATED AND SUCH PRINCIPAL PLACE OF BUSINESS MAY OR MAY NOT BE A REGISTERED PLACE OF BUSINESS HELD YES ASSESSEE COMPANY HAVING ITS PRINCIPAL PLACE OF BUSI NESS AT CALCUTTA HAD BEEN FILING ITS RETURN OF INCOME THERE AT FROM VERY BEGINNING AND WAS BEING ASSESSED AT THAT PLACE HO WEVER ASSESSING OFFICER MORADABAD ISSUED NOTICE TO ASSES SEE COMPANY TO FILE ITS RETURN AT OFFICER MORADABAD ISSUED NOT ICE TO ASSESSEE COMPANY TO FILE ITS RETURN AT MORADABAD ON GROUND T HAT IT WAS HAVING ITS REGISTERED PLACE OF BUSINESS THERE WHETH ER ASSESSEE COMPANY COULD VALIDLY FILE RETURN OF INCOME AT ITS PRINCIPAL PLACE OF BUSINESS I.E. CALCUTTA AND THEREFORE NOTICE ISSU ED BY ASSESSING OFFICER MORADABAD WAS LIABLE TO BE SET ASIDE. 4.3. FURTHER HE SUBMITTED THAT THE INCOME OF THE TR UST WAS EXEMPTED U/S 10(22) OF THE IT ACT AND IT WAS RUNNING EDUCATIONAL INSTITUTIONS AND ITS INCOME WAS TOTALLY EXEMPT FOR ASSESSM ENT YEARS 1997-98 AND 1999-2000. THEREFORE THE QUESTION OF S UBMISSION OF RETURNS OF INCOME DOES NOT ARISE. HE SUBMITTED THAT FOR ASSESSMENT YEARS 2000-01 TO 2001-02 THE PROVISIONS OF SECTION 10(22 ) WERE DE LINKED TO SECTION 11 AND 12. 6 6 4.4. HE FURTHER SUBMITTED THAT THE PROVISIONS OF SECTION 139(4C) CAME INTO FORCE W.E.F. 1.4.2003 AND IT IS MANDATORY FO R ASSESSMENT YEAR 2003-04 TO SUBMIT RETURNS OF INCOME FOR ALL EDUCATIONAL INSTITUTIONS WHOSE GROSS RECEIPTS IS MORE THAN ONE CRORE. HE FURTHER SUB MITTED THAT THE PROVISIONS OF SECTION 139(4A) GOVERNS CHARITABLE INSTI TUTIONS AND NOT SECTION 10(22). 4.5. HE RELIED ON THE JUDGEMENTS IN THE CASE OF BIRLA VIDHYA VIHAR TRUST VS. CIT CENTRAL I CALCUTTA (CAL.)(136 ITR 445) WHERE IN IT WAS HELD THAT : THE ASSESSEE A CHARITABLE TRUST RECOGNIZED AS SUCH FOR THE PURPOSES OF S.11 CLAIMED EXEMPTION U/S 10(22) FOR T HE ASSESSMENT YEAR 1972-73 IN RESPECT OF THE INCOME IT DERIVED FROM RUNNING TWO SCHOOLS. THE ITO REJECTED THE CLA IM ON THE GROUND THAT THE SECTION APPLIED ONLY TO EDUCATIONAL INSTITUTIONS AND THIS WAS UPHELD BY THE TRIBUNAL. THE TRIBUNAL MAINLY RELIED ON THE FACT THAT THE RECEIPT OF THE INCOME WAS NEIT HER A UNIVERSITY NOR AN EDUCATIONAL INSTITUTION BUT A TRU ST. THE TRIBUNAL REFERRED TO THE FACT THAT THE TRUST DEED UNDER WHIC H THE TRUST FUNCTIONED PERMITTED INVESTMENT OR APPLICABLE OF TH E TRUST MONEY OR TRUST INCOME TO OBJECTS NOT EDUCATIONAL THOUGH C HARITABLE. ON A REFERENCE HELD THAT THE FACT THAT THERE WAS A SOL ITARY INSTANCE OF APPLICATION OF INCOME FROM THE SCHOOLS FOR NON E DUCATIONAL PURPOSES IN A PRIOR YEAR WAS NOT VERY MATERIAL. T HE FACT THAT THE ASSESSEE TRUST HAD OBJECTS OTHER THAN EDUCATIONAL O BJECTS WAS ALSO NOT MATERIAL. THE ASSESSEE WAS ENTITLED TO EX EMPTION UNDER SECTION 10(22) IN RESPECT OF THE INCOME FROM THE TW O SCHOOLS. 4.6. HE SUBMITTED THAT THE ASSESSING OFFICER ERRED IN COM PUTING THE PERIOD OF DELAY WHILE IT OUGHT TO HAVE RESTRICTED AND COMPUTED FROM THE DUE DATE FOR FILING OF RETURN OF INCOME. IT IS SUBMITTED THAT RETURNS OF INCOME FILED IN NOV. 2004 ARE NON-EST AND T HEREFORE FOR DEFAULT U/S 272(2)(E) SHOULD BE RECOUNT AS LAID OUT IN SECTION 139(4) A VALID RETURN CAN BE FILED BEFORE THE EXPIRY OF ONE Y EAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THEREFORE HE SUBMITTED T HAT THE PERIOD OF LEVY OF PENALTY IMPOSED END ON 31.3.2000 FOR ASSESSME NT YEAR 1998- 99 31.3.2001 FOR ASSESSMENT YEAR 1999-2000 31.3.2002 FOR 7 7 ASSESSMENT YEAR 2000-01 AND 31.3.2003 FOR ASSESSMENT YEAR 2001-02. FOR THE ASSESSMENT YEAR 1997-98 AS PERIOD OF 6 YEARS HAD LAPSED BY 31.3.2004 AND THEREFORE EQUALLY THE LEVY OF PENALTY U/S 272A(2)(E) OF THE IT ACT FOR THE ASSESSMENT 1997-98 IS INVALID. A VALID RETURN COULD BE FILED FOR 1997-98 U/S 139(4) BY 31.3.1999. THEREFO RE THE PERIOD OF DELAY IF ANY SHOULD BE COMPUTED UPTO 31.3.1999 ONLY AND NOT TO THE DATE OF INITIATION OF PENALTY. 