Full Judgment Text
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CASE NO.:
Appeal (crl.) 1260-1261 of 1997
PETITIONER:
Prakash Nath Khanna & Anr.
RESPONDENT:
Commissioner of Income Tax and Anr.
DATE OF JUDGMENT: 16/02/2004
BENCH:
DORAISWAMY RAJU & ARIJIT PASAYAT.
JUDGMENT:
JUDGMENT
ARIJIT PASAYAT,J.
These appeals revolve round the scope and
ambit of Section 276-CC of the Income Tax Act,
1961 (in short the ’Act’), and are directed
against a common judgment rendered by a Division
Bench of the Himachal Pradesh High Court which
rejected the three writ petitions filed by the
appellants in these two appeals. The Assistant
Commissioner of Income tax, Circle I, Shimla filed
a complaint in terms of Section 276-CC of the Act
in the Court of the CJM who had issued process of
taking cognizance of the offence. In each of the
writ applications, challenge was made to legality
of the proceedings pending in the Court of Chief
Judicial Magistrate, Shimla (in short the ’CJM’).
The factual position is almost undisputed and
needs to be noted in brief.
The three appellants were partners of a firm
carrying on business under the name and style of
M/s Kailash Nath and Associates. Apart from the
three appellants, two other persons were partners
and one of them Shri Kailash Nath was the Managing
partner in terms of the Partnership Deed dated
1.4.1983. For the assessment year 1988-89 return
of income was to be filed on or before 31.7.1988,
but was in fact filed on 20.3.1991. Assessment
under Section 143(3) of the Act was completed on
26.8.1991. Proceedings for late submission of
return were initiated against the appellants under
Section 271(1)(a) of the Act and penalty was
imposed. Proceedings in terms of Section 276-CC
of the Act were also initiated and complaint was
filed before the concerned Court. As noted above,
cognizance was taken and process was issued. The
writ applications were filed challenging legality
of the proceedings. By the impugned judgment the
High Court dismissed the writ petitions. The
points which were mooted before the High Court
were re-iterated in the present appeals.
Mr. G.C. Sharma, learned senior counsel
appearing for the appellants urged the following
points for consideration:
1. The expression "to furnish
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in due time" occurring in Section
276CC means to furnish within the
time permissible under the Act.
The return furnished under
Section 139(4) at any time before
the assessment is made has to be
regarded as a return furnished
under Section 139(1). This was so
held by this Court in
Commissioner of Income Tax Punjab
v. Kullu Valley Transport Co.
Pvt.Ltd. (1970 (77) ITR 518) in
the context of Sections 22(1) and
22(3) of the Indian Income Tax
Act, 1922 (in short the ’Old
Act’) which are in pari-materia
of Section 139(1) and Section
139(4) of the Act. It follows
that return was furnished in "the
due time" and consequently
Section 276CC is not attracted.
2. The provisions of Section
276CC(i) are not intended to
apply to the cases of assessees
who have been regularly assessed
to income tax and have
voluntarily submitted their
returns of income without issue
of any notice to do so by the
Assessing Officer in that behalf,
within the time permissible to
furnish the return under the Act.
This interpretation gets support
from the marginal heading and
explanatory memo laid before
Parliament when the Section was
introduced.
3(i) The provision only applies
where the amount of tax which
would have been evaded if the
failure had not been discovered
exceeds Rs,1,00,000/-. There has
been no discovery of the failure
in this case from the point of
view of evasion of tax. The
assessee has submitted return
voluntarily, paid advance tax and
self assessment tax.
3(ii) There has been no
concealment of income in this
case, and no penalty has been or
can be imposed. The allegation
made in the complaint that there
has been evasion of tax to the
extent of Rs.5,68,039/- is based
on no evidence and is contrary to
the materials on record.
4. The petitioners in reply to
show cause notice issued pleaded
that the delay in submission of
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returns was unavoidable, because
their share of profit from the
firm in which they were partners
had not been communicated by the
Managing Partner of the firm who
was responsible for the accounts.
They had no guilty mind.
5. Mere delay in filing a return
without contumacious conduct and
mens rea being established could
not make the petitioner liable
for prosecution.
6. Petitioner having been
subjected to levy of interest
under Section 139(1) and also to
penalty proceedings under Section
271(1)(a) of the Act, could not
further be prosecuted for the
same defaults.
