TMI Blog1989 (5) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn of income of the assessee for the assessment year under reference was due under section 139(1) of the Act on or before September 30, 1967. The assessee did not file any return by the due date. A notice under section 139(2) was served upon the assessee on July 27, 1967, asking it to file the return within 30 days of the date of service of the notice. The assessee filed the return on June 17, 1969, declaring a loss of Rs. 29,008. The assessment was, however, made on an income of Rs. 2,15,415. After the revision made by the Commissioner of Income-tax under section 264 of the Act, the total income was determined at Rs. 1,19,319. A notice under section 274 read with section 271 was issued to the assessee on February 5, 1968, asking the assessee to show cause why penalty under section 271(1)(a) should not be levied on it. Before the Income-tax Officer, the only contention raised by the assessee was that even though it did not apply for extension of time, the return filed by it under section 139(4) should be deemed to have been filed within time and, therefore, no penalty should be levied. The Income-tax Officer held as follows : "I have carefully considered the facts of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Brothers [1973] 92 ITR 338. In that case, the assessee did not file a voluntary return when there was a net loss of Rs. 9,214. The return was not accepted and the income was assessed at Rs. 64,922 which included a sum of Rs. 40,000 as income from undisclosed sources, being the aggregate of three cash credits. Their Lordships of the Allahabad High Court stated that it is true that, under section 139(1), duty is cast upon every person to file a voluntary return if his income exceeds the maximum amount which is not chargeable to income-tax. The learned judge of the High Court stated that the question arises as to which income is contemplated by this provision, the income which the assessee believes to be his income or income which is finally assessed by the Income-tax Officer. Having found that, when a person is required to file voluntary return and no assessment has yet been made against him, in such circumstances, he is guided by what he himself believes to be his income. Thus, their Lordships held that when a person considers an income to be his income which is not chargeable to income-tax, he is not required to file a voluntary return if the income finally assessed, is more than t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s income below the minimum taxable income for firms. Thereafter, penalty proceedings were initiated for delay in filing the return under section 22(2) of the Indian Income-tax Act. Ultimately, the matter came up before the Bombay High Court on reference. There, the Bombay High Court observed as follows (at p. 433) : "In this case, admittedly, the income disclosed by the assessee-firm in its return, namely, Rs. 21,219, was below the limit of the taxable income for the firm. The only question that would, therefore, survive for consideration would be whether such disclosure of income by the assessee could be considered to be bona fide. The question whether such disclosure was bona fide or not was a question of fact and was primarily for the Tribunal to decide." Dr. Pal contends that the Tribunal has found that the assessee acted bona fide and, accordingly, this fact having not been disputed by the Revenue, there cannot be any ground for interference by this court. We shall first dispose of the objection taken by Dr. Pal that the issue involved in the second question relating to the non-compliance with the notice under section 139(2) and imposition of penalty in consequence there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is the income which the assessee believes to be his income and not the income which is finally assessed. In such a case, if what the assessee considers to be his income is less than the maximum not chargeable to tax, he is not required to file a voluntary return. Even if, ultimately, his income is assessed at a figure which is taxable, he may not be liable for penalty under section 271(1)(a). To that extent, the Tribunal is right in principle. The holding of a bona fide belief of an assessee that his income is less than the maximum not chargeable to tax is essentially a question of fact. Merely because the accounts disclosed a loss, it could not be a bona fide ground for not filing a return under section 139(1). According to accountancy principles, there may not be profit, but from the point of view of taxation, there may be profit having regard to the exclusion or inclusion of certain items of income and expenditure. In this case, the assessment was ultimately made on Rs. 1,19,319 which was accepted by the assessee as against the loss of Rs. 29,008. How the loss was arrived at and how the ultimate income came to be determined are relevant factors which indicate whether the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntained in the notice under section 139(2) even if it had suffered loss. It could have filed the return along with the balance-sheet and profit and loss account showing the loss allegedly suffered. That was not done. If the assessee had no obligation to comply with the notice under section 139(2), in that event, the assessee would be precluded from claiming carry forward of loss by filing a return beyond time. In this case, not only was the assessee's negative income of Rs. 29,008 determined as a positive income of Rs. 2,15,415, but the assessee also made an application under section 264 of the Act before the Commissioner of Income-tax for revision and the total income was determined at Rs. 1,19,319 which was accepted by the assessee. In that view of the matter, it cannot be said that there could be any reasonable ground to sustain the plea that income would never exceed the taxable limit and there would be no assessable income. On the contrary, the plea taken before the Appellate Assistant Commissioner was that the assessee did not apply for extension of time because the return filed by it under section 139(4) should have been treated as a return filed within time and, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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