5. ON THE OTHER HAND THE DEPARTMENTAL REPRESENTATI VE STRONGLY RELIED ON THE CIT(A) ORDER AND ALSO FILED TH E WRITTEN SUBMISSION IN SUPPORT OF HIS ARGUMENTS WHICH IS PLACED ON RECORD. F URTHER HE PLACED RELIANCE ON THE FOLLOWING JUDGEMENTS: 1. BOMBAY HIGH COURT IN THE CASE OF DIT VS. MALAD JAIN YUVAK MANDAL MEDICAL RELIEF CENTRE 250 ITR 488 (BOM.) 2. HONBLE PUNJAB & HARYANA HC IN THE CASE OF LATE GOPI MAL KUTHIALA CHARITABLE TRUST VS. ITO (46 ITR 436) 3. GODIJI PARSHNATHJI JAIN VS. (CIT 226 ITR 798) 4. HONBLE MUMBAI TRIBUNAL IN THE CASE OF SHRI DADAR (W.RLY) SIDHACHAKRA VARDHMAN TAP AYAMBIL KHATA VS. DDIT (E) (59 ITD 253). 5. METAL INDIA PRODUCTS VS. CIT (113 ITR 830) 6.AMINCHAND PYARELAL VS. IAC (285 ITR 546) 7. PRADEEP LAMP WORKS VS. CIT (249 ITR 797) 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. WE HAVE ALSO CAREFULLY GONE THROUGH RELEVANT CASE LAW CITED BY BOTH THE PARTIES. IN THIS CASES THE ASSESSEE HAD NOT FI LED ANY RETURN FROM ASSESSMENT YEAR 1997-98 TO ASSESSMENT YEARS 2003-04. T HE ASSESSEE RUNS AN ENGINEERING COLLEGE VIZ. G. PULLA REDD Y ENGINEERING COLLEGE AT KURNOOL. DURING THE COURSE OF TDS INSPECTIO N DATED 30-9- 8 8 2004 ON THE ABOVE COLLEGE IT CAME TO LIGHT THAT THE ASSESSEE DID NOT FILE RETURN OF INCOME FROM ASSESSMENT YEARS 1997-98 ONWARDS. 6.1. THE ASSESSEE FILED RETURN OF INCOME VOLUNTARILY O N 15.10.2004 FOR ASSESSMENT YEARS 1997-98 TO 2003-04. TH ERE WAS NO ISSUE OF ANY NOTICE BY THE ASSESSING OFFICER CALLING FOR RET URNS EVEN 15 DAYS AFTER THE DATE PF TDS INSPECTION. THE ASSESSEE HAS V OLUNTARILY FILED RETURNS OF INCOME. IT IS FACTUALLY INCORRECT ON T HE PART OF THE ASSESSEE TO SAY THAT THE RETURNS WERE FILED AT THE BEHEST OF THE DEPARTMENT. THERE IS NO EVIDENCE TO SHOW THAT THE DE PARTMENT INSISTED UPON THE ASSESSEE TO FILE RETURNS OF INCOME. 6.2. THE ASSESSEE AFTER VOLUNTARILY FILING RETURNS AT KURNOOL IN OCTOBER 2004 NEVER RAISED THE QUESTION OF JURISDICTION U PTO 6.1.2005 I.E. AFTER COMPLETION OF PENALTY PROCEEDINGS VIDE ORDER DA TED 4.1.2005. THE ISSUE OF JURISDICTION WAS RAISED FOR THE FIRST TIME DURING ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEARS 2003-04 VIDE LETTER D ATED 6.1.2005. 6.3. AFTER THE FILING OF RETURNS ON 15.10.2004 THE FOLLOWING PROCEEDINGS WERE INITIATED BY THE DEPARTMENT DURING W HICH NO OBJECTION WAS RAISED BYS ASSESSEE UPTO 6.1.2005. A) PENALTY PROCEEDINGS U/S 272(A) INITIATED ON 28.10.20 04 B) 148 ISSUED ON 9.12.2004 C) 143(2) ISSUED ON 13.12.2004 FOR ASSESSMENT YEARS 2003-04 D) SUMMONS ISSUED ON 13.12.2004 TO APPEAR ON 20.12.2004 E) ON 20.12.2004 THE AR APPEARED BUT DID NOT RAISE THE ISSUE OF JURISDICTION. 9 9 6.4. THE ASSESSEE VOLUNTARILY FILED RETURN OF INCOME IN FORM 3A AT KURNOOL AND THE ASSESSING OFFICER HAD THE JURISDICTION OVER THE ASSESSEE AS PER SECTION 124(5) WHICH READS AS FOLLOWS: NOTWITHSTANDING ANYTHING CONTAINED IN THIS SECTIO N OR IN ANY DIRECTION OR ORDER ISSUED U/S 120 EVERY ASSESSING OFFICER SHA LL HAVE ALL THE POWERS CONFERRED BY OR UNDER THIS ACT ON AN ASSESSING OFFI CER IN RESPECT OF THE INCOME ACCRUING OR ARISING OR RECEIVED WITHIN THE AREA IF ANY OVER WHICH HE HAS BEEN VESTED WITH JURISDICTION BY VIRTUE OF THE DIRECTION S OR ORDERS ISSUED UNDER SUB SECTION (1) OR SUB SECTION (2) OF SECTION 120. 6.5. THE MAIN TRUSTEE RESIDES AT KURNOOL THERE IS AN ENGINEERING COLLEGE AT KURNOOL RUN BY THE TRUST AND ALL THE MATER IAL ACCOUNTS RELATING TO THE ACTIVITIES OF THE TRUST WERE FOUND AT THE OFFI CE IN KURNOOL. THE ASSESSEE DESPITE SEVERAL OPPORTUNITIES GIVEN DURING PENALT Y PROCEEDINGS DID NOT RAISE ANY OBJECTION REGARDING JURISDICTION. I N VIEW OF THE ABOVE JCIT KURNOOL HELD THAT THE ASSESSEE IS ASSESSABLE AT KURNOO L IN VIEW OF SECTION 124(5) AND HE HAD JURISDICTION OVER THE ASSESSEE. THUS THE EXERCISE OF JURISDICTIONAL AUTHORITY OVER THE ASSESSEE BY JCIT KURNOOL IS JUSTIFIED. 