9911796707
TMI Blog1977 (7) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... May 20, 1971, and the Income-tax Officer levied besides the tax a sum of Rs. 1,056 as interest under section 217 of the Act for failure to voluntarily file the provisional estimate. The Income-tax Officer also levied an interest of Rs. 7,750 under section 139(1)(iii) of the Act for belated submission of the return of the income. The petitioner having exhausted all the remedies under the Act eventually filed the writ petition. Before Gangadhara Rao J., three contentions were advanced by the respondent which were as follows : "1. That the firm was assessed to income-tax for the assessment year 1967-68 ; as such, there was no obligation on the part of the firm to file a voluntary estimate of its income for the assessment year 1968-69, without a notice in writing calling upon the firm to file the provisional estimate. As such, the Income-tax Officer was incorrect in levying a fine of Rs. 1,056 for not filing the voluntary estimate. 2. That the Income-tax Officer erred in levying an interest of Rs. 7,750 under section 139(1)(iii) of the Income-tax Act although no extension of time was prayed for and granted as envisaged in section 139(1)(a) and (b) of the Act. 3. That the responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Income-tax Officer was incorrect in levying an interest of Rs. 4,720 on the total tax assessed by him. The Income-tax Officer ought to have deducted the amount of tax already paid by the assessee and ought to have levied interest only on the balance. In this appeal, Mr. Rama Rao, the learned advocate appearing for the revenue, contends that the induction of a partner on the retirement of the existing partner would amount to a change of the firm and coming into existence of a new firm, and, therefore, he submits that the learned judge was incorrect in holding that the induction of a partner on the retirement of the existing partner was only a change in the constitution of the firm. We regret, we cannot accede to this contention because, to our mind, the retirement of a partner during the relevant assessment year and the introduction of a new partner only amounts to a change in the constitution of the firm, and that is exactly what the Full Bench has decided in Additional Commissioner of Income-tax v. Visakha Flour Mills [1977] 108 ITR 466. So far as the third contention is concerned, Mr. Rama Rao contends that the learned judge was incorrect in coming to the conclusion as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer has done is that he levied interest only up to the date of filing of the estimate, and since no tax was paid by the respondent on that date, he was fully justified in levying interest as he did. Hence, with respect, the order of the learned judge to this extent is set aside. So far as the second contention is concerned, Mr. Rama Rao contends that the learned judge was incorrect in relying upon the judgment of a Bench of this court in Kishanlal Haricharan v. Income-tax Officer [1971] 82 ITR 660 (AP). What Mr. Rama Rao contends is that, in the judgment of the Bench, section 139(4) was not taken into consideration and Obul Reddy J., as he then was, in Progressive Engineering Co. v. Income-tax Officer [1976] 105 ITR 226 (AP) had taken sub-section (4) of section 139 into consideration and had held that even in a case where the assessee does not file an application for extension of time, even then interest could be levied by the Income-tax Officer. We have examined the provisions of section 139(1) and (4) in detail and have gone through the judgment of the Bench as well as the judgment of Obul Reddy J., and we are of the opinion that a point arises in this case which requires a de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, at the same time, he levied interest under the provisions of section 139. The penal interest amounted to Rs. 7,750. This interest was charged for belated submission of the return of the income. The respondent-firm, having exhausted all the remedies under the Act filed Writ Petition No. 1464 of 1973, out of which this writ appeal arises. The writ petition was heard in the first instance by our learned brother, Gangadhara Rao J., sitting singly, and one of the points which was urged before him was that the Income-tax Officer erred in levying interest in the sum of Rs. 7,750 under section 139(1), proviso (iii), of the Income-tax Act although no extension of time was prayed for or granted. This argument about interest was accepted by Gangadhara Rao J. in view of the decision in Kishanlal Haricharan v. Income-tax Officer [1971] 82 ITR 660 (AP). Against that decision of Gangadhara Rao J., this writ appeal has been filed. When the matter came up before the Division Bench consisting of one of us (Sambasiva Rao J.) and Muktadar J., the other contentions arising in the writ appeal were dealt with by the Division Bench and the point, which we have set out hereinabove, was referred to a la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment 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." Under sub-section (2), a provision is made for service of individual notice by the Income-tax Officer and that sub-section reads : "........ the Income-tax Officer may, before the end of the relevant assessment year, serve a notice upon him (the assessee) requiring him to furnish, within thirty days from the date of service of the notice, a return of his income or the income of such other person during the previous year, in the prescribed for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn beyond 30th September or 31st December ; but if the date, which is thus extended, falls beyond 30th September or 31st December, as the case may be, from 1st October or 1st January, interest at 9% per annum has to be paid. Clauses (i) and (ii) of the proviso deal with cases where no interest is chargeable. The only benefit which an assessee gets is that, by virtue of the application made by him, he avoids the payment of penalty and gets the convenience of extension of time without payment of interest, but if the date, which is thus extended falls beyond 30th September or 31st December, as the case may be, interest has to be paid at 9% per annum from 1st October or 1st January of the assessment year in question up to the date of the furnishing of the return. Sub-section (2) of section 139 contemplates a situation wherein an individual notice is served by the Income-tax Officer on the assessee calling upon him to furnish the return within thirty days from the date of service of the notice. If, after service of the notice, the assessee asks for extension of time for furnishing the return, the Income-tax Officer may, in his discretion, extend the date for furnishing the return. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n who has not furnished a return within the time allowed" occurring in clause (a) of subsection (4), all persons, who did not file the returns within the time allowed, i.e., before 30th September or 31st December, as the case may be, of the assessment year under consideration, have to pay interest in accordance with the scheme laid down in clause (iii) of the proviso to sub-section (1) irrespective of whether the return comes to be filed in the ordinary course under sub-section (1) or in pursuance of a notice under subsection (2). The question of extension of time either on application or on extension of time, because extension of time is not sought by the assessee, is totally out of consideration in the light of the provisions of section 139(4)(a). Before we proceed further, we may point out that the scheme of section 139(1) and the proviso has been recast by the legislature. The proviso to sub-section (1) of section 139 which was substituted with effect from 1st April, 1971, by the Taxation Laws (Amendment) Act, 1970, merely provides that, on an application made in the prescribed manner, the income-tax Officer may, in his discretion, extend the date for furnishing the return, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d along with the Bill, which ultimately was enacted as the Amendment Act, does not throw much light on the reasons why the legislature enacted this provision of sub-section (8). In Kishanlal Haricharan v. Income-tax Officer [1971] 82 ITR 660 (AP) the assessee failed to submit a return of his income in spite of notices issued to him under sections 139(2) and 142(1) of the Income-tax Act, 1961. The Income-tax Officer made a best judgment assessment under section 144 levying, in addition to the tax, penal interest under section 139(1)(b), proviso, clause (iii). On appeal, the Appellate Assistant Commissioner granted some slight relief to the assessee regarding the quantum of tax, but otherwise dismissed the appeal. Thereafter, the assessee preferred an application to the High Court for issue of a writ challenging the levy of penal interest. On these facts, after referring to the proviso to section 139(1), Chinnappa Reddy J., speaking for the Division Bench consisting of himself and Madhava Reddy J., observed : "A perusal of the proviso makes it clear that it is only when an assessee requests for time under the third clause, he can be directed to pay penal interest as provided in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1971. In Indian Telephone Industries Co-operative Society Ltd. v. Income-tax Officer [1972] 86 ITR 566, a Division Bench of the Karnataka High Court consisting of Govinda Bhat J. (as he then was) and Jagannatha Shetty J. was dealing with the following facts : The assessee failed to submit returns for the assessment years 1963-64 to 1969-70 and notice under section 139(2) was served oil the assessee for the assessment year 1969-70 and a notice under section 148 was served with regard to the other assessment years. The assessee filed the returns within the dates specified in the notices under sections 139(2) and 148. The Income-tax Officer levied interest under sections 139 and 217 and issued notices for penalty for late submission of returns and non-filing of estimates of advance tax. On these facts, the assessee filed writ petitions challenging the levy of interest and it was held, dismissing the writ petitions, that the levy of interest was legal. The learned counsel for the assessee before the Karnataka High Court relied on the decision of this High Court in Kishanlal Haricharan v. Income-tax Officer [1971] 82 ITR 660 (AP) and contended that the liability to pay interest aros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort, Goswami C.J., dealing with this contention, observed : "With respect, we are unable to agree with the above decision which has taken no note of section 139(4) of the Act. For the reasons given by us and in view of the provisions of sub-section (4) of section 139, there is no escape from the conclusion that clause (iii) of the proviso is attracted to the case of the present assessee and the Income-tax Officer is fully justified in charging interest in the case." Thus, like the Karnataka High Court, the Gauhati High Court also did not accept the reasoning of the Division Bench in Kishanlal Haricharan's case [1971] 82 ITR 660 (AP). In Biswanath Ghosh v. Income-tax Officer [1974] 95 ITR 372, a Division Bench of the Orissa High Court consisting of Misra and Panda JJ. held that, where the return had not been filed within the time specified under sub-section (1) of section 139 of the Income-tax Act, 1961, but was filed late and no extension of time had been obtained, the provisions of Sub-section (4)(a) of section 139 would be attracted and interest would become exigible. At page 373 of the report, Misra J., delivering the judgment of the Division Bench, has pointed out that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged. It was held that the proviso to section 139(1) required an application to be made in the prescribed manner, which required the use of the prescribed form for