Full Judgment Text
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PETITIONER:
COMMISSIONER OF INCOME TAX, ANDHRA PRADESH
Vs.
RESPONDENT:
M:. CHANDRA SEKHAR
DATE OF JUDGMENT04/12/1984
BENCH:
PATHAK, R.S.
BENCH:
PATHAK, R.S.
TULZAPURKAR, V.D.
CITATION:
1985 AIR 114 1985 SCR (2) 215
1985 SCC (1) 283 1984 SCALE (2)973
CITATOR INFO :
R 1991 SC 966 (2)
ACT:
Income Tax Act, 1961. Section 139(1) read with proviso-
In a case where Income Tax officer levies interest on income
tax return filed after the date prescribed by sub-s.(l) of
s.l39 whether a valid presumption can be raised that Income
Tax Officer extended time for filing voluntary return under
the proviso to Sub. s.(l) of s.l39.
Section 271(1)(a)-Scope of-Whether penalty can be
levied on income tax return filed after the dare
prescribed by s.139(1) but on which Income Tax officer has
levied interest under cl.(iii) of the proviso. Held No. The
rime allowed by Income Tax officer under proviso to Sub-
s.(l) of s. 139 for filing return falls within the
expression "the time allowed" in cl.(a) of Sub.s.(l) of
s.27I.
Sub-s.(l) of s.139 of the Income Tax Act, 1961
prescribes the period within which a voluntary income tax
return must be filed. When an assessee cannot file a return
within the prescribed period, the proviso to Sub-s.(1) of
s.l39 entitles the assessee to make an application for
extension of time in the prescribed manner and the form
stating the reasons on which the extension of time is
sought. On such an application being made, the Income Tax
officer is empowered to extend the period for filing the
income tax return subject to payment of interest on the
amount of tax payable.
HEADNOTE:
The respondent assessee filed voluntary income tax
returns for some assessment years after the date prescribed
by Sub-s.(l)of.139 of the Income Tax Act, 1961. The Income
Tax officer treated the assessee as being in default and
imposed penalties under cl. (a) of Sub-s.(1) of s.271 of the
Act. In appeal before the Appellate Assistant Commissioner
of Income Tax the assessee contended that since interest had
been levied under cl.(iii) of the Proviso to Sub-s. (1) of
s.l39, no question arose of imposing a penalty. The
Appellate Assistant Commissioner rejected the contention. In
second appeal the Income Tax Appellate Tribunal held that as
the Income Tax officer had levied interest upto the date of
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the filing of the returns, it must be presumed that the
Income Tax officer had extended the time for filing the
returns after satisfying himself that it was a case for
extension of time. The Appellate Tribunal allowed the
appeals and canceled the penalties. On a reference being
made. the High Court held that the Appellate Tribunal was
justified in relying upon the presumption. Hence these
appeals by the Revenue. The Revenue contended that there was
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no material to warrant the finding that an application had
made by the assessee A for extension of time and that upon
such application the Income Tax officer extended the time.
The Revenue urged that the imposition of interest does not
warrant the assumption that an application for extension of
time was made by the assessee and allowed by the Income Tax
officer.
Dismissing the appeals,
^
HELD: It cannot be disputed that the Income Tax officer
could extend the date for furnishing the return in respect
of each assessment year. It was open to him to do so under
the statute, and he was entitled to charge interest only on
the basis that the extended period fell beyond September 30
or December 31, as the case may be. In the ordinary course
of things, the Income Tax officer could have extended the
date only upon being satisfied that there a was good reason
for doing so, and that would have been on grounds pleaded by
the assessee. We consider that in the circumstances of this
case a presumption could validly be raised that all that was
done. No attempt was made by the Revenue to show that the
Income Tax officer acted arbitrarily and contrary to the
procedure envisaged by the statute. The Appellate Tribunal
considered the matter carefully and found circumstances on
the record in favour of raising the presumption. The High
Court approved of the approach adopted by the Appellate
Tribunal and did not find it contrary to law. We do not see
any reason to differ from the opinion expressed by the High
Court. [221E-G]
Additional Commissioner of Income Tax, Gujarat v.
Santosh Industries, [1974; 93 I.T.R. 563, M. Nagappa and
others v. Income Tax officer, Central Circle-l, Bangalore
and others, [1975] 99 I.T.R. 32, Poorna Biscuit Factory v.