6.6. UNDER PRE 1988 SEC. 124(5) A PERSON WAS ENTITLED TO CALL A QUESTION AND DISPUTE THE JURISDICTION OF ITO. A) IN CASES WHERE HE HAD FURNISHED A RETURN U/S 139(1) OR HIS ASSESSMENT HAD BEEN COMPLETED WITHIN ONE MONTH FROM THE DATE OF FURNISHING OF RETURN OR COMPLETION OF ASSESSMENT WHIC HEVER IS EARLIER. B) IN CASE WHERE HE HAD NOT MADE A RETURN U/S 139 (1) NO R HIS ASSESSMENT WAS COMPLETED AND HE HAD BEEN SERVED WITH A NO TICE FOR FURNISHING OF RETURN UNDER THE THEN SECTION 139(2) OR 148 THEN WITHIN THE TIME ALLOWED UNDER SUCH NOTICE. 6.7. UNDER POST S.124 OF THE IT ACT 1961: 10 10 A) WHERE HE HAS MADE A RETURN UNDER SUB SECTION (1) OF SECTI ON 115WD OR UNDER SUB SECTION (1) OF SECTION 139 AFTER THE EXPIRY OF ONE MONTH FROM THE DATE ON WHICH HE WAS SERVED WITH A NOTICE UNDER SUB SECTION (1) OF SECTION 142 OR SUB SECTION (2) OF SECTION 115WE SUB SECTION (2) OF SECTION 143 OR AFTER THE COMPLET ION OF THE ASSESSMENT WHICHEVER IS EARLIER. B) WHEN HE HAS MADE NO SUCH RETURN AFTER THE EXPIRY OF T HE TIME ALLOWED BY THE NOTICE UNDER SUB SECTION (2) OF SECTION 115WD OR SUB SECTION 1 OF SECTION 142 OR UNDER SUB SECTION 1 OF SECTIO N 115WH OR UNDER SECTION 148 FOR THE MAKING OF THE RETU RN OR BY THE NOTICE UNDER FIRST PROVISO TO SECTION 115WF OR UNDER THE FIRST PROVISO TO SECTION 144 TO SHOW CAUSE WHY THE ASSESSMENT SHOULD NOT BE COMPLETED TO THE BEST OF THE JUDGEMENT OF THE ASSESSING OFFICER WHICHEVER IS EARLIER. 6.8. A CAREFUL READING OF SECTION 124(3) AND COMPARISON WITH THE EARLIER PROVISION CLEARLY SHOWS THAT THE EMPHASIS IS ON T HE TIME ALLOWED U/S 148 OR 139(2) OR 142(1). THE SECTION CLEARLY DIVID ES THE ASSESSEE INTO TWO CATEGORIES (I)A PERSON WHO HAS MADE RETURN OF INCOME U/S 139(1) I.E. WHO HAS FILED REGULAR RETURN WITHIN DUE DATE IS COVERED UNDER SUB SECTION (A). (II) THE ABOVE SUB SECTION (B) STARTS WITH WHERE HE HAS MADE NO SUCH RETURN MEANING NO RETURN AS ENVISAGED UNDER CLAUSE (A) REGULAR RETURN. IN CASE THE ASSESSEE DOES NOT FI LE REGULAR RETURN THE ASSESSEES CASE IS COVERED BY NOTICE U/S 142(1) OR 148. THE CLAUSE CLEARLY STATES THAT THE TIME LIMIT IS EXPIRY OF TI ME ALLOWED U/S 142(1) OR 148 FOR MAKING RETURN OR UNDER FIRST PROVI SO TO SECTION 144 WHICHEVER IS EARLIER. 7. IN THE INSTANT CASE THE ASSESSEE DID NOT FILE REG ULAR RETURN U/S 139(1) OF IT ACT OR 139(4A) APPLICABLE FOR TRUSTS. HE FILED RETURNS ON VARIOUS DATES FROM 6.10.2004 TO 11.10.2004 FOR THE YE ARS UNDER CONSIDERATION. NOTICE U/S 148 WAS ISSUED ON 9.12.2004 FO R ASSESSMENT 11 11 YEARS UNDER APPEAL. THE ASSESSEE REPLIED VIDE LETTER 17 .12.2004 TO TREAT THE RETURN OF INCOME ALREADY FILED AS FILED IN RESPONSE TO NOTICE U/S 148. THE ASSESSEE DID NOT FILE REGULAR RETURN IN TIME AND NO SUCH RETURN AS ENVISAGED IN CLAUSE (A) ARE FILED. AS PER CLAUSE (B) H E SHOULD HAVE RAISED OBJECTION WITHIN THE TIME ALLOWED BY NOTICE DAT ED 9.12.2004 U/S 148 I.E. BEFORE 19.12.2004 WHICH THE ASSESSEE DID NOT D O. 7.1. SECTION 124(3) IS CLEAR IN ITS EMPHASIS ON TIME ALLOWED AS PER NOTICE U/S 148 OR 142(1) ARE UNDER FIRST PROVISO TO SECTION 144 WHICHEVER IS EARLIER. 7.2. IT CAN BE SEEN THAT CLAUSE (A) LAYS EMPHASIS ON ONE MONTH OF SERVICE OF NOTICE OR COMPLETION OF ASSESSMENT CLAUSE (B) IS CATEGORICAL ON THE TIME ALLOWED UNDER NOTICE U/S 142(1) OR 148 OR 144. IT MAY FURTHER BE NOTED THAT THERE IS NO MENTION OF NOTICE U/S 143 (2) UNDER CLAUSE (B). IT CLEARLY INDICATES THAT THERE IS A P OSSIBILITY THAT THE ASSESSMENT PROCEEDINGS MAY NOT CONTINUE AND THE ASSESSING O FFICER IS ENTITLED TO CLOSE ASSESSMENT PROCEEDINGS BY DROPPING THE SA ME AND HENCE THE MENTION OF COMPLETION OF ASSESSMENT IS NOT THERE IN CLAUSE (B) AS AGAINST ITS MENTION IN CLAUSE (A). THE COMMA USED AFTER THE WORDS WHERE HE HAS MADE NO SUCH RETURN IS CRUCIAL AS IT EMPHASIZES ONLY ON THE TIME ALLOWED UND ER ANY OF THE NOTICES MENTIONED THEREAFTER ONCE IT IS CLEAR THAT THE ASSESSEE HAS NOT MADE RETURNS AS MENTIONED IN CLAUSE (A) OF THE SUB SECTIO N. 7.3. IN OUR OPINION THE ASSESSEE IS SQUARELY COVERED U NDER CLAUSE (B) OF 124(3) AS HE HAD NOT FILED RETURN WITHIN TIME ALLOWED U/S 139(1) AS PER PROVISIONS OF SECTION 139(4A). THAT SUB SE CTION (2) OF SECTION 124 THE QUESTION OF JURISDICTION SHALL BE DETER MINED BY DGIT/CCIT/CIT OR CBDT AS THE CASE MAY BE. THE ASSESSEE DI D NOT 12 12 APPROACH ANY OF THE ABOVE AUTHORITIES TO RESOLVE HIS PR OBLEM OF JURISDICTION. 