1969 (9) TMI 30 - HC - Income Tax

Failure to file the returns as provided in section 139(1) - Whether the Tribunal rightly held that the orders of penalties in question under section 271(1)(a) of the Income-tax Act 1961 were not tenable in law - question is answered in the negative

Summary

Issues:
1. Interpretation of penalty provisions under section 271(1)(a) of the Income-tax Act, 1961.
2. Whether penalty can be imposed for default in filing returns under section 139(1) after filing returns under section 139(2).

Analysis:

The judgment delivered by the High Court of Rajasthan involved a reference by the Income-tax Appellate Tribunal regarding the imposition of penalties on two assessees for failing to submit their income tax returns under section 139(1) of the Income-tax Act, 1961. The Tribunal had to determine whether the penalties imposed under section 271(1)(a) were legally tenable. The assessees had initially applied for extensions to file their returns, but failed to do so even after multiple extensions. The Income-tax Officer initiated penalty proceedings under section 271(1)(a) for the default in filing returns under section 139(1) despite returns being eventually filed under section 139(2).

The Tribunal's reasoning revolved around the interpretation of penalty provisions under section 271(1)(a) of the Act and a comparison with the corresponding provisions of the old Act, specifically section 28(1)(a). The Tribunal highlighted the addition of the words "as the case may be" in section 271(1)(a) and emphasized that the default continued until the return was filed, regardless of the provision under which it was filed. The Tribunal's view was that penalties for defaults in filing returns under section 139(1) could not be imposed if assessment proceedings were based on returns filed under section 139(2).

The High Court analyzed the Tribunal's interpretation and disagreed with it. The Court clarified that the words "as the case may be" in section 271(1)(a) were intended to cover all scenarios of default in filing returns, whether under section 139(1) or 139(2). The Court emphasized that the default ceases once the return is filed, irrespective of the provision under which it is filed. The Court rejected the Tribunal's view that penalty proceedings could not be initiated for defaults under section 139(1) if assessment proceedings were based on returns filed under section 139(2).

Furthermore, the Court addressed arguments regarding the condonation of defaults, equitable considerations in imposing penalties, and the general nature of proceedings under the Act. The Court emphasized that the law treats all defaults equally in terms of penalty imposition and upheld the Income-tax Officer's authority to determine the appropriate penalty based on the default. The Court concluded that the Tribunal's interpretation of section 271(1)(a) was unjustified and answered the referred question in the negative, indicating that penalties for defaults in filing returns under section 139(1) could indeed be imposed even after filing returns under section 139(2).

In conclusion, the High Court's judgment clarified the interpretation of penalty provisions under the Income-tax Act, emphasizing that defaults in filing returns under section 139(1) can lead to penalties even if returns are eventually filed under section 139(2). The Court's analysis provided clarity on the cessation of default upon filing the return and upheld the Income-tax Officer's authority to impose penalties based on the nature and duration of the default.