Per contra, learned counsel appearing for
the respondents submitted that the High Court was
justified in its conclusions in dismissing the
writ petitions. The decision in Kullu Valley’s
case (supra) has no application to the facts of
the present case and in fact it was rendered in a
different set up. Sub-sections (1) and (4) of
Section 139 deal with different situations and it
cannot be said that a return filed in terms of
Section 139(4) would mean compliance with the
requirements indicated in sub-section (1) of
Section 139. It is further submitted that Section
278-E raises a presumption which is a rebutable
one and the factual aspects raised by the
appellants can be placed for consideration in the
proceedings before the learned CJM.
Since the fate of the appeals revolves round
the scope and ambit of Section 276-CC in the
background of sub-sections (1) and (4) of Section
139, it would be appropriate to quote the
aforesaid provisions, as they stood at the
relevant point of time:
"Section 276-CC: Failure to furnish
returns of income: If a person
wilfully fails to furnish in due time
the return of income which he is
required to furnish under sub-section
(1) of Section 139 or by notice given
under sub-section (2) of Section 139
or Section 148, he shall be
punishable,-
(i) in a case where the amount of tax,
which would have been evaded if the
failure had not been discovered,
exceeds one hundred thousand rupees,
with rigorous imprisonment for a term
which shall not be less than six
months but which may extend to seven
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years and with fine;
(ii) in any other case, with
imprisonment for a term which shall
not be less than three months but
which may extend to three years and
with fine:
Provided that a person shall not
be proceeded against under this
section for failure to furnish in due
time the return of income under sub-
section (1) of Section 139-
(i)for any assessment year commencing
prior to the Ist day of April, 1975; or
(ii)for any assessment year commencing
on or after the Ist day of April, 1975,
if-
(a)the return is furnished by him
before the expiry of the assessment
year; or
(b)the tax payable by him on the total
income determined on regular
assessment, as reduced by the advance
tax, if any, paid, and any tax
deducted at source, does not exceed
three thousand rupees".
Section 139: Return of income-
(1) Every person, if his total income
or the total income of any other
person exceeded the maximum amount
which is not chargeable to income
tax, shall furnish a return of his
income or the income of such other
person during the previous year in
the prescribed form and verified
in the prescribed manner and
setting forth such other
particulars as may be prescribed.
(a) in the case of every person
whose total income, or the
total income of any other
person in respect of which he
is assessable under this Act,
includes any income from
business or profession,
before the expiry of four
months from the end of the
previous year or where there
is more than one previous
year, from the end of the
previous year which expired
last before the commencement
of the assessment year, or
before the 30th day of June
of the assessment year,
whichever is later;
(b) in the case of every other
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person, before the 30th day
of June of the assessment
year:
Provided that, on an
application made in the
prescribed manner, the
Assessing Officer may, in his
discretion, extend the date
for furnishing the return,
and, notwithstanding that the
date is so extended, interest
shall be chargeable in
accordance with he provisions
of sub-section (8).
(IA) Notwithstanding anything contained
in sub-section (1), no person need to
furnish under that sub-section a
return of his income or the income of
any other person in respect of whose
total income he is assessable under
this Act, if his income or, as the
case may be, the income of such other
person during the previous year
consisted only of income chargeable
under the head "Salaries" or of
income chargeable under that head and
also income of the nature referred to
in any one or more of clause (i) to
(ix) of sub-section (1) of Section 80L
and the following conditions are
fulfilled, namely:-
(a) where he or such other person was
employed during the previous year by a
company, he or such other person was
at no time during the previous year a
director of the company or a
beneficial owner of shares in the
company (not being shares entitled to
a fixed rate of dividend whether with
or without a right to participate in
profits) carrying not less than twenty
per cent of the voting power;
(b) his income or the income of such
other person under the head
"Salaries", exclusive of the value of
all benefits or amenities not provided
for by way of monetary payment, does
not exceed twenty four thousand
rupees;
(c) the amount of income of the nature
referred to in clause (i) to (ix) of
sub-section (1) of Section 80L, if any
does not, in the aggregate, exceed the
maximum amount allowable as deduction
in his case under that section; and
(d) the tax deductible at source under
section 192 from the income chargeable
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under the head "Salaries" has been
deducted from that income.
(2) In the case of any person who, in
the Assessing 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 Assessing Officer may, before
the end of the relevant assessment
year, issue a notice to him and
serve the same upon him requiring
him to furnish, within 30 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 form and verified in
the prescribed manner and setting
forth such other particulars as
may be prescribed:
Provided that, on an
application made in the
prescribed manner, the
Assessing Officer may, in his
discretion, extend the date
for furnishing the return,
and, notwithstanding that the
date is so extended, interest
shall be chargeable in
accordance with the
provisions of sub-section
(8).