7.4. IN THE CASE OF HIND TRANSPORT CO. VS. IAC (189 IT R 326) WHEREIN IT WAS HELD THAT:. SECTION 124(5) (A) OF THE IT ACT 1961 INCOME TAX OFFICER JURISDICTION OF ASSESSMENT YEARS 1985 86 WHETHER IN VIEW OF SECTION 124 (5) (A) NO OBJECTION TO JURISDICTION CA N BE RAISED AFTER ASSESSMENT HAS BEEN COMPLETED HELD YES. SECT ION 127 READ WITH SECTION 120 OF THE IT ACT 1961 INCOME TA X AUTHORITIES POWER TO TRANSFER CASES ASSESSMENT YEARS 1985-86 WH ETHER ALLOCATION OF FUNCTIONS TO VARIOUS AUTHORITIES OR O FFICERS IS ONE OF PROCEDURES AND ANY DEFECT ARISING FROM ALLOCATION O F FUNCTIONS IS A MERE IRREGULARITY WHICH DOES NOT AFFECT RESULTANT ACTION HELD YES . A SURVEY OF THE ABOVE PROVISIONS OF THE ACT HIGHLIG HTS THE FOLLOWING SITUATIONS. AFTER CREATING THE VARIOUS I NCOME TAX AUTHORITIES THE ACT DOES NOT PRESCRIBE THEIR RESPE CTIVE JURISDICTION OR FUNCTIONS. ANY CASE CAN BE DEALT WI TH BY ANY INCOME TAX AUTHORITY WITH THE POSSIBLE EXCEPTION OF THE BOARD. ACCORDINGLY THE VARIOUS INCOME TAX AUTHORITIES ARE OF COORDINATE JURISDICTION. WHAT FUNCTION WHICH AUTHORITY SHAL L PERFORM IS LEFT TO BE DECIDED EITHER BY THE BOARD OR BY THE COMMISS IONER. ON WHAT PRINCIPLES THE BOARD AND THE COMMISSIONER WILL ALLOCATE THE FUNCTIONS IS NOT INDICATED IN THE ENACTMENT. THE A CT HAS BEEN ENACTED WITH A VIEW TO COLLECT REVENUE. INCOME TAX IS THE MAIN SOURCE OF REVENUE FOR THE STATE. IT IS THROUGH REV ENUE THAT THE MACHINERY OF STATE IS RUN. COLLECTION OF TAX IS PR ECEDED BY ASSESSMENT THEREOF. IT IS CONSEQUENTLY DESIRABLE T HAT THE ASSESSMENT PROCEEDINGS SHOULD BE COMPLETED EXPEDITI OUSLY BUT DOES NOT MEAN THE ASSESSEE PUT TO UNWARRANTED PREJU DICE THEREBY TAKING INTO ACCOUNT THE CONVENIENCE OF THE ASSESSEE ALSO. IT IS WITH THIS PURPOSE IN VIEW THAT IT HAS BEEN PROVIDED IN SUB SECTION (1) OF SECTION 127 THAT WHENEVER POSSIB LE OPPORTUNITY OF HEARING MAY BE GIVEN TO THE ASSESSEE WHILE TRANSFERRING A CASE FROM ONE PLACE TO ANOTHER. SIN CE THE ASSESSEE DOES NOT SUFFER ANY INCONVENIENCE OR PREJU DICE IF A CASE IS TRANSFERRED LOCALLY NO SUCH OPPORTUNITY HAS BE EN PRESCRIBED. FROM THESE PROVISIONS IT IS OBVIOUS THAT THE BOARD AND THE COMMISSIONER WILL EXERCISE THE POWER OF ALLOCATION OF FUNCTIONS TO VARIOUS AUTHORITIES OR OFFICERS IN THE EXIGENC Y OF TAX COLLECTION WITH DUE REGARD TO THE CONVENIENCE OF TH E ASSESSEE. THE ALLOCATION IS A MEASURE OF ADMINISTRATIVE CONVE NIENCE. IN SUCH A SITUATION THE CONCEPT OF JURISDICTION CANNO T BE IMPORTED AND CERTAINLY NOT IN THE SENSE OF INVALIDATING TH E RESULTANT ACTION ON ACCOUNT OF THE DEFECT IN THE EXERCISE OF FUNCTIONS. 13 13 BEING AN ENACTMENT AIMED AT COLLECTING REVENUE THE LEGISLATURE DID NOT INTEND COLLECTION OF REVENUE TO BE BOGGED D OWN ON ACCOUNT OF TECHNICAL PLEA OF JURISDICTION. IT HAS THEREFORE PRESCRIBED THE LIMIT UP TO WHICH THE PLEA OF JURISD ICTION MAY BE RAISED. AS PROVIDED IN SECTION 124 (5) (A) THE RIG HT IS LOST AS SOON AS THE ASSESSMENT HAS BEEN COMPLETED. EVEN WH ERE THE RIGHT IS EXERCISED BEFORE THE ASSESSMENT IS COMPLET ED THE QUESTION IS TO BE DECIDED BY THE COMMISSIONER OR BY THE BOARD. FROM THE ABOVE ACT IT IS APPARENT THAT THE ACT DOE S NOT TREAT THE ALLOCATION OF FUNCTIONS TO VARIOUS AUTHORITIES OR O FFICERS AS ONE OF SUBSTANCE. IT TREATS THE MATTER AS ONE OF PROCEDURE AND A DEFECT OF PROCEDURE DOES NOT INVALIDATE THE END ACTION. THE ANSWER TO THE FIRST QUESTION THEREFORE IS THA T THE POWER IS ADMINISTRATIVE AND PROCEDURAL AND IS TO BE EXERCIS ED IN THE INTEREST OF EXIGENCIES OF TAX COLLECTION AND THE AN SWER TO THE SECOND QUESTION IS THAT UNDER THE ACT A DEFECT AR ISING FROM ALLOCATION OF FUNCTIONS IS A MERE IRREGULARITY WHIC H DOES NOT AFFECT THE RESULTANT ACTION. 