Commissioner of Income Tax, A.P., [1975] 99 I.T.R. 41,
Commissioner of Income Tax, Orissa v Gangaram Chopolia,
[1976]103 I.T.R. 613, Metal India Products v. Commissioner
of Income Tax, Lucknow, [1978] 113 1.T.R. 830 and
Commissioner of Income Tax, Punjab v. Kula Valley Transport
Co. P. Ltd., [1970] 77 I.T.R. 518. not applicable.
Penalty under cl (a) of Sub-s (1) of s.271 of the
Income Tax Act is attracted if the Income Tax officer is
satisfied that the assessee as, without reasonable cause,
failed to furnish the returns "within the time allowed’.,
The time allowed for furnishing a voluntary return is the
time specified in Sub-s.(l) of s.139. The proviso so that
sub-section empowers the Income Tax officer to extend the
date for furnishing the return. When the Income Tax officer
extends the date, he does so in the exercise of authority
conferred by the statute, and the additional time available
to the assessee consequent upon such extension is, for all
relevant purposes, of the same character and as effective as
the statutory period specially enacted by Parliament. For
the purpose of furnishing a return it constitutes an
integral part of the time allowed for furnishing a return.
Therefore, where the Income Tax officer extends the date,
then all the time upto that date is the time allowed for
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furnishing the return. The additional period consequent upon
such extension falls within the expression "the time
allowed" in cl.(a) of Sub-s.(l) of s.271. That being so, the
conclusion must follow that the penalty provision does not
come into play at all. [223C-G]
217
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1299 A
to 1303 of 1973
From the Judgment and order dated the 3rd February,
1972 of the Andhra Pradesh High Court in case referred No.
61 of 1970
S. T. Desai, M. N. Tandon and Miss. A. Subhashini for
the Appellant.
A. Subba Rao, for the respondent.
The Judgment of the Court was delivered by
PATHAK, J. These appeals by special leave are
directed(. against the judgment of the High Court of Andhra
Pradesh disposing of a reference under Sub-s. (1) of s. 256
of the Income-tax Act, 1961 on the following questions of
law:
1. Whether on the facts and in the circumstances
of the case, the Appellate Tribunal was justified in
concluding that the charging of interest indicated that
the Income-tax officer was satisfied that there was
sufficient cause for delay in filing the return of
income ?
2. Whether on the facts and in the circumstances
of the case, the Tribunal was justified in cancelling
the penalties levied under section 271 (1) (a) ?
The respondent assessee is a partner in the firm, M/s
Manik Rao & Brothers. He filed voluntary returns for the
assessment years 1959-60, 1960-61, 1961-62 and 1962-63, all
on August 2, 1963. The return for the assessment year 1963-
64 was filed on August 2, 1964. On account of the delay in
filing the returns the Income Tax officer treated the
assessee as being in default and imposed penalties under cl.
(2) of Sub-s. (1) of s. 271 of the Act. In appeal before the
Appellate Assistant Commissioner of Income Tax the assessee
contended that as the returns had been furnished before the
end of four years from the end of the relevant assessment
years, that is to say, the period prescribed by Sub-s. (4)
of s. 139 of the Act, he was not liable to any penalty. It
was also pointed out by the assessee that interest had been
levied under clause (iii) of the proviso to Sub-s. (1) of s.
139 and, therefore, no question arose of imposing a penalty.
Both contentions were rejected by the
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Appellate Assistant Commissioner. In second appeal before
the A income Tax Appellate Tribunal the assessee raised
substantially the same contentions. The Appellate Tribunal
took the view that in cases falling under Sub-s. (1), Sub-s.
(2) and Sub-s. (4) of s. 139 the Income Tax officer was
empowered to grant time for filing a return. and on such
time being granted the assessee would be liable to pay
interest. It pointed out that the assessee had in fact given
his reasons for the delay in filing the returns ’both for
the purpose of levy of interest under cl. (1) of s. 139 and
also the levy of penalty under cl. (a) of Sub-s. (1) of s.
271". It held that as the Income Tax officer had levied
interest upto the date of the filing of the returns it must
be presumed that the Income Tax officer had extended the
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time for filing the returns after satisfying himself that it
was a case for extension of time. The presumption was
founded in the principle that an officer entrusted with a
judicial or quasi judicial duty must be presumed to have
discharged his duties in a proper and bona fide manner. The
appellate Tribunal allowed the appeals and cancelled the
penalties.
At the instance of the Commissioner of Income Tax, the
Appellate Tribunal made a reference to the High Court of
Andhra Pradesh. The High Court held that the Appellate
Tribunal was justified in relying upon the presumption that
official acts had been regularly performed, and that
therefore it must be presumed that the Income Tax officer
had extended the time upon grounds made out by the assessee,
because otherwise the Income Tax officer could not have
charged interest. Holding that no penalty was livable in the
circumstances, the High Court answered the reference in
favour of the assessee.