(3) If any person who has not been
served with a notice under sub-
section (2), has sustained a loss
in any previous year under the
head "Profits and gains of
business or profession" or under
the head "Capital gains" and
claims that the loss or any part
thereof should be carried forward
under sub-section (1) of Section
72, or sub-section (2) of Section
73, or sub-section (1) or sub-
section (3) of Section 74, or sub-
section (3) of Section 74A, he may
furnish within the time allowed
under sub-section (1) or by the
thirty first day of July of the
assessment year relevant to the
previous year during which the
loss was sustained, a return of
loss in the prescribed form and
verified in the prescribed manner
and containing such other
particulars as may be prescribed,
and all the provisions of this
Act shall apply as if it were a
return under sub-section (1).
(4)(a) Any person who has not
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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
sub-section (8) 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 Ist day of April, 1967
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
Ist day of April, 1968 three years
from the end of the assessment year;
(iii)where the return relates to a
previous year relevant to any other
assessment year, two years from the
end of such assessment year.
(4A) Every person in receipt of income
derived from property held under trust
or other legal obligation wholly for
charitable or religious purposes or in
part only for such purposes, or of
income being voluntary contributions
referred to in sub-clause (iia) of
clause (24) of section 2 shall, if the
total income in respect of which he is
assessable as a representative
assessee(the total income for this
purpose being computed under this Act
without giving effect to the
provisions of sections 11 and 12)
exceeds the maximum amount which is
not chargeable of income tax furnish a
return of such income of the previous
year in the prescribed form and
verified in the prescribed manner and
setting forth such other particulars
as may be prescribed and all the
provisions of this Act shall, so far
as may be, apply as if it were a
return required to be furnished under
sub-section (1).
(4B) The Chief Executive Officer
(whether such Chief Executive Officer)
is known as Secretary or by any other
designation) of every political party
shall, if the total income in respect
of which the political party is
assessable (the total income for this
purpose being computed without giving
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effect to the provisions of section
13A) exceeds the maximum amount which
is not chargeable of income tax
furnish a return of such income of the
previous year in the prescribed form
and verified in the prescribed manner
and setting forth such other
particulars as may be prescribed and
all the provisions of this Act shall,
so far as may be, apply as if it were
a return required to be furnished
under sub-section (1).
(5)If any person having furnished a
return under sub-section (1) or sub-
section (2), discovers any omission or
any wrong statement therein, he may
furnish a revised return at any time
before the assessment is made.
Kullu Valley’s case (supra ) was rendered in
the background of Section 22 of the Old Act.
Great emphasis is laid on the observation by this
Court that sub-section (3) of Section 22 of the
Old Act was in the nature of a proviso to sub-
section (1) thereof. It is to be noted that the
decision was rendered in a totally different
context. The question related to the treatment of
a return of loss filed beyond the time provided
under sub-section (1) of Section 22. The
observation on which reliance is placed cannot be
read out of context.
In Kullu valley’s case (supra) the majority
view was that Section 22(3) of the Old Act
(corresponding to Section 139(4) of the Act) is
merely a proviso to Section 22(1)
(Section 139(1)) respectively, and if Section
22(3) is complied with, Section 22(1) must be
held to have been complied with and that if
compliance has been made with Section 22(3), the
requirement of Section 22(2A) (corresponding to
Section 139(3) of the Act) would stand satisfied.
It was thus, held that the ascertained losses
could be carried forward to the subsequent years
and set off, even though suo motu return is not
filed within time prescribed under Section 22(1)
of the Old Act.
The decision was rendered in a conceptually
different situation, and has no relevance so far
as the present dispute is concerned.
The basic issue in Kullu Valley’s case
(supra) was determination of loss on the basis of
return filed under Section 22(1) or 22(3) of the
Old Act. In the Act, Section 80 deals
specifically with the situation.
The original Section 80 in the Act reads as
under:
"Notwithstanding anything contained in
this Chapter, no loss which has not
been determined in pursuance of a
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return filed under Section 139, shall
be carried forward and set off under
sub-section (1) of Section 72 or sub-
section (2) of Section 73 or sub-
section (1) of Section 74".
By the Taxation Laws (Amendment) Act, 1984 with
effect from Ist April, 1985, the words "under
Section 139" (underlined for emphasis) were
substituted by the words "within the time
allowed under sub-section (1) of Section 139 or
within such further time as may be allowed by the
Income Tax Officer". (underlined for emphasis)
As a result of the amendment of Section
139(3) by the Taxation Laws (Amendment and
Miscellaneous Provisions) Act, 1986 the power of
the Income tax Officer to extend time for
furnishing return was taken away w.e.f. Ist
April, 1987.
