1974 (7) TMI 5 - HC - Income Tax

Issues Involved
1. Legality of imposing penalty for late filing of returns under Section 139(1) and 139(4) of the Income Tax Act, 1961.
2. Interpretation of Section 139(1), proviso (iii), and Section 139(4) of the Income Tax Act, 1961.
3. Jurisdiction and competence of the Income Tax Officer (ITO) to impose interest under Section 139(1), proviso (iii).
4. Applicability of penalty proceedings under Section 271(1)(a) of the Income Tax Act, 1961.
5. Double jeopardy in the context of levying penal interest and initiating penalty proceedings.

Detailed Analysis

1. Legality of Imposing Penalty for Late Filing of Returns
The appellant contended that Section 22(3) of the Indian Income Tax Act, 1922, should be read as a proviso to Section 22(1)/22(2), implying that if the return is filed before the assessment is complete, it cannot be considered late. This argument was based on Supreme Court decisions in CIT v. Kulu Valley Transport Co. P. Ltd. and S.C. Prashar v. Vasantsen Dwarkadas. The trial judge dismissed this contention, relying on the Supreme Court decision in Gursahai Saigal v. CIT, which held that the return filed after the due date is considered late, making the imposition of penalty lawful.

2. Interpretation of Section 139(1), Proviso (iii), and Section 139(4)
The appellant, through Dr. Debi Pal, argued that Section 139(1), proviso (iii), and Section 139(4) should be interpreted to mean that interest at 9% can only be charged if the ITO extends the filing date. Dr. Pal emphasized that Section 139(4) gives a statutory right to file returns within four years, and the provisions of proviso (iii) should apply mutatis mutandis without requiring an application for extension. The court, however, found this interpretation untenable, stating that such a reading would render the ITO's discretionary power to extend the filing date meaningless and redundant. The court relied on established principles of statutory interpretation, emphasizing that the clear and unambiguous language of the statute must be adhered to.

3. Jurisdiction and Competence of the ITO to Impose Interest
Dr. Pal argued that the ITO has no jurisdiction to impose interest under proviso (iii) unless he extends the filing date. The court rejected this, stating that Section 139(4) provides a statutory right to file returns within four years, and the imposition of interest is mandatory as per proviso (iii) of Section 139(1). The court clarified that the ITO's discretionary power to extend the filing date and impose interest is separate from the statutory right under Section 139(4).

4. Applicability of Penalty Proceedings under Section 271(1)(a)
The court examined whether filing a return under Section 139(4) exempts an assessee from penalty under Section 271(1)(a). The court referenced decisions from the Madras, Andhra Pradesh, and Gujarat High Courts, which uniformly held that filing under Section 139(4) does not shield an assessee from penalty for late filing under Section 271(1)(a). The court agreed with these precedents, stating that the statutory right to file within four years under Section 139(4) does not negate the penalty for failing to file within the time allowed under Section 139(1).

5. Double Jeopardy in Levying Penal Interest and Initiating Penalty Proceedings
The appellant argued that levying penal interest under Section 139 and initiating penalty proceedings under Section 271 amounts to double jeopardy. The court dismissed this argument, stating that interest is a compensatory measure for the delay in filing, while penalty under Section 271(1)(a) is punitive for the default. The court found no legal basis to consider this as double jeopardy.

Conclusion
The court dismissed the appeal, upholding the trial judge's decision. It concluded that the appellant's contentions lacked merit, and the statutory provisions were clear in mandating interest and allowing penalty proceedings for late filing of returns. The court emphasized strict adherence to the statutory language and dismissed the argument that the interpretation should favor the assessee when the statute is clear and unambiguous.

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