Kishanlal Haricharan vs Income Tax Officer, A-Ward

Chinnappa Reddy, J.—For the assessment year 1962-63 ending with the Diwali of 1961, the petitioner failed to submit a return of income before June 30, 1962, as he was bound to do u/s 139(1) of the Income Tax Act, 1961. On February 16, 1963, the Income Tax Officer issued a notice to the petitioner u/s 139(2) calling upon him to submit a return before March 18, 1963. Even then no return was fifed. Later, in August, 1966, the Income Tax Officer issued a notice u/s 142(1) of the Act directing the petitioner to produce his accounts on September 5 1966. The clerk of the petitioner appeared before the Income Tax Officer on December 9, 1966, and prayed for time. The Income Tax Officer refused to grant time and after waiting till the end of the day, he proceeded to make an assessment u/s 144 of the Act to the best of his judgment. In addition to the tax, the Income Tax Officer also directed the petitioner to pay penal interest of Rs. 11,991-19. He purported to levy penal interest under the third clause of proviso to Section 139(1)(b) of the Act. The petitioner preferred an appeal to the Appellate Assistant Commissioner against the order of assessment. The Appellate Assistant Commissioner granted some slight relief to the petitioner regarding the quantum of tax and dismissed the appeal. As the petitioner was advised that there were no grounds for preferring an appeal to the Income Tax Appellate Tribunal, he did not prefer an appeal questioning the quantum of tax. He was also advised that he could not prefer an appeal against an order levying penal interest. He, therefore, filed the present application for the issue of a writ in which he questions the levy of penal interest only.

Sri T. Ramachandra Rao, learned counsel for the petitioner, submitted that the third clause of the proviso to Section 139(1)(b) is inapplicable to the facts of the case. We are of the view that Sri Ramachandra Rao is right in his submission. The proviso to Section 139(1)(b) is as follows:

"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, up to 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 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."

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 the clause. Where the assessee does not request for time for submitting a return, the third clause has no application. Other consequences may follow. For example, the petitioner may subject himself to the penalty provided in Section 271 of the Act. The petitioner may also subject himself to a best judgment assessment by the Income tax Officer. Those consequences may follow when the assessee fails to submit a return, but the consequences of paying penal interest does not follow. An assessee is liable to pay penal interest under the third clause of proviso to Section 139(1)(b) only if he asks for extension of time under that clause. The result is that the Income Tax Officer was not justified in levying penal interest in the present case.

The writ petition is allowed and the order of the Income Tax Officer in File No. 205/62-63 dated December 7, 1956, is quashed to the extent of the levy of penal interest. The petitioner is entitled to his costs, Advocate''s fee Us. 100.

Petition allowed.