RAMANATHAN V Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) OF the two questions referred to us under section 66(2) of the Act, one has been withdrawn by the assessee and the surviving question is :

(2.) THE facts are these :For the year in question, the assessment on the assessee as a Hindu undivided family was completed under section 23(4) of the Act on January 12, 1954. THE late karta of the family, Vriddachala Reddiar, failed to comply with the notice served upon him under section 22(2) of the Act. Two proceedings were simultaneously set on foot, one of which was an application under section 27 of the Act for cancelling the assessment. This application was dismissed by the Income-tax Officer on July 2, 1954. An appeal to the Appellate Assistant Commissioner was also dismissed on August 10, 1955. Simultaneously with these proceedings, an appeal in so far as the quantum of income determined on best of judgment as liable to be taxed was taken to the Appellate Assistant Commissioner. He made an order on August 10, 1955, reducing the computed income by Rs. 5,000. Appeals were taken to the Tribunal both from the decision of the Appellate Assistant Commissioner in the quantum-appeal and the dismissal of the application under section 27. A composite order was passed by the Tribunal. THE Tribunal directed "that the two cases in appeal be restored to the file of the Income-tax Officer, and they be disposed of in accordance with law." This order was made on June 12, 1956.

(3.) IN an application under section 27 of the Act, an assessee is required to satisfy the INcome-tax Officer that he was prevented by sufficient cause from making the return or from complying with the terms of the relevant notice. When we come to section 28, however, the INcome-tax Officer has to be satisfied that any person has without reasonable cause failed to furnish the return. While in the one case, the requirement is only a sufficient cause to enable the cancellation of the assessment, to justify the imposition of the penalty, the absence of reasonable cause has to be established. Again, in an application under section 27 of the Act, it seems to us that the onus is upon the assessee to establish sufficient cause, while under section 28, before a penalty could be imposed, it is for the department to show that the assessee who failed to submit the return did so without reasonable cause. The extracts from the order of the INcome-tax Officer and the Appellate Tribunal in so far as the imposition of the penalty is concerned clearly establish that both of these authorities relied only upon the failure by the assessee to show cause in the proceeding under section 27 in supporting their conclusions justifying imposition of the penalty under section 28. It is noteworthy that, in the present case, the return was filed on January 24, 1954, even before the order of assessment under section 23(4) was served upon the assessee. It is not a case where, after becoming aware of the making of the order of assessment to the best of judgment, that the assessee filed the return. Before the authorities below, evidence was produced to show that the assessee was suffering from heart disease and in his capacity as permanent headman of the village had also been granted leave on a previous occasion on account of illness. IN his reply to the notice, he pointed out that it was on account of his illness that he was unable to hand over the books to the auditor, a fact which was really supported by the auditor. These facts have not really been taken into account by the departmental authorities. More particularly, the Tribunal has ignored the difference in the language employed in sections 27 and 28 of the Act in this regard, and has virtually relied upon his failure to show sufficient cause, which led to the dismissal of the application under section 27, as establishing also the absence of a reasonable cause under section 28. While the INcome-tax Officer was satisfied that there was sufficient cause for failure to make the return, the grounds shown by the assessee may well amount to reasonable cause within the meaning of section 28.