Commissioner of Income Tax vs Surinder Kumar Pramod Kumar and Others

Ashok Bhan, J.—The Tribunal, Amritsar, has referred to this Court the following four questions of law for its opinion:

Whether, on the facts and in the circumstances of the case, the Tribunal is correct in holding that the applications made after the expiry of the due dates are valid in law and that the ITO is bound to consider them?

Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that if no rejection is communicated to the assessee, he is justified in presuming that the extension applications having been made were duly granted by the ITO?

Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the assessee is not required to incorporate all time reasonable causes in the explanation submitted by him to the ITO and that whether the Tribunal is justified in considering a cause not so incorporated in the explanation?

Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the assessee was not in default right from 10-6-1971 when the return was due to the date the return was filed?

The facts briefly stated are as under:

For the assessment year 1971-72, the department on 4-5-1971 issued notice u/s 139(2) of the income tax Act, 1961 (''the Act''), asking the assessee to furnish the return within 30 days of the receipt of the notice. Notice u/s 139(2) was served on 11-5-1971 and the return was due to be filed by the assessee on or before 10-6-1971. The assessee filed the return on 13-2-1974. As there was delay in filing of return, the ITO initiated penalty proceedings u/s 271(1)(a) of the Act for default of the late filing of the return by 32 months. The assessee filed his reply to the show-cause notice. The ITO, not being satisfied with the explanation of the assessee, found that the assessee was not prevented by reasonable cause from filing of the return and she, therefore, imposed the penalty of Rs. 3,27,715 for late filing of return by 32 months. The AAC, in appeal reversed the order of the ITO. The AAC found that the assessee was prevented by reasonable cause from not having filed the return up to 13-2-1974 and as such, the entire penalty was ordered to be cancelled. Being aggrieved, the revenue filed an appeal before the Tribunal. The Tribunal upheld the order of the AAC and dismissed the appeal filed by the revenue. At the instance of the revenue, four questions of law reproduced in the earlier part of this judgment, have been referred to this Court for its opinion.

Another fact which may be adverted to at this stage is that the assessee sought extension of time for filing of return by filing applications dated 27-9-1971, 28-3-1972, 19-9-1972, 28-4-1973 and 30-9-1973 up to 30-12-1971,30-6-1972,31-10-1972,30-9-1973 and 15-11-1973, respectively. The extension applications were made by the assessee much after the expiry of due date and after the expiry of the dates for which extensions were sought by the assessee under various applications. The contention raised before the Tribunal was that the assessee had filed applications for extension of period repeatedly which were made much after the expiry of the due date and after the expiry of the dates for which extension was sought and, therefore, such applications did not deserve any consideration. As against this, the contention of the assessee was that he had made number of applications for extension of time for filing the income tax return but no order either accepting or rejecting the applications for filing the return was ever conveyed to the assessee and, therefore, the assessee remained under the belief that the extension applications having been made had been duly granted by the ITO. The question before the Tribunal was as to whether the extension applications given by the assessee were required to be disposed of under the law by the ITO and whether the assessee was justified for having presumed that the extension applications made thereby were duly granted in the absence of any order to the contrary communicated to the assessee. The learned Tribunal relied upon two judgments of this Court in Addl Additional Commissioner of Income Tax Vs. Roshan Lal Kuthiala (Deceased) (by his Legal Representatives), and Karam Singh Vs. Commissioner of Income Tax, wherein it has been held that applications could be made even after the expiry of the prescribed period and the ITO was under an obligation in law to either grant or reject the application for extension of time for filing the return and further that such an order, if passed, should be conveyed to the assessee. In this case, since the rejection order was not conveyed to the assessee by the ITO, the assessee could be taken to be under a reasonable belief that his request had been acceded to and, therefore, there was no delay in filing the return.

We have considered the arguments advanced by the learned counsel appearing for the department. Question No. 1 is squarely covered by the judgment of this Court in Karam Singh''s case {supra) wherein it has been held as under:

From the application form prescribed for asking for extension of time for filing of the return of income, it is clear that the application can be made even after the expiry of the prescribed date. Moreover, the proviso to section 139(2) of the income tax Act, 1961, does not contain any limitation to the effect that such an application must be made before the due date. (p. 726)

Following the view taken by this Court in Karam Singh''s case (supra), question No. 1 is answered in the affirmative, i.e., in favour of the assessee and against the revenue and it is held that application(s) for extension of time filed beyond due date are valid in law and the ITO was bound to consider them.