Yet again, by the Direct Tax Laws (Amendment
Act), 1987 w.e.f. Ist April, 1989 the words
"within the time allowed under sub-section (1)
of Section 139 or within such further time as may
be allowed by the Income tax Officer" were
substituted by the words "in accordance with the
provisions of sub-section (3) of Section 139".
It is well settled principle in law that the
Court cannot read anything into a statutory
provision which is plain and unambiguous. A
statute is an edict of the legislature. The
language employed in a statute is the
determinative factor of legislative intent. The
first and primary rule of construction is that
the intention of the legislation must be found in
the words used by the legislature itself. The
question is not what may be supposed and has been
intended but what has been said. "Statutes
should be construed, not as theorems of Euclid",
Judge Learned Hand said, "but words must be
construed with some imagination of the purposes
which lie behind them". (See Lenigh Valley Coal
Co. v. Yensavage (218 FR 547). The view was re-
iterated in Union of India v. Filip Tiago De Gama
of Vedem Vasco De Gama (AIR 1990 SC 981), and
Padma Sundara Rao (dead) and Ors. V. State of
Tamil Nadu and Ors. (2002 (3) SCC 533).
In D.R. Venkatchalam v Dy. Transport
Commissioner (1977 (2) SCC 273) it was observed
that courts must avoid the danger of a priori
determination of the meaning of a provision based
on their own preconceived notions of ideological
structure or scheme into which the provision to
be interpreted is somewhat fitted. They are not
entitled to usurp legislative function under the
disguise of interpretation.
While interpreting a provision the court
only interprets the law and cannot legislate it.
If a provision of law is misused and subjected to
the abuse of process of law, it is for the
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legislature to amend, modify or repeal it, if
deemed necessary. (See Rishabh Agro Industries
Ltd. V. P.N.B. Capital Services Ltd. (2000 (5)
SCC 515). The legislative casus omissus cannot be
supplied by judicial interpretative process.
Two principles of construction- one relating
to casus omissus and the other in regard to
reading the statute as a whole -appear to be well
settled. Under the first principle a casus
omissus cannot be supplied by the court except in
the case of clear necessity and when reason for
it is found in the four corners of the statute
itself but at the same time a casus omissus
should not be readily inferred and for that
purpose all the parts of a statute or section
must be construed together and every clause of a
section should be construed with reference to the
context and other clauses thereof so that the
construction to be put on a particular provision
makes a consistent enactment of the whole
statute. This would be more so if literal
construction of a particular clause leads to
manifestly absurd or anomalous results which
could not have been intended by the legislature.
"An intention to produce an unreasonable
result", said Danckwerts, L.J., in Artemiou v.
Procopiou (1966 (1) QB 878), "is not to be
imputed to a statute if there is some other
construction available". Where to apply words
literally would "defeat the obvious intention of
the legislation and produce a wholly unreasonable
result", we must "do some violence to the
words" and so achieve that obvious intention and
produce a rational construction. (Per Lord Reid
in Luke v. IRC {1963 AC 557} where at AC p.577 he
also observed: "This is not a new problem,
though our standard of drafting is such that it
rarely emerges".}
The heading of the Section or the marginal
note may be relied upon to clear any doubt or
ambiguity in the interpretation of the provision
and to discern the legislative intent. In C.I.T.
v. Ahmedbhai Umarbhai and Co. (AIR 1950 SC 134)
after referring to the view expressed by Lord
Machnaghten in Balraj Kunwar v. Jagatpal Singh
(ILR 26 All. 393 (PC), it was held that marginal
notes in an Indian Statute, as in an Act of
Parliament cannot be referred to for the purpose
of construing the statute. Similar view was
expressed in Board of Muslim Wakfs, Rajasthan v.
Radha Kishan and Ors. (1979(2) SCC 468), and
Kalawatibai v. Soiryabai and Ors. (AIR 1991 SC
1581). Marginal note certainly cannot control the
meaning of the body of the Section if the
language employed there is clear. (See Smt.
Nandini Satpathy v. P.L. Dani and Anr. (AIR 1978
SC 1025) In the present case as noted above, the
provisions of Section 276-CC are in clear terms.
There is no scope for trying to clear any doubt
or ambiguity as urged by learned counsel for the
appellants. Interpretation sought to be put on
Section 276-CC to the effect that if a return is
filed under sub-section (4) of section 139 it
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means that the requirements of sub-section (1) of
Section 139 cannot be accepted for more reasons
than one.
