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TMI Blog1977 (11) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... demand notice dated March 27, 1967, for payment of a sum of Rs. 57,735 as tax for the assessment year. Out of this amount, Rs. 36,961 was paid. A demand notice for Rs. 20,774 was issued. This included an amount of Rs. 7,351 as interest under s. 139 of the I.T. Act, 1961. Against the imposition of interest on the petitioner for filing the return beyond the specified time allowed under s. 139, the petitioner filed a petition for waiver of the interest as provided under r. 11 7A of the I.T. (Second Amend.) Rules, 1964. That petition was rejected on May 30, 1969. The firm, M/s. Ganeshdas Sreeram, of which the petitioner is one of the partners, filed an appeal against the assessment order and the demand notice issued to the firm before the AAC of Income-tax who fixed the income of the petitioner at Rs. 74,704 for the assessment year 1962-63. Respondent No. 1 issued a fresh notice of demand. According to this assessment, the petitioner had to pay Rs. 38,766, out of which Rs. 36,961 had already been paid. The demand notice was, therefore, issued for Rs. 1,805. The tax of Rs. 38,1766 demanded from the petitioner included interest, under s. 139, of Rs. 4,071. It is the first contention o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nner, the Income-tax Officer may, in his discretion, extend the date for furnishing the return-- (i) in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired on or before the 31st day of December of the year immediately preceding the assessment year, and in the case of any person referred to in cl. (b), up to a period not extending beyond the 30th day of September of the assessment year without charging any interest; (ii) in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired after the 31st day of December of the year immediately preceding the assessment year, up to the 31st day of December of the assessment year without charging any interest; and (iii) up to any period falling beyond the dates mentioned in cls. (i) and (ii), in which case, interest at six per cent. per annum shall be payable from the 1st day of October or the 1st day of January, as the case may be, of the assessment year to the date of the furnishing of the return-- (a) in the case of a registered firm or an unregistered firm which has been as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication has been made by the assessee and the ITO extends the date for furnishing the return beyond the dates specified in cls. (a) and (b) of sub-s. (1). Sub-s. (4) enables the assessee to file the return at any time before the four assessment years from the end of the assessment year to which the return relates, in case he has not furnished the return within the time allowed to him under sub-ss. (1) and (2). In such a case, the provisions of sub-cl. (iii) of the proviso to sub-s. (1) have been made applicable. The question, therefore, is whether interest is chargeable if the return is filed under sub-s. (4) even though no application for extension of time has been filed by the assessees. According to the petitioner, interest is chargeable in such a case, only if an application for extension of time has been filed. Since the petitioner filed no such application, his contention is that no interest is chargeable. On the other hand, the contention of the respondent is that interest is chargeable in such cases even if no application for extension of time has been filed by the assessee. The Division Bench before which these petitions came up for hearing observed that the main poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en payable if the firm had been assessed as an unregistered firm. It was contended that in order to appreciate the correct impact of clause (iii) of the proviso to sub-section (1) of section 139, we must take note of the fact that the provisions of clauses (i) and (ii) of the proviso to section 139(1) have to be looked at in order to find out the significance of the dates, 1st day of October and 1st day of January, occurring in clause (iii). In our opinion, the Legislature has incorporated by reference the provisions of clause (iii) of the proviso to sub-section (1) in section 139(4) and once those provisions are read as having been so incorporated, so much of these provisions of clause (iii) of the proviso have to be read in section 139(4) as may be applicable and as may be consistent with the language of the two provisions. Under these circumstances, on a mere construction of the provisions of section 139(4) read with the third clause of the proviso to sub-section (1) of section 139, it must be held that an assessee who does not furnish his return within the time mentioned in sub-section (1) of section 139 or within the time given to him under the notice under section 139(2) ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a manner different from the one in which the language is incorporated in the section. We cannot incorporate words in the statute which the Legislature in its wisdom has not incorporated, nor can we ignore the words which the Legislature has incorporated. This is more so when the statute to be interpreted is a fiscal statute. It is now well settled