TMI Blog1980 (2) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to file any return. At the time of making an assessment for the said assessment year 1962-63, the ITO treated a sum of Rs. 1,46,000 as income from undisclosed sources and the business income was determined at Rs. 14,330 and thereby the total income of the said firm was computed at Rs. 1,60,398. The ITO made the said assessment in the status of an unregistered firm after refusing registration under s. 185 of the I.T. Act, 1961 (hereinafter referred to as " the said Act "). The petitioners state that as the said firm has been treated as an unregistered firm, the petitioners had no statutory obligation to file any return in respect of the share income from the said firm. Being aggrieved and dissatisfied with the said order of assessment and also the order refusing registration to the said firm, the petitioners preferred appeals before the AAC. The AAC, by his order dated May 28, 1968, disposed of the quantum appeal and granted relief of Rs. 42,500 to the said firm. In respect of the appeal against the order of refusal of registration, the AAC, by his order dated May 28, 1968, confirmed the order of the ITO. Being aggrieved and dissatisfied with the said orders of the AAC, the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be taken. Thereafter, by a letter dated November 10, 1972, the said firm intimated respondent No. 2 that the partners had no objection to the reopening of the assessment proceedings under s. 147 of the said Act, in their individual case. On or about February 28, 1973, the petitioners received notices, all dated February 22, 1973, under s. 148 of the said Act for the said assessment year 1962-63, issued by respondent No. 2, whereby the said respondent intended to reassess the income of the petitioners for the said assessment year 1962-63 as he had reason to believe that the petitioners' income chargeable to tax for the said assessment year had escaped assessment within the meaning of s. 147 of the said Act. By the said notices, the petitioners were required to deliver to respondent No. 2, the returns, in the prescribed form, within 30 days from the date of service of the said notices. In the said notices, it was stated that the said notices were issued after obtaining the necessary satisfaction of the CBDT. The petitioners state that in response to the said notices dated February 22, 1973, the petitioners by letters, all dated February 28, 1973, intimated respondent No. 2 that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in holding that, as the petitioners knew that large additions had been made in the hands of the firm on account of the hundi loans latest by March 29, 1967, the petitioners should have filed the returns at best by that time. The petitioners further state that respondent No. erred in holding that the petitioners knew all the time that the petitioners' income as well as that of the said firm were high enough to warrant the petitioners' filing the returns of income and since the petitioners had not done it, the penal interest under s. 139 of the said Act has rightly been levied. The petitioners state that respondent No. 1 went wrong, in fact, in holding that the assessments for 1962-63 were completed by the ITO, respondent No. 2, on February 5, 1974, February 7, 1974, February 12, 1974 and February 12, 1974, respectively. The petitioners further state that it will appear from the records of the case that the petitioners filed the returns for the assessment year in question on February 17, 1972, and respondent No. 2 completed the assessments for the said year on February 12, 1974, February 7, 1974, February 12, 1974, and February 12, 1974, respectively, under s. 143(1) of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied on the decision in the case of Mulakh Raj Bimal Kumar v. ITO [1977] 107 ITR 382 (J K). The second broad submission of Mr. Dutt is that no interest could be imposed under s. 217 of the Act also. In this aspect, he has firstly submitted that, similarly, in respect of s. 217 of the Act also, no such interest is imposed by the assessment order or the demand notice. The only reference is to the challan itself. In this connection, he has relied on Mulakh Raj Bimal Kumar's case [1977] 107 ITR 382 (J K). The second branch of submission of Mr. Dutt on this heading is that under s. 217 of the Act interest can be imposed only when the ITO makes a regular assessment under s. 148 read with s. 147 of the said Act. It is not a regular assessment. In this connection he has drawn my attention to s. 2(40) of the Act. He bar, also drawn my attention to the relevant records of the case, copies of which have been annexed to this petition. In support of his contention, Mr. Dutt refers to the following: CIT v. Ram Chandra Singh [1976] 104 ITR 77 (Pat) and Smt. Kamla Vati v. CIT [1978] 111 ITR 248 (P H). On behalf of the Revenue, Mr. Nandalal Pal has made the following submissions. So far a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly, this question was not involved therein. In connection with the contention of Mr. Pal that a new point is sought to be raised, he has submitted that it was a pure question of law. Before I deal with the respective contentions of the parties it is necessary to set out the relevant provisions of s. 139(1) of the Act as it stood at the material time. " 139. Return of income.