Question No. 2

The facts giving rise to this question have been enumerated in the earlier paragraphs of this judgment. It has been held in Harmanjit Trust Vs. Commissioner of Income Tax, ) and Roshan Lal Kuthiala''s case (supra), that a duty is enjoined upon the ITO to intimate to the assessee whether its request for extension of time for furnishing the return had been granted or refused. If no communication is addressed either accepting or rejecting the application within reasonable time by the ITO, then the assessee is justified in presuming that the extension applications filed by him were duly granted by the ITO. Mr. A.K. Mittal, the learned counsel appearing for the revenue, has challenged the correctness of the view taken by this Court and for that proposition relied upon the following three judgments:

T. Venkata Krishnaiah and Co. Vs. Commissioner of Income Tax, ) Assam Frontier Veneer and Saw Mills Vs. Commissioner of Income Tax, and Commissioner of Income Tax Vs. S.P. Viz Construction Co., . The later two judgments have relied upon the reasoning given by the Andhra Pradesh High Court in T. Venkata Krishnaiah & Co.''s case (supra). This Court in Harmanjit Trust''s case {supra) has specifically disagreed with the view taken by their Lordships of the Andhra Pradesh High Court in T. Venkata Krishnaiah & Co.''s case (supra). Their Lordships of the Patna High Court in S.P. viz Construction Cat case (supra) have not noticed either of the three judgments of this Court referred to in the earlier part of this paragraph. Incidentally, their Lordships of the Patna High Court in S.P. viz Construction Co. ''s case {supra) have not taken notice of a judgment of their own Court in Commissioner of Income Tax Vs. Ramdas and Sons, where the said High Court had taken the view that when applications for extension of time were not replied to by the ITO, the assessee could presume that his request for extension of time had been granted and, thus, the assessee had reasonable cause for not filing the return by the due date. This Court in Harmanjit Trust''s case (supra) relied upon the view taken by Patna High Court in Ramdas & Sons'' case (supra).

We have considered the matter afresh at length and we are in respectful agreement with the view taken by this Court in the pronouncements of this Court, referred to above. In Harmanjit Trust''s case (supra) this Court has specifically disagreed with the view taken by the Andhra Pradesh High Court in T. Venkata Krishnaiah ''s case (supra). We quote the following observations of this Court in Harmanjit Trust''s case (supra) as having correctly enumerated the law on the point:

... Duty was cast on the ITO to intimate to the assessee whether its request for extension of time for furnishing the return had been granted or refused. Thus, the predominant view in various High Courts is that the assessee can well presume that his request for extension of time for furnishing the return had been granted, unless the ITO well in time communicates to the assessee his refusal. And it is precisely for this reason that form I.T.N.S. (Annex ''F'' with the statement) has been provided for use of the ITO to convey grant or refusal of extension of time. The lone voice of the Andhra Pradesh High Court in T. Venkata Krishnaiah and Co. Vs. Commissioner of Income Tax, , holding the contrary view that the ITO was hot bound under the provisions of any Act or the Rules made thereunder to pass any order on the application for extension of time, received after the expiry of the date given in the notice under sub-section (2) to section 139, to our mind, with due aspect to the Hon''ble Judges of that Court, is not sound and in line with the predominant and appropriate view taken by a majority of the High Courts and especially by this Court. The aforesaid view of the Andhra Pradesh High Court alone was the axis on which the appellate decision of the Tribunal revolved, and to our view not rightly. (p. 218)

For the foregoing reasons, question No. 2 is answered in the affirmative, ie., in favour of the assessee and against the revenue and it is held that since the applications filed by the assessee remained unreplied by the ITO, the assessee was justified in presuming that extension applications having been made were duly granted by the ITO.

Question No. 3

The assessee had filed the extension applications stating therein several grounds in support of the reasonable cause for delayed filing of the returns. The assessee did not raise the plea in either of these applications that he was under a bona fide belief that since no reply in respect of the extension applications had been conveyed, it was presumed by him that the applications filed for extension of time for filing of return stood sanctioned by the ITO. An argument was raised before the Tribunal that since the assessee had never put in such a plea in its extension application which was submitted to the ITO on 21 -2-1977 in reply to the show-cause notice for levy of penalty u/s 271 (1)(a) and the assessee having not raised any plea regarding such belief, it was not open to the Tribunal to entertain this ground as it had not been taken as one of the grounds in reply to the show-cause notice and, therefore, the same did not exist at all. The Tribunal repelled this argument and held that such a plea could be taken by the assessee at the appellate stage as well. It was argued that the Tribunal erred in taking the view to this effect. It is not necessary for the assessee to state all the matters in its explanation and the absence of one or more causes in its explanation would not mean that such cause did not exist at all. The assessee may be prevented from not filing the return by several causes and it is not necessary for the assessee to state all causes in its explanation. The absence of one or more cause/s in the explanation would not mean that such cause did not exist at all. It cannot be inferred that, since the assessee did not take up the plea that he was under a bona fide belief that since no communication rejecting the application for extension of time had been received, therefore, the same stood granted, this ground did not exist at all or in any case that such a cause could not be taken into consideration by the Tribunal especially in view of the law laid down by this Court in Karam Singh''s case (supra) and Roshan Lal Kuthiala''s case (supra). Question No. 3 is, accordingly, answered in the affirmative, i.e., in favour of the assessee and against the revenue.

Question No. 4

Question No. 4 is essentially a question of fact. In any case, in view of what has been held on question Nos. 1,2 and 3, this question does not survive for adjudication. No order as to costs.