TMI Blog1996 (11) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... rakash Nath, Sandeep Khanna and Smt. Govindi, were partners of the firm carrying on business in the name and style of Kailash Nath and Associates during the year relevant to the assessment year 1988-89. Besides them, Shri Kailash Nath and Ravi Khanna were also partners out of whom Sh. Kailash Nath was the managing partner as per the terms of the partnership deed dated April 1, 1983 (annexure "P-1" in each writ petition). All the partners were entitled to share in profits of the firm by 20 per cent. each of the total profits and liable to suffer losses in the same proportion. Though they had deposited advance tax between April 1, 1987, and March 31, 1988, they failed to submit their respective returns on or before July 31, 1988, as per the provisions of section 139(1) of the Act. Each petitioner filed his/her return on March 20, 1991, and the final assessment order under section 143(3) of the Act was made by separate orders dated August 26, 1991. For late submission of the return, penalty proceedings were initiated against each petitioner and by separate orders dated March 16, 1992 (annexure "P-2" in each petition), penalty of the amount stated therein was imposed under section 27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring 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 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 the provisions of sub-section (8). Section 139(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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or, where no return has been furnished, the date of completion of the assessment under section 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source : Provided that the Assessing Officer may, in such cases and under such circumstances as may be prescribed, reduce or waive the interest payable by any assessee under this sub-section. Explanation 1.--For the purposes of this sub-section, 'specified date', in relation to a return for an assessment year, means,-- (a) in the case of every assessee whose total income, or the total income of any person in respect of which he is assessable under this Act, includes any income from business or profession, the date of 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 the 30th day of June of the assessment year, whichever is later ; (b) in the case of every other assessee, the 30th day of June of the assessment year. Explanation 2.--Where, in relation to an asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of tax, remaining payable. As to who is authorized to sign and verify the return to be filed under section 139, is provided under section 140 of the Act. Further, if a person does not furnish a return either under section 139(2) or send a return under section 139(4) or revised return under section 139(5) or fails to comply with notice/direction under sections 142(1) and 142(2A) or section 143(2), he is liable to be assessed ex parte under section 144 of the Act after taking into account all relevant material which the Assessing Officer has gathered. Section 276CC of the Act, which makes failure to furnish a return, in due time, an offence, is as under : " Section 276CC : " 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 year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission of return within the time prescribed for such submission under the Act. Submissions made by learned counsel for the parties. The first point raised by learned counsel for the petitioner is that on correct interpretation of the words "before the assessment is made" used in section 139(4) of the Act, the return filed by each petitioner before the assessment of his/her return on August 26, 1991, was within due time as the time prescribed under section 139(1) or section 139(2) stood extended up to the date of assessment of his/her return. For making his submissions, learned counsel has relied upon the judgment of the Supreme Court in CIT v. Kulu Valley Transport Co. P. Ltd. [1970] 77 ITR 518. In the said judgment, the learned judges of the Supreme Court were dealing with the return filed under sub-section (3) of section 22 of the Indian Income-tax Act, 1922 (hereinafter, for short, "the 1922 Act"), which provided that if any person has not furnished a return within the time allowed by sub-section (1) or sub-section (2) of section 22, or having furnished a return under either of those sub-sections, discovers any omission or wrong statement therein, he may furnish a return or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded period of two years as provided under section 139(4)(b)(iii). This rider seems to have been provided for the best judgment assessment which might be made if any person fails to make a return required by any notice given under sub-section (2) of section 139 of the Act. Therefore, these words are to be read in the context these are used. Moreover, sub-section (4) of section 139 does not control sub-section (1) of section 139 which provides statutory period for furnishing the return, which is "due time" as mentioned in section 276CC. Therefore, the first submission of learned counsel for the petitioners is rejected. Another submission made by learned counsel for the petitioners is that the expression "if the failure had not been discovered" governs both clauses (i) and (ii) of section 276CC and in a case where there is no such discovery and the return is filed voluntarily, as in the present case, there will be no measure of punishment, in the absence of which there is no justification to hold a trial against the petitioners. According to learned counsel, "discovery" tantamounts to some action taken by the respondents either by issuing a notice under section 139(2) or section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra. 7 thereof, the partners have full and free access at all times to the books of account of the firm and they are permitted to have any extracts therefrom. Further, in para. 8 of the deed, the accounts of the firm should be closed on March 31, every year when final accounts in the profit and loss account and the balance-sheet should be prepared and audited by a firm of chartered accountants. In view of this, it cannot be said that the explanation of each petitioner in reply to the show cause notice was such that respondent No. 1 should not have proceeded further with the matter. Moreover, it is a question of fact that each petitioner had reasonable cause or explanation not to file his/her return within the "due time" which he/she has to prove during the course of the trial pending against him/her. Lastly, it is submitted by learned counsel for the petitioners that the ingredients of the offence under section 276CC are not made out from the complaint, as such, it deserves to be quashed and the petitioners should not be put to trial. On a perusal of the complaint, we do not find any substance in this submission. After giving the facts in paras. 1 to 6, it is stated in para. 7 tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng them to get the accounts finalised and, above all, it was their first year of account, the Tribunal was satisfied that the assessee had shown reasonable cause for the delay in filing the return and deleted the penalty. In ITO v. Autofil [1990] 184 ITR 47 (AP), the learned judge was deciding the appeals against the order of acquittal under section 276CC of the Act and, after examining the meaning of the term "wilful failure" in the context of the facts proved on record, held that the delay in filing the return was caused due to illness of the clerk of the assessee, who could not finalise the accounts, it was held that there was no presence of mens rea, a bad motive and a guilty mind, on the part of the assessee, as such, they could not be held guilty of the offence under section 276CC of the Act. In Narayan v. Union of India [1994] 208 ITR 82 (MP), the learned judge was dealing with the criminal revision directed against the conviction under section 276CC of the Act. In view of the proved facts on record that the assessee had failed to furnish the return in due time on account of his illness in respect of which he had produced a medical certificate from a doctor, the credibil ..... 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