1971 (12) TMI 36 - HC - Income Tax

1. Whether, when the due date for compliance with the notice under section 139(2), falls within the due date for compliance with the provisions of section 139(1), the notice issued under section 139(2) is illegal ? 2. Whether non-compliance with the provisions of section 139(2), constitutes sufficient cause for exoneration from levy of penalty under section 271(1)(a)?

Summary

Issues:
1. Interpretation of section 139(2) of the Income-tax Act regarding the legality of notice issuance.
2. Consideration of non-compliance with section 139(2) as sufficient cause for exemption from penalty under section 271(1)(a).
3. Determination of liability to penalty under section 271(1)(a) for non-compliance with section 139(2).
4. Application of section 271(2) in computing penalty for a partner of a firm.

Analysis:
The judgment pertains to a reference under section 256(1) of the Income-tax Act, 1961, for the assessment year 1964-65. The primary issue revolved around the legality of notices issued under section 139(2) of the Act. The court deliberated on whether the Income-tax Officer had the authority to fix a submission date before the deadline specified under section 139(1). The court referenced a similar case from the Allahabad High Court, emphasizing that sub-sections (1) and (2) of section 139 operate independently, allowing the Income-tax Officer to demand a return before the due date under sub-section (1). The court rejected the contention that the notices were illegal, ruling in favor of the department on this issue.

Regarding the second issue, the court considered whether non-compliance with section 139(2) could serve as sufficient cause for exemption from penalty under section 271(1)(a). The assessee-firm argued that the delay in filing was due to incomplete audit and the alleged illegality of the notice. The court upheld the Tribunal's decision, stating that the reasons provided did not constitute sufficient cause for the firm. However, a different stance was taken concerning one of the partners, who solely derived income from the firm. The court found that the partner had a valid reason for the delay, as he relied on the firm's accounts to file his return, unlike the firm itself. Thus, the court ruled in favor of the partner on this issue.

As for the liability to penalty under section 271(1)(a), the court did not address this matter due to the resolution of the previous issues. Similarly, the application of section 271(2) in calculating the penalty for a partner of a firm was not discussed further, as it was contingent on the resolution of the primary issues. Ultimately, the court answered questions 1 and 2 in the manner discussed, with no costs awarded in the case.