7.5. IN THE CASE OF PANNALAL BINRAJ VS. UOI (31 ITR 5 65) (SC) THE WHERE IN HELD AS FOLLOWS: TAKING NOTE OF THE ABOVE SCHEME OF THE ACT THEIR L ORDSHIPS OVERRULED THE PLEA OF JURISDICTION RAISED IN WALLACE BROS. & CO. LTD. SUPRA. IT HOWEVER SEEMS TO US OPEN TO SERIOUS DOUBT WHETHER T HE ASSESSEE IS ENTITLED TO RAISE THIS QUESTION AT ALL AND WHETHER IT IS REALLY A MATTER FOR DECISION BY THE COURT. CLAUSE 3 OF SECTION 64 PROV IDES THAT ANY QUESTION AS TO THE PLACE OF ASSESSMENT SHALL BE DETERMINED B Y THE COMMISSIONER OF CENTRAL BOARD OF REVENUE. THE THIRD PROVISO TO THE CLAUSE ENACTS THAT IF THE PLACE OF ASSESSMENT IS CALLED IN QUESTI ON BY THE ASSESSEE THE ITO SHALL IF NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM REFER THE MATTER FOR DETERMINATION UNDER THIS SUB SECTION BEF ORE ASSESSMENT IS MADE. THESE PROVISIONS CLEARLY INDICATE THAT THE M ATTER IS MORE ONE OF THE ADMINISTRATIVE CONVENIENCE THAN OF JURISDICTION AND THAT IN ANY EVENT IT IS NOT ONE FOR ADJUDICATION BY THE COURT. THE SECOND PROVISO TO CLASE 3 FURTHER ENACTS THAT THE PLACE OF ASSESSMENT SHALL NOT BE CALLED IN QUESTION BY AN ASSESSEE IF HE HAS MADE A RETURN IN RESPONSE TO THE NOTICE UNDER SUB SECTION 1 OF SECTION 22 OR IF HE HAS NOT MADE SUCH A RETURN IT SHALL NOT BE CALLED IN QUESTION AFTER TH E EXPIRY OF THE TIME ALLOWED BY THE NOTICE FOR THE MAKING OF A RETURN. THIS CONFIRMS US IN THE VIEW THAT THE SCHEME OF THE ACT DOES NOT CONTEM PLATE AN OBJECTION AS TO THE PLACE OF ASSESSMENT BEING RAISED ON AN AP PEAL AGAINST THE ASSESSMENT AFTER THE ASSESSMENT HAS BEEN MADE. 7.6. FROM THE VARIOUS JUDGEMENTS CITED ABOVE IT IS CLEAR THAT THE MATTER OF JURISDICTION IS ONLY A MATTER OF CONVENIENCE AND GENERALLY AN ADMINISTRATIVE ISSUE. THE ASSESSEE GRIEVANCE IF ANY SHOULD BE REGARDING 14 14 THE INCONVENIENCE IN ATTENDING TO THE PROCEEDINGS AT KU RNOOL. THIS GRIEVANCE WOULD HAVE BEEN VALID DURING THE PENDENCY OF PROCEEDINGS BEFORE THE ASSESSING OFFICER ONCE THE PROCEEDINGS ARE OVER THE ISSUE OF JURISDICTION IS ONLY OF ACADEMIC IMPORTANCE UNLESS AND UNTI L THE ASSESSEE SHOWS THAT IT MADE ANY DIFFERENCE ON MERITS HAD HE BEEN ASSESSED BY DDIT(E) HYDERABAD. IN ABSENCE OF ANY SPECIFIC GRIEVANCE B Y THE ASSESSEE THE RAISING OF JURISDICTIONAL ISSUES IS OUT OF TIME LIMITED PRESCRIBED IN SECTION 124(3). 7.7. IT IS SUBMITTED BY A.R. THAT THE PENALTY WAS LE VIED BY THE JCIT OF INCOME TAX UPTO THE DATE OF THE PENALTY ORDE R. THE JCIT HELD THAT THE RETURNS FILED BY THE ASSESSEE ON 6.10.2004 FOR THE ASSESSMENT YEARS 1997-98 1998-99 AND 1999-2000 AND ON 11.10. 2004 FOR THE ASSESSMENT YEARS ARE BEYOND ALL THE TIME LIMITS PRESCRIBED AND ARE TREATED TO BE INVALID RETURNS. IN VIEW OF THE ABOV E PENALTY WAS CALCULATED AND LEVIED AS IF NO RETURN WAS FILED UP TO T HE DATE OF LEVY OF PENALTY. IT WAS TREATED BY THE JCIT THAT THE DEFAUL T OF NOT FILING THE RETURN CONTINUED UP TO THE DATE OF LEVY OF PENALTY O N 4.1.2005. 8. IT WAS ARGUED BY THE ASSESSEE THAT THE PENALTY SHOU LD HAVE BEEN RESTRICTED UPTO THE TIME LIMIT PRESCRIBED U/S 139 ( 4). THEREFORE IT WAS SUBMITTED THAT THE PERIOD OF LEVY OF PENALTY SHOUL D HAVE BEEN RESTRICTED UPTO 31.3.2000 FOR ASSESSMENT YEARS 1998-99 31 3 2001 FOR ASSESSMENT YEARS 1999-2000 31.3.2001 ASSESSMENT YEARS 1999- 2000 31.3.2002 FOR ASSESSMENT YEARS 2001-02 AND 31.3.2003 FO R ASSESSMENT YEARS 2001-02. THE D.R. MADE AN ARGUMENT THAT IT IS NOT TENABLE IN VIEW OF THE CLEAR CUT PROVISIONS OF SECTION 272A(2) THAT THE PENALTY SHALL BE PAYABLE FOR EVERY DAY DURING WHICH THE FAILURE TO FILE RETURN CONTINUES. HE SUBMITTED THAT