To appreciate the true scope of the questions referred,
it is necessary to understand the scheme enacted in s. 139
of the Income tax Act, 1961. Broadly, the scheme envisages a
voluntary return by the assessee under Sub-s. (1) of s. 139,
a return consequent upon a notice by the Income Tax officer
under Sub-s. (2) of s. 139 and a return in the circumstances
mentioned in Sub-s. (4) of s. 139. We are not concerned
where with a return under Sub-s. (3) of s. 139 disclosing a
loss nor are we concerned with a revised return under Sub-s.
(S) of s. 139. In the case of a voluntary return, Sub-s. (1)
of s. 139 prescribes the period within which such returns
must be filed. Where no return can be filed within the
prescribed period,
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the assessee is entitled to apply to the Income Tax officer
for extending the date for furnishing the return. The lncome
Tax officer is empowered to extend the date in his
discretion. In a case covered by cl. (i) of the proviso to
Sub-s. (1) of s. 139 the period may be extended upto
September 30 of the assessment year without charging any
interest, and in a case covered by cl. (ii) of the proviso
the period may be extended upto December 31 of the
assessment year similarly without charging any interest. But
where the period is extended beyond the dates mentioned in
clauses (i) and (ii), then under cl. (iii), the assessee is
liable to pay interest from october 1 or January I, as the
case may be, of the assessment year to the date of the
furnishing of the return on the amount of tax payable on the
total income reduced by the advance tax paid and any tax
deducted at source. Similarly, in the case of a return
furnished under Sub-s. (2) of s. 139 the Income Tax officer
has power to extend the date for furnishing the return
subject to payment of interest in the circumstances set
forth in relation to voluntary returns under Sub-s. (1) of
s. 139. Where, however, the assessee does not furnish a
return within the time allowed to him under Sub-s. (1) or
Sub-s. (2) of s. 139 then before any assessment is made he
may, under Sub-s (4) of s. 139, furnish a 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 in that event the provisions of Sub-cl.
(iii) of the proviso to Sub-s. (1) of s. 139 relating to
payment of interest would apply to the case. Sub- s. (8) of
s. 139 was inserted by the Finance Act, 1963 with effect
from April 28, 1963. It declared that notwithstanding
anything contained in cl. (iii) of the proviso to Sub-s. (1)
of s. 139, it was open to the Income Tax officer, in certain
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prescribed cases and circumstances, to reduce or waive the
interest payable by any person under any provision of s.
139. It may be noted that the language of Sub-s. (8) of s.
139 suffered material change with effect from April 1, 1971.
Now, it will be apparent that delay in filing a return
of income results in the postponement of payment of tax by
the assessee resulting in the State being deprived of a
corresponding amount of revenue for the period of the delay.
It seems that in order to compensate for the loss so
occasioned Parliament enacted the provision for payment of
interest. It is apparent also from the language of cl. (iii)
of the proviso that interest becomes payable only upon the
220
Income Tax officer acting on an application made by the
assessee for the purpose and extending the date for
furnishing the return. At the relevant time the proviso to
Sub-s. (1) of s. 139 read:-
Provided that on an application made in the
prescribed manner, 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 clause (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, upto 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 cl.
(b) of s. 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,"
It is only where the Income Tax officer extends the time for
221
furnishing the return beyond September 30 or December 31, as
the case may be, that interest becomes payable.
Now the contention on behalf of the Revenue is that
there is no material to warrant the finding that an
application had been made by the assessee for extension of
time and that upon such application the Income Tax officer
extended the time. It is urged that the imposition of
interest does not warrant the assumption that an application
for extension of time was made by the assessee and allowed
by the Income Tax officer. The proviso to Sub-s. (1) of s.
139 requires the assessee to make an application for
extension of time in the prescribed manner, and the
prescribed form of the application set forth is Form No. 6
pursuant to rule 13 of the Income Tax Rules, which requires
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the assessee to state the reasons on which the extension of
time is sought. All this, learned counsel contends,
contemplates that the Income Tax officer should apply his
mind to relevant material before him before deciding, in his
discretion, whether the time should be extended. Learned
counsel, however, has not been able to satisfy us why the
presumption raised by the Appellate Tribunal, and endorsed
by the High Court, should not prevail. It cannot be disputed
that the Income Tax officer could extend the date for
furnishing the return in respect of each assessment year. It
was open to him to do so under the statute, and he was
entitled to charge interest only on the basis that the
extended period fell beyond September 30 or December 31, as
the case may be. In the ordinary course of things, the
Income Tax officer could have extended the date only upon
being satisfied that there was good reason for doing so, and
that would have been on grounds pleaded by the assessee. We
consider that in the circumstances of this case a
presumption could validly be raised that all that was done.
