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TMI Blog1979 (1) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... for filing the returns but no orders were passed by the ITO on the application. Ultimately, notices under s. 139(2) were issued and served on the assessee. For the first year, i.e., 1963-64, the notice was served on December 3, 1963, and for the second of the years under consideration, i.e., 1964-65, the notice was served on March 30, 1965. As per the notices necessary returns were required to be filed by the assessee within 35 days of the service of the respective notices. However, the assessee filed returns not within this period but on May 4,1965, and on April 19,1966, respectively, for the two assessment years. The ITO initiated penalty proceedings for belated submission of returns and penalties in the sums of Rs. 13,000 and Rs, 11,420, respectively, were levied under s. 271(1)(a) of the I.T. Act, 1961, for these two assessment years. This was done after giving necessary opportunity to the assessee. The aggrieved assessee carried the matter in appeal to the AAC who confirmed the penal action with minor modifications. A consolidated order was passed by the AAC in the two appeals. The copies of the orders of the ITO are annexed as enclosures A-1 and A-2 to the statement of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions to the ITO, Jodhpur, for extending the time which had been extended up to August 31, 1962. As a result of similar applications, further extension was granted up to September 30, 1962, but the returns were not filed even by that day. The ITO then served notices on the assessees under s. 139(2) of the Act calling upon them to file returns within 30 days and the returns were then filed on April 25, 1963. During the course of the assessment proceedings notices were issued against the assessees asking them to show cause why a penalty should not be imposed for failure to submit the returns under s. 139(1) of the Act. The explanation for delay which was offered by the assessee was not found adequate and penalties were imposed on both of them as prescribed under s. 271(1)(a) of the I.T. Act, 1961. An appeal was preferred to the AAC before whom it was, inter alia, submitted that as soon as notices under s. 139(2) of the Act were issued, it must be taken that the delay in filing returns under s. 139(1) was condoned by the ITO and as such no action could be taken for not filing the returns in time as laid down by s. 139(1). We are not concerned with the other contention in the appeal. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter 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 clauses (i) and (ii), in which case, interest at nine 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 assessed under clause (b) of section 183, on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm, and (b) in any other case, on the amount of tax payable on the total income, reduced by the advance tax, if any, paid or by any tax deducted at source, as the case may be ...... (2) In the case of any person who, in the Income-tax Officer's opinion is assessable under this Act, whether on his own total income or on the total income of any other person during the previous year, the Income-tax Officer may, before the end of the relevant assessment year, serve a notice upon him requiring him t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 139 or by notice given under sub-section (2) of section 139 or section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by sub-section (1) of section 139 or by such notice, as the case may be, or (b) has without reasonable cause failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) of section 143, or (3) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,-- (i) in the cases referred to in clause (a), in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent. of the tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent. of the tax ;..." According to the Rajasthan High Court, the defaults contemplated under section 271(1)(a) were of four kinds: 1. any person who without reasonable cause has failed to submit return of total income which he was required to furnish under sub-s. (1) of s. 139; or 2. any person who without reasonable cause has failed to furnish the return of total income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot take it that the Income-tax Officer, merely because he had issued a notice under section 139(2) to a person who had not filed the return under section 139(1), must be taken to have condoned his default in not furnishing the return under section 139(1)." One further agrument was urged before the Rajasthan High Court which may be noted and that was that if the return pursuant to a notice under s. 139(2) is filed beyond time provided in the notice, there would be two defaults, one under s. 139(1) and another under s. 139(2), it being obvious that the period of the latter default will be much shorter than the other one. The argument which was urged before the Rajasthan High Court and brushed aside was that where there were two periods of default, then action for imposition of penalty could be taken only for the shorter period of default. The Rajasthan High Court found no merit in any such argument. The decision of the