VARIOUS COURTS HAVE HELD TH AT THE TIME LIMIT PRESCRIBED U/S 139(4) HAS NOTHING TO DO WITH THE PENALTY LEVIABLE U/S 271 (1) (A) AS THE PROVISIONS OF 271 (1) (A) WITH R EGARD TO 15 15 CALCULATION OF PENALTY ARE SIMILAR TO THAT OF 272A (2) (E). THE PENALTY IN THIS CASE ALSO IS CLEARLY LEVIABLE FOR THE PERIOD DURING WHICH THE DEFAULT CONTINUES. THE DEFAULT IN THIS CASE HAS CONTINUED TILL TH E DATE OF LEVY OF PENALTY AS THE RETURNS FILED BY THE ASSESSEE ARE TREATED AS INVALID AND NON EST. W.E.F. 1.4.76 THE UPPER LIMIT OF PENALTY I MPOSABLE HAS BEEN DONE AWAY WITH AND HENCE THE PENALTY IS LEVIABLE DURI NG THE PERIOD FOR WHICH THE DEFAULT CONTINUES. AS LEVY OF PENALTY U/S 27 2A(2)(E) IS NOT LINKED WITH THE ASSESSED/RETURNED INCOME THE PENALTY HA S BEEN RIGHTLY LEVIED BY THE ASSESSING OFFICER AS PER THE PROVISIONS OF TH E ACT DURING WHICH DEFAULT CONTINUED. THE D.R. SUBMITTED THAT THE DEFAULT WAS OVER ON 17.12.2004 WHEN IN RESPONSE TO THE NOTICE U/S 148 T HE ASSESSEE ASKED THAT THE RETURNS FILED IN THE MONTH OCTOBER 2004 CAN BE TREATED AS FILED IN RESPONSE TO NOTICE U/S 148. 8.1. THE D.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT SHOWN ANY JUST AND REASONABLE CAUSE FOR THE INORDINATE DELAY IN FILING OF RETURNS AS PER THE PROVISIONS OF THE ACT. FOR THE ASSESSMENT YEA RS THE ASSESSEE HAS ONLY STATED THAT IT WAS PREVENTED BY A REASONABLE A ND SUFFICIENT CAUSE BUT DID NOT SPECIFY WHAT IS THAT REASONABLE CAUSE. FOR THE SUBSEQUENT YEARS THE ASSESSEE ONLY PLEADED THAT THE SUBSEQ UENT YEARS RETURNS COULD NOT HAVE BEEN FILED WITHOUT FINALIZING THE EARLIER YEARS BOOKS OF ACCOUNTS SHEET AND HENCE NON FILING OF RETURNS F OR EARLIER YEARS CONSTITUTED A REASONABLE CAUSE FOR SUBSEQUENT YEARS. 8.2. THE D.R. CONTENDED THAT DURING THE PERIOD UNDE R CONSIDERATION THE TRUST WAS CONTINUOUSLY EXPANDING ITS EDU CATIONAL INSTITUTIONS AND WAS ESTABLISHING NEW COLLEGES/NEW COURSE S WHICH CLEARLY SHOWS THAT THE TRUST WAS VERY ACTIVE IN ALL SPHERES OF I TS ACTIVITIES AND IT WAS PURE NEGLIGENCE ON THE PART OF THE TRUSTEES WHICH CA USE INORDINATE DELAY IN FILING OF RETURN. THE TRUSTEES BY THEIR OW N ADMISSION CLARIFIED THAT THERE ARE NO MAJOR REASONABLE CAUSES FOR THE CONTI NUED DELAY IN 16 16 FILING OF RETURNS. THE DELAY OF EIGHT YEARS CAN IN NO WAY BE ATTRIBUTED TO THE NON AVAILABILITY OF ACCOUNTS STAFF IN THE LIGHT OF THE FACT THAT ALL OTHER ACTIVITIES OF THE TRUST WERE BEING CARRIED ON WITHOUT ANY HINDRANCE. IT IS SUBMITTED BY D.R. THAT THE JCIT KURNOOL HAD JURISDICTION OVER THE ASSESSEE TO LEVY OF PENALTY. ALTERNATIVELY THE ASSESSEE O BJECTION TO THE JURISDICTION IS BEYOND THE TIME LIMITS PRESCRIBED U/S 12 4(3) AND NOT TENABLE. THE ASSESSEE ARGUMENT THAT IS NOT REQUIRED TO FILE RETURNS AS THE TAXABLE INCOME IS NIL AND THE RETURNS ARE TAX NEUT RAL IS ALSO NOT TENABLE. IN VIEW OF THE ABOVE THE JCIT WAS CORRECT I N LEVYING THE PENALTY FOR ALL THE YEARS UNDER CONSIDERATION AND THE QUANTUM OF PENALTY WAS ALSO LEVIED CORRECTLY UPTO THE DATE OF DEFAULT. 8.3. FURTHER IN THIS CASE THOUGH THE INCOME IS BELOW THE TAXABLE LIMIT THE ASSESSEE REQUIRED TO FILE RETURN OF INCOME SIN CE THE INCOME OF THE ASSESSEE NOT BELOW THE TAXABLE LIMIT BEFORE THE APP LICATION OF PROVISIONS OF SEC. 11 & 12 AND THE ASSESSEE NOT COVERED BY PROVISIONS OF SECTION 139 (4A). THIS VIEW IS SUPPORTED BY JUDGEMENT OF PUBJAB & HARYANA CASE IN THE CASE OF LATE GOPIMAL KUTHIALA CHARI TABLE TRUST VS. ITO (46 ITR 436) (P&H) WHEREIN HELD THAT ALTHOUGH TH E TRUST OR AN INSTITUTION MAY CLAIM THAT ITS INCOME IS EXEMPT FROM TAX IT SHOULD BE FURNISHED RETURN OF INCOME . 