No attempt was made by the Revenue to show that the Income
Tax officer acted arbitrarily and contrary to the procedure
envisaged by the statute. The Appellate Tribunal considered
the matter carefully and found circumstances on the record
in favour of raising the presumption. The High Court
approved of the approach adopted by the Appellate Tribunal]
and did not find it contrary to law. We do not see any
reason to differ from the opinion expressed by the High
Court.
In the instant case, the extension was a matter falling
within Sub-s. (1) of s. 139, and the returns furnished by
the assessee must be attributed to that provision. They were
not returns furnished
222
within the contemplation of Sub-s. (4) of s. 139. Therefore,
the decision of the Gujarat High Court in Additional
Commissioner of Income Tax, Gujarat v. Santosh
Industries,(l) of the Karnataka High court in M. Nagappa and
others v. Income Tax officer, Central Circle-l, Bangalore
and others,(a) of the Andhra Pradesh High Court in Poorna
Biscuit Factory v. Commissioner of Income Tax, A.P.,(3) of
the Orissa High Court in Commissioner of Income Tax, Orissa
V. Gangaram Chapolia,(4) and of the Allahabad High Court in
Metal India Products v. Commissioner of Income Tax,
Lucknow(’) cannot be invoked in the instant case. They are
cases dealing with a return filed in the circumstances
mentioned in Sub-s. (4) of s. 139.
our attention has also been drawn to the decision of
this Court in Commissioner of Income Tax, Punjab v. Kulu
Valley Transport Co. P. Ltd.(") That was a case where the
returns were filed under Sub-s. 3 of s. 22 of the Indian
Income Tax Act, 1922. They were not returns furnished within
the time allowed by or under Sub-s. (1) or Sub-s. (2) of s.
22 of that Act. Accordingly, that case also need not be
considered.
In the result, we uphold the answer returned by the
High Court to the first question raised in the reference.
The second question raises the point whether the
Appellate Tribunal was justified in cancelling the penalties
levied under cl. (a) of Sub-s. (1) of s. 271. That provision
reads:-
"271 (1) If the Income Tax officer or the Appellate
Assistant Commissioner 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 income which he was required to
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furnish under Sub-s. (1) of s. 139 or by notice
given under Sub-s. (2) of s. 139 or 9. 148 or has
without reasonable cause failed to furnish it
within the time
(1) [l974] 93 I.T.R. 563.
(2) [1975] 99 I.T.R. 32.
(3) [1975] 99 I.T.R. 41.
(4) [1976] 103 I.T.R. 613.
(5) [1978] 113 I.T.R. 830.
(6) [1970] 77 I.T.R. 518
223
allowed and ni the manner required by Sub-s. (1) of s.
139 or by such notice, as the case may be, or A b) ....
-
(c) ...
...................................................._
he may direct that such person shall pay by way of penalty,-
(i)
..................................................._
(ii)
...................................................
(iii)......... -...... -....... -...... -.......-.....
-
It is clear that penalty is attracted if the Income Tax
officer is satisfied that assessee has, without reasonable
cause, failed to furnish the returns "within the time
allowed". The time allowed for furnishing a voluntary return
is the time specified in Sub-s. (1) of s. 139. We have seen
that the proviso to that sub-section empowers the Income Tax
officer to extend the date for furnishing the return. It was
open to Parliament to specify by express enactment the date
by which a return must be filed, and also confer power on
the Income Tax officer to extend the date for doing so. When
the Income Tax officer extends the date, he does so in the
exercise of authority conferred by the statute, and the
additional time available to the assessee consequent upon
such extension is, for all relevant purposes, of the same
character and as effective as the statutory period
specifically enacted by Parliament. For the purpose of
furnishing a return it constitutes an integral part of the
time allowed for furnishing a return. Therefore, where the
Income Tax Officer extends the date, then all the time upto
that date is the time allowed for furnishing the return. The
additional period consequent upon such extension falls
within the expression "the time allowed" in cl. (a) of Sub-
s. Of s. 271. That being so, the conclusion must follow that
the penalty provision does not come into play at all.
In our opinion, the High Court was right in
answering the second question also in favour of the
assessee.
We express our agreement with the opinion of the
High Court a on both the questions referred to it.
Accordingly, these appeals fail and are dismissed with
costs.
H.S K. Appeal dismissed.
224