-(1) Every person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall furnish a return of his income or the income of such other person during 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 six 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars 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 Income-tax Officer may, in his discretion, extend the date for furnishing the return, and, notwithstanding that the date so extended, interest shall be chargeable in accordance with the provisions of sub-section (8)... (8) (a) Where the return under sub-section (1) or sub-section (2) or sub-section (4) for an assessment year is furnished after the specified date, or is not furnished, then [whether or not the Income-tax Officer has extended the date for furnishing the return under sub-section (1) or subsection (2)], the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be charged. In that case, no return even within the period of four years and prior to the making of the assessment was filed. It was pointed out that the position was different from April 1, 1972. In this connection the learned judge followed the Division Bench judgment of the Andhra Pradesh High Court in the case of Kishanlal Haricharan v. ITO [1971] 82 ITR 660. In the case of ITO v. Secunderabad Tin Industries [1978] 113 ITR (AP) [FB], cited by Mr. Pal, a Full Bench of the Andhra Pradesh High Court considered the question as to the scope of s. 139(4) of the Act. In that case, admittedly, the return was filed within four years as required under sub-s. (4) of s. 139. One of the contentions raised was that the ITO erred in law in levying Rs. 7,750 under s. 139(1)(iii) of the Act although no extension of time was prayed for or granted. Writ petition having been filed, the learned single judge answered this question in favour of the petitioner. In this connection, the learned single judge followed the decision in Kishanlal v. ITO [1971] 82 ITR 660 (AP), and came to the conclusion that having regard to the provisions of s. 139(1)(iii), only when the time was extended by the ITO on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) of the proviso to sub-s. (1) of s. 139 can be levied only if the assessee asks for extension of time from the ITO. In this context, it is interesting to point out that the Full Bench stated as follows (p. 13): "...inasmuch as, in that particular case, the assessee had not filed, any return whatsoever and the assessment was made under section 144 on the basis of best judgment assessment, no penal interest could be charged, because under the scheme of section 139(2) and (4), as it stood prior to April 1, 1971, interest could only be calculated from the date of 1st October or 1st January of the assessment year, as the case may be, up to the date of the filing of the return and since no return at all was filed, as the law then stood, it was impossible to calculate interest because the date up to which interest could be charged was not mentioned in the Act at all. It is to fill up this lacuna that special provision has been made in section 139(8) as it now stands with effect from April 1, 1972." It was pointed out that though the final conclusion of the learned judges can be justified, the reasoning which appealed to them could not be sustained. In this connection, various oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the I.T. Act, 1961. In other words, even if an assessee has been refused extension of time on his application by the ITO either under the proviso to sub-s. (1) of s. 139 or under the proviso to sub-s. (2) of s. 139, he can immediately or within the prescribed period of four years, file his return under s. 139(4) of the I.T. Act paying interest and thereby assume a position as if the ITO has granted him extension of time although in fact, it has been rejected. That seems to be an absurdity and renders prov. (iii) to sub-s. (1) of s. 139 redundant and nugatory. Further, from the scheme of the said s. 139(1), (2) and (4), it is quite clear that the assessee is given, firstly, a statutory period for filing his return either voluntarily or on being served with notice by the ITO under sub-s. (2) of s. 139 and, thereafter, further time can be granted by the ITO on the application of the assessee in the prescribed manner without charging interest and, thereafter, interest must be charged if the time is extended by the ITO on the application of the assessee in the prescribed manner beyond the specified period. Whereas, in sub-s. (4) of s. 139 an assessee who has not furnished his return wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of time to file his return beyond the periods under sub-s. (1) or sub-s. (2) as the case may be, without making an application before the ITO in the prescribed manner. That is an absurdity which is not warranted by the wordings of the said sections and such an interpretation would render the provision of sub-s. (1) or sub-s. (2) for extension of time beyond the specified period on the application of the assessee in the prescribed manner by the ITO at his discretion wholly unnecessary. And that interpretation would give a right to an assessee to file his return at any time within the four years as prescribed under sub-s. (4) of s. 139 by payment of interest only, as if the time has been allowed by the ITO although there was no application for the same in the prescribed manner or such an application has been rejected by the ITO