One of the significant terms used in Section
276-CC is ’in due time’. The time within which
the return is to be furnished is indicated only
in sub-section (1) of Section 139 and not in sub-
section (4) of Section 139. That being so, even
if a return is filed in terms of sub-section (4)
of Section 139 that would not dilute the
infraction in not furnishing the return in due
time as prescribed under sub-section (1) of
Section 139. Otherwise, the use of the expression
"in due time" would loose its relevance and it
cannot be said that the said expression was used
without any purpose. Before substitution of the
expression "clause (i) of sub-section (1) of
section 142" by Direct Tax Laws (Amendment) Act,
1987 w.e.f. 1.4.1989 the expression used was
"sub-section (2) of section 139". At the
relevant point of time the assessing officer was
empowered to issue a notice requiring furnishing
of a return within the time indicated therein.
That means the infractions which are covered by
Section 276-CC relate to non-furnishing of return
within the time in terms of sub-section (1) or
indicated in the notice given under sub-section
(2) of Section 139. There is no condonation of
the said infraction, even if a return is filed in
terms of sub-section (4). Accepting such a plea
would mean that a person who has not filed a
return within the due time as prescribed under
sub-sections (1) or (2) of Section 139 would get
benefit by filing the return under Section 139(4)
much later. This cannot certainly be the
legislative intent.
Another plea which was urged with some
amount of vehemence was that the provisions of
Section 276-CC are applicable only when there is
discovery of the failure regarding evasion of
tax. It was submitted that since the return under
sub-section (4) of Section 139 was filed before
the discovery of any evasion, the provision has
no application. The case at hand cannot be
covered by the expression "in any other case".
This argument though attractive has no substance.
The provision consists of two parts. First
relates to the infractions warranting penal
consequences and the second, measure of
punishment. The second part in turn envisages two
situations. The first situation is where there is
discovery of the failure involving the evasion of
tax of a particular amount. For the said
infraction stringent penal consequences have been
provided. Second situation covers all cases
except the first situation elaborated above.
The term of imprisonment is higher when the
amount of tax which would have been evaded but
for the discovery of the failure to furnish the
return exceeds one hundred thousand rupees. If
the plea of the appellants is accepted it would
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mean that in a given case where there is
infraction and where a return has not been
furnished in terms of sub-section (1) of Section
139 or even in response to a notice issued in
terms of sub-section (2), the consequences
flowing from non-furnishing of return would get
obliterated. At the relevant point of time
Section 139(4)(a) permitted filing of return
where return has not been filed within sub-
section (1) and sub-section (2). The time limit
was provided in clause (b). Section 276-CC refers
to "due time" in relation to sub-sections (1)
and (2) of Section 139 and not to sub-section
(4). Had the Legislature intended to cover sub-
section (4) also, use of expression "Section
139" alone would have sufficed. It cannot be
said that Legislature without any purpose or
intent specified only the sub-sections (1) and
(2) and the conspicuous omission of sub-section
(4) has no meaning or purpose behind it. Sub-
section (4) of Section 139 cannot by any stretch
of imagination control operation of sub-section
(1) wherein a fixed period for furnishing the
return is stipulated. The mere fact that for
purposes of assessment and carrying forward and
to set off losses it is treated as one filed
within sub-sections (1) or (2) cannot be pressed
into service to claim it to be actually one such,
though it is factually and really not by
extending it beyond its legitimate purpose.
Whether there was wilful failure to furnish
the return is a matter which is to be adjudicated
factually by the Court which deals with the
prosecution case. Section 278-E is relevant for
this purpose and the same reads as follows:
"278-E: Presumption as to
culpable mental state-
(1) In any prosecution for any offence
under this Act which requires a
culpable mental state on the part of
the accused, the court shall presume
the existence of such mental state but
it shall be a defence for the accused
to prove the fact that he had no such
mental state with respect to the act
charged as an offence in that
prosecution.
Explanation: In this sub-section,
"culpable mental state" includes
intention, motive or knowledge of a
fact or belief in, or reason to
believe, a fact
(2) For the purposes of this section,
a fact is said to be proved only when
the court believes it to exist beyond
reasonable doubt and not merely when
its existence is established by a
preponderance of probability".
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There is a statutory presumption prescribed
in Section 278-E. The Court has to presume the
existence of culpable mental state, and absence
of such mental state can be pleaded by an accused
as a defence in respect to the act charged as an
offence in the prosecution. Therefore, the
factual aspects highlighted by the appellants
were rightly not dealt with by the High Court.
This is a matter for trial. It is certainly open
to the appellants to plead absence of culpable
mental state when the matter is taken up for
trial.
Looked at from any angle the appeals are
without merit and are dismissed.