Napoli Restaurant vs Commissioner of Income Tax

Venkataramaiah, J.—The assessee is a registered firm and the assessment year is 1969-70. The return of income was due to be filed by it in respect of the assessment year on or before June 30, 1969. A notice u/s 139(2) of the income tax Act, 1961 (hereinafter referred to as "the Act"), was served on the assessee on July 3, 1969. In spite of this and several other notices that were issued u/s 142(1) of the Act, the return was filed only on December 16, 1970. The ITO, therefore, took action u/s 271(1)(a) of the Act to levy penalty and after hearing the assessee levied a penalty of Rs. 17,720 u/s 271(1)(a) read with section 271(2) of the Act. The AAC and the income tax Appellate Tribunal, Bangalore Bench, Bangalore, dismissed the appeals filed by the assessee. At the instance of the assessee two questions are referred to this Court u/s 256(1) of the Act :

(1) Whether, on the facts and in the circumstances of the case, by the levy of interest calculated under clause (iii) of the proviso to section 139(1) of the income tax Act, 1961, the income tax Officer must be deemed to have condoned the delay in filing the return of income ?

(2) Whether, on the facts and in the circumstances of the case, the calculation of the penalty by applying the provision of section 271(2) of the income tax Act, 1961, is valid in law ?

In so far as the first question is concerned the contention of the assessee is that since interest had been levied under clause (iii) of the proviso to section 139(1) of the Act, the ITO must be deemed to have condoned the delay in filing the return and hence no penalty was leviable u/s 271(1)(a) of the Act. It is true that the ITO has levied interest under clause (iii) of the proviso to section 139(1) of the Act. He can levy such interest when application is made by the assessee for extending the time for filing the return and the extension prayed for is allowed. He can also levy interest under that provision in a case to which section 139(4), as it, stood during the relevant period, applied. The relevant part of section 139(4) of the Act read as follows :

(4)(a) Any person who has not 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 clause (iii) of the proviso to sub-section (1) shall apply in every such case;

(b) the period referred to in clause (a) shall be-....

(iii) where the return relates to a previous year relevant to any other assessment year, two years from the end of such assessment year.

In the instant case it is not the case of the assessee that it had in fact made an application for extension of time to file the return and time had been extended. The presumption contained in question No. 1 may arise in a case where the facts are not clear and there is no possibility of levying the interest in question in any other way. In the instant case interest was leviable u/s 139(1), as the case of the assessee satisfied the conditions mentioned therein. The levy of interest cannot, therefore, be construed as amounting to the condonation of delay in filing the return as required by law. The Tribunal was right in holding that the levy of interest u/s 139(1) of the Act did not amount to condonation of delay in filing the return.

In so far as the second question is concerned, it has to be observed that section 271(2) of the Act provides that when the person liable to penalty is a registered firm or an unregistered firm which has been assessed under clause (b) of section 183, then notwithstanding anything contained in the other provisions of this Act, the penalty imposable under sub-section (1) shall be the same amount as would be imposable on that firm if that firm were an unregistered firm.

The contention of Sri S.P. Bhat, learned counsel for the assessee, is that sub-section (2) of section 271 of the Act would be applicable only when the registered firm itself was not liable to pay tax and since during the relevant assessment year the registered firm also could be taxed, sub-section (2) of section 271 would not be applicable. It is difficult to agree with him. The words "notwithstanding anything contained in the other provisions of the Act" appearing in section 271(2) of the Act require the ITO to levy the same penalty on a registered firm as would imposable on it if that firm were an unregistered one, when the default is committed. The Tribunal was right in holding that section 271(2) of the Act was applicable to the case on hand. In the result, both the questions referred to us are answered against the assessee. No costs.