1978 (12) TMI 25 - HC - Income Tax

Issues Involved:
1. Whether the default under section 139(1) of the Income-tax Act, 1961, is independent of section 139(2) and survives after compliance with a notice under section 139(2).
2. The interpretation and interaction of sections 139(1), 139(2), 139(7), 148, and 271(1)(a) of the Income-tax Act, 1961.
3. The applicability of penalty provisions under section 271(1)(a) for failure to file a return under section 139(1) after filing a return under section 139(2).

Issue-wise Detailed Analysis:

1. Independence of Default under Section 139(1):
The court examined whether the default under section 139(1) is independent of section 139(2) and survives after the assessee complies with a notice under section 139(2). The assessee argued that once a return is filed in response to a notice under section 139(2), no penalty could be levied for the default under section 139(1). The court rejected this contention, stating that the default under section 139(1) is independent and survives even after compliance with section 139(2).

2. Interpretation of Relevant Sections:
The court analyzed the statutory provisions involved:
- Section 139(1) imposes an obligation on every person whose total income exceeds the non-taxable limit to file a return voluntarily.
- Section 139(2) allows the Income-tax Officer (ITO) to issue a notice requiring the filing of a return if the person is assessable.
- Section 139(7) states that no return under section 139(1) is needed if a return has already been furnished under section 139(2).
- Section 148 deals with the procedure for assessing escaped income and equates the notice under section 148 to that under section 139(2).
- Section 271(1)(a) provides for penalties for failure to furnish returns as required under sections 139(1), 139(2), or 148.

The court concluded that section 139(1) and section 139(2) contemplate separate defaults, and the combined effect of these sections is to create multiple defaults, each of which can attract a penalty under section 271(1)(a).

3. Applicability of Penalty Provisions:
The court held that the obligation to file a return under section 139(1) is independent of the obligation under section 139(2). Filing a return under section 139(2) does not absolve the default under section 139(1). The court referred to multiple High Court decisions supporting this view, including those from Rajasthan, Delhi, Andhra Pradesh, and Gujarat High Courts. These courts held that compliance with a notice under section 139(2) does not condone the default under section 139(1).

The court disagreed with the Patna High Court's decision in Addl. CIT v. Bihar Textiles, which held that issuing a notice under section 139(2) precludes the application of penal provisions for failure to file a return under section 139(1). The court found no statutory basis for this interpretation and emphasized that the ITO has no power to condone defaults under section 139(1) unless reasonable cause is shown.

The court concluded that the default committed under section 139(1) is not wiped out by subsequent compliance with section 139(2). Therefore, the ITO is justified in imposing a penalty for the default under section 139(1) even if the return is filed in response to a notice under section 139(2).

Conclusion:
The court answered the referred question in the affirmative, holding that the default under section 139(1) is independent of section 139(2) and survives after compliance with a notice under section 139(2). The penalty imposed for the default under section 139(1) was upheld, and the assessee's appeal was dismissed. There was no order as to costs.

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