exercising his discretionary power. Therefore, such a construction is not warranted by the wordings and the scheme of the said sub-ss. (1) and (2) and (4) of s. 139 of the I.T. Act, 1961. The only interpretation possible is that an assessee, who has not filed his return within the time allowed either originally or within the extensions under sub-s. (1) or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (iii) to subs. (1) of s. 139 of the I.T. Act, 1961. Further, it is clear from the provision of sub-s. (1) of s. 271 of the I.T. Act, 1961, that the appellant, prima facie, comes within the said provision as it has not filed its return as required under sub-s. (1) of s. 139 of the I.T. Act, and as such the respondents had jurisdiction to issue the said notices which are challenged in the writ petition." In the case of Shankarlall Goenka v. ITO [1979] 119 ITR 229 (Gauhati), a Full Bench of the Gauhati High Court held as follows (head note): " Filing of an application for extention of time by the assessee and grant of such extension by the Income-tax Officer are not conditions precedent for application of sub-section (4) of section 139. Under the provisions of section 139(4) read with clause (iii) of the proviso to section 139(1), an assessee who has not furnished his return within the time mentioned in sub-section (1) of section 139 or within the time given to him in the notice under sub-section (2) of section 139 may file his return before the assessment is made so long as it is filed within the period of four years from the end of the assessment year under consideration subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is to be accepted. The above argument is riot at all convincing. As already noticed, one of the contentions of the learned counsel for the petitioner is that sub-s. (4) is applicable only in a case where the assessee applies for extension of time and the ITO has granted him such extension. The other contention, which conflicts with the first contention, is that it is not the intention of the Legislature to charge interest for such belated submission of return as the persons concerned in such a case are liable to pay penalty under s. 271 of the Act. If extension of time for submission of return is prayed for and granted by the ITO and the return is filed within such time, the question of liability to pay penalty would not arise as, in that case, there would be no default. In such a case sub-s. (4) is not attracted at all. This subsection is attracted if the return is not filed within the time allowed to an assessee under sub-s. (1) or sub-s. (2) but is filed before the assessment is made and before the end of the four assessment years from the end of the assessment year to which the return relates. Section 271 of the Act will have application in such a case, as there is clear de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ays 'in every such case'." In the case of Koipally Brothers v. ITO [1979] 119 ITR 931 (Ker), single judge of the Kerala High Court also held similarly and followed the decision in Ganesh Das Sreeram v. ITO [1974] 93 ITR 19 (Gauhati), In the case of Mulakh Raj Bimal Kumar v. ITO [1977] 107 ITR 382 (J K), it was held that unless the order of assessment itself incorporated an order for payment of interest, the assessee cannot be asked by means of a simple demand notice to pay penal interest both under ss. 139 and 217 of the Act. On the question of s. 217 of the Act, it was held in the case of CIT v. Ram Chandra Singh [1976] 104 ITR 77 (Pat), that as a proceeding for reassessment under s. 34 of the 1922 Act or under s. 147 of the 1961 Act is not a proceeding in connection with the " regular assessment ", no penalty could be imposed for non-furnishing of an estimate of the advance tax payable by the assessee. Penalty can be imposed for non-filing of estimate of advance tax only in connection with the " regular assessment" under s. 23 of the 1922 Act or s. 143 or s. 144 of the 1961 Act. In this case, it was held that regular assessment has been defined in s. 2(40) of the Act as ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he question of levy of interest under sub-s. (4) would not arise where no return has been filed within the period of four years. This position is also made clear by the various decisions, as referred to above, interpreting sub-s. (4). In the present case, the Commissioner himself has pointed out that the return was filed within four years and, accordingly, it was a valid return (sic). In that view of the, matter, I hold that sub-ss. (1) and (2) of s. 139 have no application in the facts and circumstances of this case as there was no application for extension and there was no extension in fact. Sub-section (4) has no application in the facts Ind circumstances of the case because no return has been filed by the petitioner within four years from the date within the meaning of the said sub-section. Accordingly the position of levying penal interest, if any, is without any authority of law. On the second branch of his contention also, I must accept the contention of Mr. Dutta. In the present case, it may be said that though the demand notice did not refer to any such penal interest, the challan which accompanied the demand notice gave the break up and mentioned the interest. The chall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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