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TMI Blog1992 (8) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee stated before the ITO that his quantum appeals were pending before the Tribunal and, requested that the proceedings be kept pending till the disposal of the appeals by the Tribunal. As the limitation for levying the penalty was expiring on 31-3-1987, the ITO did not grant time to the assessee and levied penalties for various amounts, aggregating to Rs. 1,56,860 for the periods of delay, after the due dates for filing the voluntary returns, stated above. The DCIT(A), in appeals, upheld the penalties by observing that the additions made in the assessment orders on the basis of which the penalties were imposed, were upheld in the first appeals and, thereafter by the Tribunal, in the second appeals. 3. The learned counsel for the assessee, Sri V. H. Patil, submitted that the assessee was having a bona fide belief that he was under no obligation to file the returns as his income was only from salary from which tax was deducted at source. It was further submitted that for the period of default up to 31-3-1976, the maximum penalty that could be levied was 50 per cent of the assessed tax and for the period of default thereafter, penalty could be levied at the rate of 2 per cent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance was placed on the decisions of the Madhya Pradesh High Court in the case of Chunnilal Bros. v. CIT [1979] 119 ITR 199 ; that of the Orissa High Court in the case of CIT v. Ravi Talkies [1982] 137 ITR 176 ; that of the Calcutta High Court in the case of Kashiram Tea Industries Ltd. v. ITO [1981] 132 ITR 783 ; and that of the Punjab Haryana High Court in CIT v. Dehati Co-operative Marketing-cum-Processing Society [1981] 130 ITR 504. The period of two years, he submitted, had expired due to the default of the assessee and, therefore, he cannot and should not be allowed to take the benefit of his own default. Further, there is no such limitation under section 271 that the penalty cannot be levied for the default after the two years from the end of the assessment year. The assessee could have filed and did actually file the returns before the issue of notices under section 148 in 1978 even after the expiry of the said period of two years. He, therefore, submitted that the assessee having failed to show reasonable cause for the late filing of the returns, the penalties were rightly levied and sustained by the departmental authorities. 5. We have heard the parties and considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or filing of return by any person who has not furnished under sub-section (1), or (2), at any time, before the assessment was made. This was the position prior to amendment by the Finance Act, 1968 inserted with effect from 1st April, 1968. Under the new provision, an assessee may, before the assessment is made, furnish the return before the specified period under clause (b) thereof, i.e., four years if the return relates to the financial year relevant to the assessment year commencing on or before 1st April, 1967 ; three years from assessment year commencing on 1st April, 1968, and two years for any subsequent year. In the relevant years, the assessee could not have filed the returns after two years. Other provisions are not discussed as they do not have any bearing on the issue before us. 6. Section 271(1)(a) and (i) provides for penalty for failure of an assessee to file return without reasonable cause. These are : " 271 (1). If the Income-tax Officer or the Appellate Assistant Commissioner or the Commissioner (Appeals) in the course of any proceedings under this Act, is satisfied that any person-- (a) has without reasonable cause failed to furnish the return of total inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n diem", i.e., it occurs on the day to day basis and it is a continuing default. To quote the Supreme Court at page 341 : " .......in view of the language used in section 271(1)(a) of the 1961 Act (corresponding to section 18(1)(a) of the Wealth-tax Act), the position was beyond dispute that the Legislature intended to deem the non-filing of the return to be a continuing default and the wrong for which penalty was to be visited, commenced from the date of default and continued month after month until compliance was made and the default came to an end. " As stated earlier, for the period prior to 10-1-1986, the default under section 271(1)(a) of the Act was failure or delay in filing the return "Without reasonable cause". Both failure and delay are to be "without reasonable cause" and if there was a reasonable cause for any period of delay or failure, the assessee could not be charged with the levy of penalty for that period. Further, in the case of Suresh Seth it was held that the amount of penalty has to be as per the rate prevailing on the due date, whereas in the subsequent decision in the case of Maya Rani Punj it was held that it should be at the rates when the default ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances, the assessee's plea that he was under a bona fide belief cannot be accepted. There is no reasonable cause shown on this account. This contention of the assessee is, accordingly, rejected. 9. We now come to the second aspect of the matter. As per the provisions of section 139(4), an assessee can file the return within two years from the end of the assessment year. This section, as it stood at the relevant time, reads as under : " (4)(a) 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 the period specified in clause (b), and the provisions of clause (iii) of the proviso to sub-section (1) shall apply in every such case. (b) The period referred to in clause (a) shall be-- (i) where the return relates to a previous year relevant to any assessment year commencing on or before the 1st day of April, 1976, four years from the end of such assessment year ; (ii) where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1968, three years from the end of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter two years from the end of impugned assessment year, be that period of two years elapsed by the fault of the assessee or otherwise. 11. Similarly, we do not find any merit in revenue's submission that section 148 does not mitiage the already committed default under section 139(1) and that the bar placed under section 139(4) is lifted by the issuance of notice under section 148. As aforesaid, the assessee has been given time to file the return within two years from the end of the assessment year under section 139(4) and the assessee, of his own, could not have filed the return thereafter. The notice under section 148 might enable and require the assessee to file the return after the expiry of the said two years period, but, in our opinion only prospectively, i.e., after the issue of the notice. Take for an example an assessee who, like the one before us, does not file the return voluntarily under section 139(1) or under section 139(2) and no notice under section 148 is issued to him, files the return after the expiry of the said period of two years. That return, as aforesaid, would be an invalid one. After the issue of notice under section 148, such a return can be taken on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not, therefore, be charged with penalty for the period after two years from the end of the respective assessment years, as the assessee, in our opinion, could not be said to have no reasonable cause ; inasmuch as, it was impossible for him to file a return after the two years period from the respective assessment year and before the issuance of notice under section 148 of the Act. 13. We also get support in our aforesaid view by the provisions of Explanation 3, inserted below section 271(1)(iii) by the Taxation Laws (Amendment) Act, 1975, with effect from 1st April, 1976. It reads as under : " Explanation 3--Where any person who has not previously been assessed under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, fails, without reasonable cause, to furnish within the period specified in sub-clause (iiii) of clause (a) of sub-section (1) of section 153 a return of his income which he is required to furnish under section 139 in respect of any assessment year commencing on or after the 1st day of April, 1974, and, until the expiry of the period aforesaid, no notice has been issued to him under sub-section (2) of section 139, or section 148 and the Income-tax Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qual to two per cent of the tax for every month during which the default continued but not exceeding in aggregate 50 per cent of the tax was leviable. We, accordingly, reduce the penalty for these years to Rs. 3,545, Rs. 10,220, Rs. 11,043, Rs. 13,326 and Rs. 1,810 respectively. For the assessment year 1974-75, the penalty for 21 months delay up to 1-4-1976 and 12 months delay up to 31-3-1977, i.e., the period of two years from the assessment year, would be at 2 per cent per month of the delay, i.e., 66 per cent for 33 months delay. It works out to Rs. 3,869. For the assessment year 1975-76, the penalty would be @ 2 per cent for the entire delay and this is what the assessing officer has levied. No interference is called for insofar as the penalty pertaining to assessment year 1975-76 onwards is concerned. 16. For all these years, the penalties have been levied before the order of the Tribunal and the Tribunal had directed to adjust the undisclosed income of Rs. 94,666 by taking Rs. 25,000 as from the sources of the assessee's wife as against the credit of Rs. 20,000 given by the assessing officer and by excluding interest pertaining to the said sum of Rs. 25,000, the effect of w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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