getting the extension. At page 644 of the report, it has been pointed out that the Division Bench of the Delhi High Court was in agreement with the view of the Division Bench of this court in Kishanlal Haricharan's case [1971] 82 ITR 660 (AP). It appears that the attention of the learned judges of the Division Bench of the Delhi High Court was not drawn to the decision of the Karnataka High Court ; but their attention was drawn to the decision of the Gauhati High Court in Ganesh Das Sreeram v. Income-tax Officer [1974] 93 ITR 19, and dealing with the decision of the Gauhati High Court, Khanna J. observed : "We must say with profound respect that we are unable to persuade ourselves to agree with this view." Thus, the Delhi High Court has accepted the view taken by the learned judges of this High Court in Kishanlal Haricharan's case [1971] 82 ITR 660 (AP). In Progressive Engineering Co. v. Income-tax Officer [1976] 105 ITR 226 (AP) Obul Reddi J. (as he then was) distinguished the decision of the Division Bench of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m a case where returns were filed, pursuant to a notice issued by the Income-tax Officer under section 148. There is nothing in the language of clause (iii) of the proviso to section 139(1) or in subsection (4) of section 139 to indicate that where returns are filed beyond the time specified in clauses (i) and (ii) of the proviso pursuant to a, notice issued by the Income-tax Officer, clause (iii) of the proviso is not applicable." The learned judge held that the fact that no application was made by the petitioner for extension of time was not relevant at all in view of sub-section (4) of section 139 of the Act and that is how the learned judge distinguished the case before him from Kishanlal Haricharan's case [1971] 82 ITR 660 (AP). We are in agreement with the reasoning of Obul Reddi J. (as he then was) on the analysis of section 139(4) which we have set out hereinabove. Thus, the decision of Obul Reddi J. was on the same lines as the decisions of Karnataka, Orissa and Gauhati High Courts. In Commissioner of Income-tax v. Bahri Bros. (P.) Ltd. [1976] 102 ITR 443 a Division Bench of the Patna High Court consisting of S. N. P. Singh C.J. and S. K. Jha J. dealt with this poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd by the Gauhati High Court in Ganesh Das Sreeram v. Income-tax Officer [1974] 93 ITR 19. The Division Bench, after referring to the decision in Kishanlal Haricharan's case [1971] 82 ITR 660 (AP), observed at page 236 of the report : "With respect, it may be pointed out that there was no provision in section 144 similar to the provision of section 139(4) making the provisions of the third clause of the proviso to section 139(1) applicable when an order of best judgment assessment is made under section 144. The best judgment assessment can be made, inter alia, if any person fails to make the return required by any notice given to him under sub-section (2) of section 139 and has not made a return or a revised return under sub-section (4) or sub-section (5) of section 139. But there was no provision in section 144 as is to be found in section 139(4) stating that the provisions of clause (iii) of the proviso to subsection (1) of section 139 is to apply to every such case falling within section 144(a) of the Act. Under these circumstances the final decision of the Andhra Pradesh High Court can be supported on the ground that there was no provision in law making clause (iii) of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicable in cases arising under section 139(4)(a). Since clause (iii) of the proviso to sub-section (1) of section 139 stands by itself, viz., where the extension of time is granted up to any period falling beyond the dates mentioned in clauses (i) and (ii) of the proviso, interest at 9% per annum is to be paid 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. It is obvious that the words "any person who has not furnished a return within the time allowed to him under sub-section (1) or sub-section (2)" occurring in section 139(4)(a) contemplate all cases of late filing of the returns irrespective of whether any extension of time has been applied for and granted or not. The words "any person" at the commencement of section 139(4)(a) are not capable of any modification whatsoever and the argument of dissection of clause (iii) of the proviso to section 139(1) cannot be sustained. A Division Bench of the Jammu and Kashmir High Court in Mulakh Raj Bimal Kumar v. Income-tax Officer [1977] 107 ITR 382 has taken the same view as the Delhi High Court in Garg Co. v. Commissioner of Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Telephone Industries Co-operative Society Ltd. v. Income-tax Offtcer [1972] 86 ITR 566. However, on the provisions of law as it stood for the relevant assessment year, it was not open to the Income-tax Officer to levy interest on the facts of the case before the Calcutta High Court. These are all the decisions which have been brought to our notice and with respect, we are unable to accept the reasoning of the learned judges of the Division Bench of this court in Kishanlal Haricharan's case [1971] 82 ITR 660 (AP), and of the learned judges of the Delhi, Patna and Jammu and Kashmir High Courts under the different decisions referred to above. We are in agreement with the views expressed by the learned judges of the Karnataka, Gauhati, Orissa and Gujarat High Courts under the different decisions referred to above. If the conclusion, which we have reached, is not adopted, an anomalous situation is likely to arise, inasmuch as a person, who co-operates with the department by applying for extension of time, is put on a worse footing than a person who does not apply for extension of time and who files the return at his own sweet will. That is an additional factor, apart from the analy ..... X X X X Extracts X X X X X X X X Extracts X X X X
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