Kodur Orange Produce Co. vs Commissioner of Income Tax

Ismail, J.—The Income Tax Appellate Tribunal, Madras Bench, u/s 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "" the

Act ""), has referred the following question of law for the opinion of this court :

Whether the Tribunal erred in holding that penalty could be imposed on the assessee u/s 271(1)(a) for the delay in submission of the return when

at the same time interest under the proviso to Section 139 had also been imposed ?

The facts necessary for the understanding of the above question are as follows :

The case relates to two assessment years 1965-66 and 1966-67. For the first assessment year, the Income Tax return was due on September

30, 1965, but the same was filed on July 1, 1967, i.e., after a delay of about 21 months. For the second assessment year, the return was due on

September 30, 1966, but the same was filed on October 17, 1967, i.e., after a delay of about 12 months. The Income Tax Officer initiated penalty

proceedings against the assessee u/s 271(1)(a) of the Act and levied penalty of Rs. 5,704 for the former year and Rs. 5,334 for the latter year.

The assessee contested the levy of penalty putting forward the contention that the Income Tax Officer has collected interest u/s 139(1) of the Act

and, therefore, he had no jurisdiction to impose the penalty. This contention was rejected by the Income Tax Officer as well as the Appellate

Assistant Commissioner on appeal. The Appellate Assistant Commissioner, however, with regard to the latter year gave a direction to the Income

Tax Officer to recompute the penalty. Against the orders of the Appellate Assistant Commissioner, the assessee preferred appeals to the Income

Tax Appellate Tribunal and the Tribunal confirmed the orders of the Appellate Assistant Commissioner. It is the correctness of this order of the

Tribunal that is challenged in the form of the question referred to this court and extracted above.

The argument advanced on behalf of the assessee is that since the Income Tax Officer has collected interest under the proviso to Section 139(1)

of the Act, the Income Tax Officer had no jurisdiction to levy penalty u/s 271(1)(a) of the Act. We are of opinion that this contention is without

substance. Section 271(1)(a) of the Act, so far as it is relevant, states :

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 furnish under Sub-section (1) of Section 139

or by notice given under Sub-section (2) of Section 139 or Section 148 or has without reasonable cause failed to furnish it within the time allowed

and in the manner required by Sub-section (1) of Section 139 or by such notice, as the case may be.......

he may direct that such person shall pay by way of penalty,--

(i) ....in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent. of the tax for every month during which the default

continued, but not exceeding in the aggregate fifty per cent. of the tax......

Thus, it will be seen that this provision attracts the liability to penalty in two circumstances : one is, failure to furnish the return itself without

reasonable cause and the second is, failure to furnish the return within the time allowed and in the manner required by Sub-section (1) of Section

139 or by such notice, without reasonable cause. As we pointed out already, in this case, as per the provisions of Section 139(1) of the Act,

returns were due on September 30, 1965, and September 30, 1966, respectively, and the said returns were filed only after the expiry of the

respective dates and after the lapse of the time referred to already. Section 139(1) of the Act contains a proviso enabling the Income Tax Officer

to extend the time for filing the return on an application made in the prescribed manner by the assessee. In this case, admittedly no application was

presented by the assessee in the prescribed manner to the Income Tax Officer for extension of time for filing the returns. Equally, admittedly the

Income Tax Officer had no occasion to pass any order extending the time for filing the returns, as there was no application for such extension.

However, the learned counsel for the assessee contended that even when there was no application by the assessee and there was no express order

by the Income Tax Officer extending the time, so long as the Income Tax Officer had collected the interest as provided in the third sub-clause of

the proviso to Sub-section (1) of Section 139, he must be deemed to have extended the time and, therefore, the returns filed by the assessee were

within the time as contemplated by Section 139 and, therefore, the penalty cannot be levied u/s 271(1)(a) of the Act. We are of the opinion that

this argument is misconceived. We are not concerned in the present case with whether the collection of interest by the Income Tax Officer under

the proviso to Section 139(1) was correct or not. All that we are pointing out is that there was no application by the assessee for extension of time

for submitting the returns and consequently there was no order by the Income Tax Officer extending the time for submission of the returns. So long

as the returns were not filed before the dates mentioned in Section 139(1) of the Act and so long as there had been no order by the Income Tax

Officer extending the time for filing the returns, it must necessarily follow that the returns filed by the assessee had not been filed within the time

allowed and in the manner required by Sub-section (1) of Section 139. If so, on the face of it, the provisions of Section 271(1)(a) are clearly

attracted and, therefore, the penalty was lawfully levied on the assessee. Under these circumstances, we answer the question referred to us in the

negative and against the assessee. There will be no order as to costs.