1971 (9) TMI 58 - HC - Income Tax

(1) Whether Income-tax Officer should be deemed to have granted extension of time for filing the return when he did not pass any orders on the assessee s application? (2) Whether levy of interest calculated under clause (iii) of the proviso to section 139(1) the Income-tax Officer must be deemed to have condoned the delay in filing the return of income ? (3) Whether Income-tax Officer had the power to levy a penalty under section 271(1)(a) when he had already levied interest under section 139 ? and (4) Whether Income-tax Officer had jurisdiction to levy penalty under section 271(1)(a) of the Act where a return was filed under section 139(4) and penal interest was also levied under the provisions of this latter section ?

Summary

Issues Involved:
1. Extension of time for filing the return.
2. Condonation of delay by levy of interest.
3. Power to levy penalty under section 271(1)(a) after levying interest under section 139.
4. Jurisdiction to levy penalty under section 271(1)(a) when a return is filed under section 139(4).

Issue-wise Detailed Analysis:

1. Extension of time for filing the return:
The court addressed whether the Income-tax Officer (ITO) should be deemed to have granted an extension of time for filing the return when no order was passed on the assessee's application dated September 16, 1963. The court concluded that the application for extension was received after the due date, and thus, the ITO was not bound to pass any order. The court emphasized that it is the duty of the assessee to file an application for extension in advance and obtain the extension before the due date. The court held that there is no provision in the Act or rules requiring the ITO to pass an order on an application filed after the due date, and there is no scope for presuming that an application for extension must have been granted when no order was passed. Therefore, the answer to question No. 1 was in the negative and against the assessee.

2. Condonation of delay by levy of interest:
The court examined whether the levy of interest under clause (iii) of the proviso to section 139(1) implies that the ITO condoned the delay in filing the return. The court clarified that the levy of interest does not ipso facto condone the delay. The purpose of levying interest is to collect interest on the tax due for the period of delay, and it does not imply that the delay is condoned. The court emphasized that the interest is not penal in nature but compensatory. Therefore, the answer to question No. 2 was in the negative and against the assessee.

3. Power to levy penalty under section 271(1)(a) after levying interest under section 139:
The court considered whether the ITO had the power to levy a penalty under section 271(1)(a) after levying interest under section 139. The court held that the levy of interest and the levy of penalty serve different purposes. Interest is levied to compensate for the delay in payment of tax, while the penalty is imposed for the failure to file the return within the prescribed time without reasonable cause. The court concluded that both interest and penalty can be levied simultaneously as they address different contingencies. Therefore, the answer to question No. 3 was in the affirmative and against the assessee.

4. Jurisdiction to levy penalty under section 271(1)(a) when a return is filed under section 139(4):
The court addressed whether the ITO had jurisdiction to levy a penalty under section 271(1)(a) when a return was filed under section 139(4). The court held that the provisions of section 271(1)(a) are attracted the moment the ingredients of that provision are established, regardless of whether the return is filed under section 139(4). The court emphasized that section 139(4) permits the filing of a return before the assessment is made but does not absolve the assessee from the penalty for the initial default. Therefore, the answer to question No. 4 was in the affirmative and in favor of the Government.

Conclusion:
The court ruled against the assessee on all four questions, affirming the ITO's actions in levying interest and penalties. The assessee was ordered to pay the costs of the reference, with an advocate's fee of Rs. 300.