CHHAGANLAL S UTERIYA Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) BY this petition under Article 226 of the Constitution of India, the petitioner has challenged the order dated 15.9.1999 passed by the Income Tax Officer, Ward No.2(5), Rajkot, imposing penalty of Rs.83,640/- against the petitioner under section 271(1)(c) of the Income Tax Act, 1961 (the Act). The petitioner also challenged the order dated 22.2.2002 passed by the Commissioner of Income Tax, Rajkot-III, rejecting the revision petition filed by the petitioner under section 264 of the Act.

(2.) THE petitioner, an individual, is a proprietor of a business by the name of M/s Rashmi Furniture in Rajkot. For the assessment year 1994-95, the petitioner had not filed his return of income. THE respondent No.1 issued notice under section 148 of the Act on 10.3.1997, notices under section 142(1) of the Act which came to be issued on 15.10.97 and 19.3.99 as well as a show cause notice under the first proviso to section 144(1) of the Act on 19.3.99. However, since the petitioner did not reply to the said notices, the Assessing Officer finalized the assessment proceedings under section 144 of the Act on 31.3.1999, determining total income of the petitioner at Rs.2,39,190/-. THE Assessing Officer also initiated penalty proceedings under section 271(1)(c) of the Act. Accordingly, a show cause notice came to be issued to the petitioner under section 274 of the Act read with section 271(1)(c) of the Act on 31.3.1999 which came to be served upon the petitioner. However, the petitioner did not submit any reply to the same, hence, the respondent No.1 presumed that the petitioner had accepted the assessment order and had nothing more to say in the penalty proceedings initiated 271(1)(c) of the Act and imposed minimum penalty of Rs.83,640/-. Being aggrieved, the petitioner filed a revision petition under section 264 of the Act before the respondent No.2, which came to be rejected vide the impugned order dated 7.3.2002 on the ground that the petitioner had failed to comply with the show cause notice as well as the reminder issued to him. Being aggrieved, the petitioner has filed the present petition challenging the above referred orders.

(3.) IT was submitted that the said conditions are cumulative in nature, and each one of them is required to be satisfied for the purpose of invoking the provisions of Explanation 3. Adverting to the facts of the present case, it was submitted that the period specified under sub-section (1) of section 153 of the Act, is two years, hence, Explanation 3 to section 271(1) could have been invoked against the petitioner if until the expiry of the period specified under section 153(1) of the Act, that is by 31st March 1997, no notice had been issued to the petitioner under section 142(1)(i) or section 148 of the Act. However, in the facts of the present case, as is evident from the order made under section 271(1)(c) of the Act, notice under section 148 was issued to the petitioner on 10.3.1997, that is, before the expiry of the period mentioned in section 153(1) of the Act. In the circumstances, Explanation 3 would not be applicable inasmuch as the condition that no notice should have been issued to such person under section 142(1) or section 148 of the Act within the period prescribed under section 153(1) of the Act, is not fulfilled in the present case. IT was submitted that unless a person falls within the purview of Explanation 3 to sub-section (1) of section 271 of the Act, failure to furnish a return would not amount to concealment within the meaning of section 271(1)(c). In the circumstances, the impugned order levying penalty under section 271(1)(c) of the Act on the petitioner for failure to furnish return of income for assessment year 1994-95 without fulfilling the conditions of Explanation 3 to section 271(1) of the Act, being contrary to the statutory provisions, cannot be sustained and deserves to be quashed and set aside.