that the language of such a statute has to be construed in its strict sense. The assessee is always entitled to the benefit of doubt, if any, left in the language of the statute. Sub-section (4) applies the provisions of clause (iii) of the proviso to the cases falling under it. The phrase 'in which case', occurring in clause (iii) makes the subsequent portion of the clause dealing with interest dependent on the earlier portion of the clause, which read with the opening part of the proviso makes the making of an application in the prescribed manner and the actual grant of extension by the Income-tax Officer, conditions precedent for the payment of interest. There may be a lacuna in the language, which we are afraid, we cannot fill up. We are fortified in this view by the subsequent amendment effected by the Finance Act, 1972, by which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, extend the date for furnishing the return." Hence, if no part of sub-cl. (iii) is treated as redundant, then interest will be chargeable only if an application has been filed for extension of time and the ITO does extend the date for furnishing the return. The Act as a whole must be construed in case there is ambiguity. Under s. 271 of the Act penalty can be levied on the assessee only if he has failed to furnish the return within the time specified under sub-s. (1) of s. 139 or by notice given under sub-s. (2) of s. 139 or within the time allowed and in the manner required by subs. (1) of s. 139 or by such notice, as the case may be. Hence, if the return is filed within the time extended by the ITO on an application made under the proviso to sub-s. (1) of s. 139, no penalty can be levied on the assessee for the delay in filing his return under s. 271 of the Act. Sub-s. (4) of s. 139 applies to cases where the return is not filed within the time allowed under sub-s. (1) or sub-s. (2) of s. 139. If an application is filed by the assessee for extension of time either under the proviso to sub-s. (1) or under the proviso to sub-s. (2) and if the return is filed within the exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtant is the rule of construction that if the words of a statute are precise and unambiguous, they must be accepted as declaring the express intention of the legislature." In CIT v. Naga Hills Tea Co. Ltd. [1973] 89 ITR 236 (SC), it has been observed as follows: " If a provision of a taxing statute can be reasonably interpreted in two ways, that interpretation which is favourable to the assessee, has got to be accepted. This is a well accepted view of law." In Craies on Statute Law, 7th Edn., at page 113, the rules on interpretation of a taxing statute have been stated as follows, quoting Lord Cairns in [1869] LR 4 (HL) page 100, 122 (Partington v. Attorney-General): " In Partington v. Att.-Gen., Lord Cairns said : 'I am not at all sure that, in a case of this kind--a fiscal case--form is not amply sufficient; because, as I understand the principle of all fiscal legislation, it is this if the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nregistered firm. But merely because the registered firm has been treated as an unregistered firm for the purposes of charging interest, the liability of the partner of the registered firm to be charged with interest on his share of the income does not cease. It is only if the registered firm had been treated as an unregistered firm for assessment of tax under the Act that the liability of the partner to be assessed to tax would cease. But in this case it is only for the purpose of charging interest. under s. 139 that the registered firm is treated as an unregistered firm. For the purposes of assessment of tax under the Act the registered firm continues to be treated as a registered firm and its partners continue to be similarly treated. Hence, the mere fact that for the purpose of charging interest, the registered firm is treated as if it is an unregistered firm does not take away the liability of the partner of the registered firm to be charged with interest on his share of the income under cl. (b) of sub-cl. (iii) of the proviso to sub-s. (1) of s. 139. Hence, this contention of the petitioner is to be rejected. Hence, since the petitioners succeed on the first point, these pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to as the second view by my Lord in his judgment. For the sake of convenience, I also propose to refer to these two views as the first view and the second view, respectively. The relevant provisions of s. 139 of the Act have been quoted in extenso in the judgment of my Lord and I do not propose to repeat. From the provisions of cls. (a) and (b) of sub-s. (1) it is seen that every person having income assessable under the Act has got to file his return before the expiry of six months from the end of the previous year or before the 30th day of June of the assessment year, as the case may be. Under these two clauses, the statute itself, without any application from the assessee, gives time for filing the return, as above. Then there is the proviso under the said sub-section enabling the ITO to grant further extension of time, in his discretion, on an application made in the prescribed form in that behalf. There are three clauses under this proviso. Clause (i) and cl. (ii) enable the ITO to extend time up to certain dates, as mentioned therein without charging interest and cl. (iii) enables the ITO to extend time up to any period falling beyond the dates mentioned in cls. (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 139 it will make no sense. As has been pointed out by Divan C.J., speaking for the Gujarat High Court in Chottalal Co. v. ITO [1976] 105 ITR 230, sub-s. (4) of s. 139 contemplates a situation which is altogether different from the situation contemplated by the proviso, cl. (iii) to sub-s. (1) of s. 139. Clause (iii) of the proviso to sub-s. (1) enables the ITO to grant extension of time up to any period beyond the dates mentioned in cls. (i) and (ii), subject to payment of interest at 6 per cent. from the first day of October or the first day of January, as the case may be, of the assessment year to the date of furnishing of the return. Under this clause, the ITO cannot charge interest if an assessee having obtained extension of time from the ITO up to some date beyond the dates mentioned in cls. (i) and (ii) failed to file his return within the time so extended but filed his return some time beyond the extended period. In such a case, interest can be charged only under sub-s. (4) read with cl. (iii) to sub-s. (1) if the necessary conditions mentioned therein are fulfilled. It is thus evident that incorporation of the entire proviso to sub-s. (1) in sub-s. (4) or literal applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est for such belated submission of return as the persons concerned in such a case are liable to pay penalty under s. 271 of the Act. If extension of time for submission of return is prayed for and granted by the ITO and the return is filed within such time, the question of liability to pay penalty would not arise as, in that case, there would be no default. In such a case sub-s. (4) is not attracted at all. This sub-section is attracted if the return is not filed within the time allowed to an assessee under sub-s. (1) or sub-s. (2), but is filed before the assessment is made and before the end of the four assessment years from the end of the assessment year to which the return relates. Section 271 of the Act will have application in such a case as there is clear default in filing the return in time. Thus, if the first contention of the learned counsel for the petitioner, namely, that sub-s. (4) is applicable only when an assessee filed an application for extension of time and the same is granted by the ITO is accepted, the assessee will be liable to be charged with interest as well as penalty. If, on the other hand, it is held, accepting the second argument of the learned counsel f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of cl. (iii) of the proviso to sub-s. (1) in s. 139(4) and once these provisions are read as having been so incorporated, so much of these provisions of cl. (iii) of the proviso have to be read in s. 139(4) as may be applicable and as may be consistent with the language of the two provisions." In this view of the provisions of s. 139(4) read with cl. (iii) of the proviso to sub-s. (1) of s. 139, it has got to be held that an assessee who does not furnish his return within the time mentioned in sub-s. (1) of s. 139 or within the time given to him in the notice under sub-s. (2) of s. 139 may file his return before the assessment is made so long as it is filed within the period of four years from the end of the assessment year under consideration, subject, however, to the condition that such belated filing would attract the provisions of cl. (iii) of the proviso to sub-s. (1) and would make the assessee liable to pay interest as mentioned in the said clause. Filing of an application for extension of time by the assessee and grant of such extension by the ITO are not the conditions precedent for application of sub-s. (4) of s. 139 of the Act. There is no scope for tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arts of the proviso to sub-s. (1), which are not so brought in by incorporation, cannot be read as to limit the clear meaning of cl. (iii) or to control cl. (iii), namely, levying of interest in the case of belated return filed by the assessee under sub-s. (4) of, s. 139 of the Act. In the case of Mayor, Aldermen and Burgesses of the Borough of Portsmouth v. Charles Bovill Smith, James Goldsmith the younger and John Baker Goldsmith, [1885] 10 App Cas 364, the House of Lords, at page 371, observed : " Where a single section of an Act of Parliament is introduced into another Act, I think it must be read in the sense which it bore in the original Act from which it is taken, and that consequently it is perfectly legitimate to refer to all the rest of that Act in order to ascertain what the section meant, though those other sections are not incorporated in the new Act. I do not mean that if there was in the original Act a section not incorporated, which came by way of a proviso or exception on that which is incorporated, that should be referred to. But all others, including the interpretation clause, if there be one, may be referred to." On the principle of law above, where only c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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