Rajasthan High Court has been referred to, applied and followed by the Delhi High Court in CIT v. Hindustan Industrial Corporations [1972] 86 ITR 657. It was held by the Division Bench of the Delhi High Court that the plain language of s. 139(2) could not be strai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omatic extension of time to submit the return stood granted up to 30th November, 1962, on the basis of a circular letter issued by the Central Board of Direct Taxes and the default continued till 15th April, 1963, when the assessee submitted its return of income in compliance with the notice served upon it by the Income-tax Officer in pursuance of the provisions of section 139(2). The plain language of sub-section (2) of section 139 cannot be strained to hold that the assessee was absolved of its statutory obligation from filing a return of its income voluntarily under section 139(1) and the default committed in not filing the return cannot be taken note of for initiating proceedings for imposition of penalty and that the period of default shall cease from the date when the notice under section 139(2) issued by the Income-tax Officer to the assessee requiring it to furnish a return of its income within 30 days from the date of service of the notice. We are, therefore, of the opinion that, on the facts and in the circumstances of the case, the Tribunal was not justified in holding that the default under section 139(1) of the Act existed only till the date when the notice under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court that because the ITO had issued a notice under s. 139(2) after expiry of the period prescribed by s. 139(1), the ITO was deemed to have condoned the non-compliance with the requirements prescribed by s. 139(1). This was also not accepted by the Andhra Pradesh High Court. In this connection, it considered the provision to be found contained in s. 139(7) and followed the decision of the Rajasthan High court in Indra and Co.'s case [1971] 79 ITR 702. It may be noted that the arguments advanced on behalf of the petitioner were considered independently of the decision and after expressing its own view on the various points canvassed before it the Andhra Pradesh High Court observed that the view found support in the Division Bench decision of the Rajasthan High Court in Indra and Co's case [1971] 79 ITR 702. The relevant observations are to be found at pages 463 to 465 of the above report. The precise paragraphs need not be extracted as the arguments advanced before the Andhra Pradesh High Court have been fully covered by the Rajasthan High Court and the Delhi High Court in the two decisions earlier noted. A comparable provision under the G.T. Act, 1958, came to be consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee would still be held to be liable for penalty ? On a true construction of section 271(1)(a), I am of the view that once a notice under sub-section (2) of section 139 is issued, that precludes the penal provision being attracted in so far as the failure to furnish the return under sub-section (1) of section 139 is concerned. If a contrary view is taken, it would lead not only to an anomalous result, but it would be doing violence to the express language of the statute. In so deciding the point, I am aware of the decision of the Supreme Court in the case of C. A. Abraham v. Income-tax Officer, Kottayam [1961] 41 ITR 425, wherein it has been held that, in interpreting a fiscal statute, the court cannot proceed to make good deficiencies, if there be any ; the court must interpret the statute as it stands and in case of doubt in a manner favourable to the taxpayer. But where by the use of words capable of comprehensive import, provision is made for imposing liability for penalty upon the taxpayer guilty of fraud, gross negligence or contumacious conduct, an assumption that the words were used in a restricted sense so as to defeat the avowed object of the legislature in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Patna High Court, on which strong reliance has been placed on behalf of the assessee, to find out whether the construction placed on the statutory provision which appealed to the Division Bench of the Patna High Court can be considered to be a reasonable construction or interpretation. If that construction be regarded as a possible or reasonable construction, then the principle laid down by the Supreme Court in Vegetable Products Ltd.'s case [1973] 88 ITR 192 would come into play and that construction may be required to be given or preferred over the other construction which appealed to the Rajasthan, Delhi and Andhra Pradesh High Courts. With respect to the learned judges of the Patna High Court, we are afraid that the construction they have placed on the statutory provisions cannot be fairly regarded as a possible or reasonable construction of the same. In the said decision in Addl. CIT v. Bihar Textiles [1975] 100 ITR 253 (Pat), it has been observed at the foot of page 256 that once a notice is issued under 139(2), penalty under cl. (a) of sub-s. (1) of s. 271 could be imposed for default on the part of the assessee to comply with the directions in the said noti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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