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TMI Blog1972 (9) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 235. 2. A notice under section 271(1) (a) was issued requiring the assessee to show cause why penalty should not be levied. The assessee referred to the return having been filed oh 3-2-1965 the tax having been paid on the basis of self-assessment and the interest as laid down in section 139(1) having been charged. It was pointed out that the assessment had been completed on 11-9-1967 even though the first appointment had been fixed on 26-7-1965. According to the assessee, if the assessment had been completed soon after the first appointment on 26-7-1965 the interest that would have been levied would have been smaller. The assessee wanted the penalty proceedings to be dropped. 3. The ITO by his order dated 3-7-1969 levied penalty of ₹ 1,723. He pointed out that the assessee-firm had at no time filed an application in Form No. 6 of the Income-tax Rules, 1962 seeking extension of time by adducing reasonable explanation. In the absence of any reasonable cause for the late submission of the return, he observed that he was constrained to levy penalty of ₹ 2,723 for the default committed by the assessee-firm. 4. The assessee appealed to the AAC who by his order date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a different offence so that it could not bar the department from levying penalty under section 271(1)(a) if the offence described therein was made out. He pointed out that the assessee had not shown any sufficient cause for the delay so that the penalty was properly levied. 7. For the assessee, the learned counsel wanted to support the order of the AAC on the basis of the decision in the case of Kulu Valley Transport Co. (P.) Ltd. (supra). He submitted that two questions arose, namely, (1) whether after the return had been filed under section 139(4), the penal provision would be attracted, and (2) whether interest having been levied, could penalty also be levied. With reference to the first point, he relied on the decision in the case of Kulu Valley Transport Co. (P.) Ltd. (supra) and with reference to the second he referred us to the language of section 139 to show that the ITO should be taken to have extended the time for filing the return by levying interest. He submitted that the Madras High Court decision had not considered the relevant passage in the Supreme Court judgment so that that cannot be taken as a decision against him. According to the counsel, the Supreme Court h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder which the said words came to be omitted. In the notes on clauses which appear in (1938) ITR the following passage occurs : Section 22(3) allowed an assessee to file a return or revised return before assessment is made and so to escape an assessment under section 23(4). He is to retain this right but in order to prevent him escaping the consequences of submitting an original false return or evading the penalty for failure to submit a return the closing words of this sub-section [the words which we have underlined above] have been omitted and a suitable proviso has been inserted in section 28. (p. 46) The Legislature passed section 22(3) as amended above by omitting the italicised words. The proviso referred to as a ';suitable proviso'; to section 28 of the 1922 Act ran as follows : Provided that - (c)the submission of a return or revised return under sub-section (3) of section 22 or a correct return under section 34 shall not operate to prevent the imposition of a penalty under this sub-section. 10. When the Bill went before the Select Committee, the Select Committee made certain amendments to the Bill and it omitted the proviso extracted above. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnish within the time specified in the general notice given under sub-section (1) or within such further time as the Income-tax Officer in any case may allow, all the particulars required under the prescribed form of return of total income and total world income in the same manner as he would have furnished a return under sub-section (1) had his income exceeded the maximum amount not liable to income-tax in his case, and all the provisions of this Act shall apply as if it were a return under sub-section (1). 13. In Kulu Valley Transport Co. (P.) Ltd.';s case (supra) the Supreme Court was concerned with a return filed in January 1956 showing a loss for the assessment years 1953-54 and 1954-55. The question was whether the losses returned by the assessee in January 1956 had to be determined and carried forward under section 24(2) of the 1922 Act. No notice had been served in that case under section 22(2). That was clearly a case where the return had been filed beyond the time specified in the general notice under section 22(1). Shah, J. (as he then was) held that the return was strictly governed by sub-section (2A) of section 22 and that upon such a return the assessee cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viso to section 22(1). Thus, a return submitted at any time before the assessment is made is a valid return. In considering whether a return made is within time sub-section (1) of section 22 must be read along with sub-section (3) of that section. A return whether it is a return of income, profits or gains or of loss must be considered as having been made within the time prescribed if it is made within the time specified in section 22(3). In other words, if section 22(3) is complied with, section 22(1) also must be held to have been complied with. If compliance has been made with the latter provision the requirements of section 22(2A) would stand satisfied. (p. 529) 15. In our opinion, the majority judgment lays down the following propositions : 1. The ITO could not ignore the return filed after the time limit under section 22(1) and had to determine the loss and this was concluded by the decision in the case of v. Ranchhoddas Karsondas (supra). 2. Section 22(3) must be read with section 22(1) as a proviso thereto. 3. If section 22(3) is complied with, then section 22(1) also must be held to have been complied with. 4. If compliance with section 22(1) had been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he judgment on which reliance was placed, in view of this submission we would go into the matter for ourselves and see how far the Supreme Court';s judgment supports the stand taken by the assessee here. 18. The provision under which the return had been submitted is section 139(4) running as follows : Any person who has not furnished a return within the time allowed to him under sub-section (1) or sub-section (2) may before the assessment is made furnish the return for any previous year at any time before the end of four assessment years from the end of the assessment year to which the return relates, and the provisions of sub-clause (iii) of the proviso to sub-section (1) shall apply in every such case. The provision is substantially in the same language as used in section 22(3). The provision as extracted above opens with the words ';any person who has not furnished a return within the time allowed to him under sub-section (1) or sub-section (2)';. The condition precedent to the operation of section 139(4) is that there must not have been a return within the time allowed under section 139(1) or section 139(2). If the section itself says that the return co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge of section 139(4), the present return has to be treated as having been filed after the time limit specified in section 139(1). When once this is the position, it follows that the assessee should be treated as having failed to furnish the return within the time allowed under the law. The offence under section 271(1)(a) is constituted insofar as the present case is concerned by the following words : (1) In the Income-tax Officer... is satisfied that any person - (a). . . has without reasonable cause failed to furnish it (the return) within the time allowed and in the manner required by sub-section (1) of section 139... he may direct that such person shall pay by way of penalty, - The penalty is prescribed in the statute itself. 19. We may also compare the language of section 139(1) and (2) on the one hand with section 139(4) on the other. Section 139(1) and (2) contain the word ';shall'; thereby indicating that they are mandatory in character. In section 139(4), the auxiliary verb used is ';may'; showing thereby that it is a permissive provision. It is usual to find that the violation of a mandatory provision is followed by a penal provision and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted out already section 139(4) starts with the condition that the assessee has not furnished a return within the time allowed under sub-section (1) or sub-section (2). The proviso is part of sub-section (1). When once the time is taken as extended, then there would be no need to enact by a separate provision that the assessee could file a return within the time allowed under the law. In other words, section 139(4) would apply only where the return is belated. The consequence of a belated return would be to attract interest and that is specifically provided. If that provision was not there, then there would be some room for the view that interest cannot be charged, because interest can be charged only where an application is made. In, order to provide that even where an application is not made the interest could be charged, the closing words of sub-section (4) attract the operation of sub-clause (iii) of the proviso. The incorporation of sub-clause (iii) of the proviso is, thus, for a limited purpose. We do not consider that the operation of the closing words of sub-section (4) is to enlarge the time limit as if the assessee had made an application and the ITO had granted it. The o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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