8.4. IT WAS HELD BY HONBLE BOMBAY HIGH COURT IN THE CASE OF DIT VS. MALAD JAIN YUVAK MANDAL MEDICAL RELIEF CENTRE (25 0 ITR 488 (BOM) THAT: 61.3 EVEN THOUGH THE INCOME OF A CHARITABLE OR RE LIGIOUS TRUST MAY NOT BE LIABLE TO TAX AFTER GIVING EFFECT TO THE PROVISI ONS OF SECTIONS 11 AND 12 SUB SECTION (4A) OF SECTION 139 CASTS AN OBLIGA TION ON THE PERSON IN RECEIPT OF SUCH INCOME TO FILE A RETURN IF THE INCO ME WITHOUT GIVING EFFECT TO THE PROVISIONS OF SECTIONS 11 AND 12 EXCE EDS THE EXEMPTION LIMIT. SINCE THE QUANTUM OF PENALTY FOR DEFAULT IN FILING THE RETURN WAS TO BE CALCULATED WITH REFERENCE TO THE AMOUNT OF TA X PAYABLE NO PENALTY FOR DEFAULT IN FILING THE RETURN UNDER SECT ION 139 (4A) COULD BE LEVIED IN CASES WHERE NO TAX WAS PAYABLE AFTER GIVI NG EFFECT TO THE 17 17 PROVISIONS OF SECTION 11 AND 12. THE AMENDED PROVI SIONS PROVIDE FOR LEVY OF PENALTY IN SUCH CASES IN A SUM NOT EXCEEDIN G ONE PER CENT OF THE TOTAL INCOME OF THE TRUST (WITHOUT GIVING EFFECT TO THE PROVISIONS OF SECTIONS 11 AND 12) FOR EACH YEAR OF DEFAULT OR PAR T THEREOF. 8.5. FURTHER ARGUMENT OF THE ASSESSEE COUNSEL IS THAT TH E RETURN FILED BY THE ASSESSEE HAVE BEEN TREATED AS NON EST RETURN AND NO LIABILITY OF TAX AS SUCH NO PENALTY LEVIABLE. IN OUR OPINION TH IS ARGUMENT HOLDS NO MERIT. THE PENALTY PROCEEDINGS U/S 272A(2)(E) IS AN INDEPENDENT PROVISION FROM ASSESSMENT OF INCOME AND DETERMINATION OF INCOME NOTHING TO DO WITH THE QUANTUM OF PENALTY AS LONG AS ASSESSEE IS REQUIRED TO FILE RETURN OF INCOME U/S 139(4A) OF THE IT ACT. ONCE THE ASSESSEE LIABLE TO FILE RETURN OF INCOME UNDER THE PROVI SIONS OF ACT AND IT FAILS TO RETURN OF INCOME THEN PROVISIONS OF S.272A(2)( E) IS APPLICABLE AND ARISING OF NON LIABILITY OF TAX NOTHING TO DO WI TH THE PROVISIONS OF THIS SECTION. WE ARE PLACING RELIANCE ON THE JUDGEMENT OF GU JARAT HIGH COULD GODIJI PARSHNATHJI JAIN VS. CIUT (226 ITR 798) WHERE IN HELD THAT LEVY OF PENALTY U/S 271(1)(A) FOR DELAY IN FILING RETURN BY CHARITABLE TRUST AS PROVIDED U/S 139(4A) EVEN WHEN NO TAX WAS PAYABLE BY A TRUST IS JUSTIFIED. 8.6. IN VIEW OF THE ABOVE DISCUSSION THE ASSESSEES ARGU MENT THAT BECAUSE OF ULTIMATE INCOME IS NIL IT IS NOT REQUIR ED TO FILE RETURN CANNOT BE UPHELD. 8.7. FURTHER ARGUMENT OF THE ASSESSEE COUNSEL IS THAT THE PENALTY IF ANY SHOULD BE IMPOSED WITHIN A REASONABLE PERIOD F ROM THE END OF ASSESSMENT YEAR AND THEREFORE INITIATION AND LEVY OF PE NALTY AFTER A LONG PERIOD OF 8 YEARS IS WHOLLY UNSUSTAINABLE. THIS ARGUME NT HAVE NO MERIT SINCE A PLAIN READING OF SECTION 272A(2)(E) SHOWS THAT T HERE IS NO TIME LIMIT PRESCRIBED UNDER THE ACT FOR INITIATION OF PENA LTY UNDER THE SAID 18 18 SECTION. THE LEVY OF PENALTY UNDER THAT SECTION HAS NO LINK WITH THE ASSESSMENT PROCEEDINGS. 8.8. FURTHER THE ARGUMENT OF THE ASSESSEE COUNSEL IS THA T THE PENALTY TO BE LEVIED FOR NON FILING THE RETURN OF I NCOME TO THE PERIOD WITHIN WHICH THE ASSESSEE COULD HAVE FILED THE RETURN O F INCOME AND IT CANNOT BE LEVIED FOR AN INDEFINITE PERIOD TILL THE D EFAULT CONTINUES. WE FIND FORCE IN THIS ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE. THE ASSESSEE CANNOT FILE A RETURN OF INCOME AFTER THE TIME LI MIT PROVIDED U/S 139(4) OF THE IT ACT. IN SUCH CIRCUMSTANCES EVEN IF TH E ASSESSEE FILES THE RETURN OF INCOME FOR ANY ASSESSMENT YEAR AFTER THE EXPIRY OF THE TIME LIMIT LAID DOWN U/S 139(4) IT IS INVALID RETURN . IN VIEW OF THIS WE ARE OF THE OPINION THAT FOR DEFAULT U/S 272A(2)(E) OF THE IT ACT TIME LIMIT TO BE COUNTED AS LAID DOWN IN SECTION 139 (4) OF THE IT ACT. ACCORDINGLY WE DIRECT THE ASSESSING OFFICER TO RECOMPUTED THE PENALTY. THE LEARNED DR RELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF SRI DADAR (W.RLY) SIDHACHAKRA VARDHAMAN TAP AYAMBIL KHAT A VS. DY. DIRECTOR OF INVESTIGATION (E) (59 ITD 253) (SMC). TH IS ORDER OF THE TRIBUNAL IS DELIVERED BY SINGLE MEMBER BENCH HENCE NOT FOLLOWED. 8.9. FURTHER THE ASSESSEE HAS NOT SHOW ANY REASONABLE CA USE FOR NOT FILING RETURN OF INCOME AS PER SECTION 139 OF THE I T ACT. THE ASSESSEE HAS BEEN CARRIED ON ITS ACTIVITIES WITHOUT ANY STOP AND IT MUST HAVE KNOW THE LEGAL OBLIGATIONS TO FILE RETURN OF IN COME IN ACCORDANCE WITH LAW AND IN OUR OPINION IT IS DUE TO THE NEGLIG ENCE ON THE PART OF THE ASSESSEE THE INORDINATE DELAY WAS CAUSED DUE TO THE NEGLI GENCE OF THE ASSESSEE. THE DEFAULT OF THE ASSESSEE CANNOT BE CONDONED SIM PLY BECAUSE THE ASSESSEE SEEKS FOR SYMPATHY OR MERELY OUT OF BE NEVOLENCE TO THE PARTY SEEKING RELIEF. IN GRANTING THE INDULG ENCE AND EXCUSING THE DEFAULT IT MUST BE PROVED BEYOND THE SHADOW OF DOUBT THAT THE ASSESSEE WAS DILIGENT AND WAS NOT GUILTY OF NEGLIGENCE WHATSOEVE R. A DISTINCTION 19 19 MUST BE MADE BETWEEN A CASE WHERE THE DELAY IS INORDINA TE AND A CASE WHERE THE DELAY OF A FEW DAYS. WHEREAS IN THE FORMER CASE THE CONSIDERATION OF PREJUDICE TO THE OTHER SIDE WILL BE A RELEVANT FACTOR SO THE CASE CALLS FOR A MORE CAUTIOUS APPROACH. BUT IN THE L ATTER CASE NO SUCH CONSIDERATION MAY ARISE AND SUCH A CASE DESERVES A REBEL APPROACH. NO HARD AND FAST RULE CAN BE LAID DOWN IN T HIS REGARD. THE COURT HAS TO EXERCISE THE DISCRETION ON THE FACTS OF EACH C ASE KEEPING IN MIND THAT IN CONSIDERING THE EXPRESSION SUFFICIENT CAUSE THE PRINCIPLES ADVANCING SUBSTANTIAL JUSTICE IS OF PRIME IMPORTANCE. THE SUFFICIENT CAUSE WITHIN THE CONTEMPLATION OF THE PROVISIONS MUST BE A CAUSE WHICH IS BEYOND THE CONTROL OF THE PARTY INVOKING THE AID O F THE PROVISIONS. THE CAUSE FOR THE DELAY IN FILING THE RETURN WHICH BY DUE CARE AND ATTENTION COULD HAVE BEEN AVOIDED CANNOT BE A SUFFICIE NT CAUSE. WHERE NO NEGLIGENCE NOR ACTION OR WANT OF BONA FIDE CAN B E IMPUTED TO THE ASSESSEE A LIBERAL CONSTRUCTIONS OF THE PROVISIONS HAS TO BE M ADE IN ORDER TO ADVANCE SUBSTANTIAL JUSTICE. SEEKERS OF JUSTICE MUST COME WITH CLEAN HANDS. IN THE PRESENT CASE WE FIND THAT THE ASSESSE E CANNOT JUSTIFY THE DELAY. ONLY THE REASON GIVEN IS THAT NON AVAILABILITY OF ACCOUNTING STAFF AND THERE WAS NO MAJOR REASONABLE CAUSE A S PER THE OWN ADMISSION GIVEN BY SHRI SUBBA REDDY TRUSTEE OF T HE ASSESSEE WHOSE STATEMENT REPRODUCED IN THE PAGE NO.2 OF THE PEN ALTY ORDER. IT WAS STATED BY HIM THAT THERE WAS NO SPECIFIC REASON FOR D ELAY IN FILING THE RETURN OF INCOME HE HAS GIVEN GENERAL REASON THAT STAFF CONVERSANT WITH THE AUDITING PROCEDURE WAS NOT AVAILABLE. THIS WAS FORTIFIED BY THE FURTHER STATEMENT OF SHRI G. PULLA REDD MAIN TRUSTEE OF THE ASSESSEE WHEREIN CONFIRMED THAT HE IS UNABLE TO RECOLLECT ANY MA JOR REASON AND THE DELAY IN FILING THE RETURN OF THE INCOME BY THE TRUST IS WITHOUT ANY REASON AND HE STATED THAT HE DEEPLY REGRET THE SAME. THE DELAY OF ALMOST 8 YEARS CANNOT BE ATTRIBUTED TO NON AVAILABILIT Y OF ACCOUNT STAFF IN THE LIGHT OF THE FACT THAT THE ASSESSEE SUCCESSFULLY CARRYING OUT ALL OTHER ACTIVITIES OF THE TRUST. IN OUR OPINION THE ASSESSEE HAS NOT SHOW ANY 20 20 REASONABLE CAUSE FOR NOT FILING THE RETURN OF INCOME IN ACCORDANCE WITH THE PROVISIONS OF S.139 OF THE ACT. ACCORDINGLY IN OUR OPINION PENALTY IS LEVIABLE U/S 272A(2)(E) OF THE IT ACT IN ALL ASSESSMENT Y EARS. 8.10. FOR THE ASSESSMENT YEAR 1997-98 THE ASSESSEE SUBMITT ED THAT TIME LIMIT FOR FILING THE RETURN OF INCOME EVEN U/.S 148 EXPIRED ON 31.3.2004. THE RETURN FILED ON 16.10.2004 IS BEYOND TIME AND NO PENALTY COULD BE LEVIED. THIS ARGUMENTS OF THE ASSESSEE HO LD MERIT. SINCE WE HAVE ALREADY HELD EARLIER PARA THAT PENALTY BE LEVIABLE FOR NON FILING RETURN OF INCOME TILL THE TIME AVAILABLE TO F ILE THE RETURN OF INCOME U/S 139(4) AS SUCH THE QUESTION OF FILING THE RETURN O F INCOME U/S 148 IS NOT RELEVANT. 9. IN THE RESULT THE FIVE APPEALS OF THE ASSESSEE STAND PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT : 11.2.2010 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 11 TH FEBRUARY 2010 COPY FORWARDED TO: 1. M/S SEKHAR & CO. CA 133/4 RP ROAD SECUNDERABAD 2. JCIT KURNOOL RANGE KURNOOL. 2. CIT(A) GUNTUR CAMP AT HYDERABAD 3. CIT(A) HYDERABAD. 4. CIT HYDERABAD 5. THE D.R. ITAT HYDERABAD. NP