TMI Blog1971 (8) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... come on the ground that the audit of books of accounts of the assessee was not complete. The Income-tax Officer granted time uptil 21st October, 1962. A notice dated 23rd February, 1963, under section 139(2) of the Act was served on the assessee on 14th March, 1963, requiring it to furnish the return of its income within thirty days from the date of service of the notice. The assessee submitted its return showing its income at Rs. 1,95,132. On this amount of income shown and keeping in view the status of the registered firm the tax payable by it was Rs.16,655, after giving credit of advance tax paid amounting to Rs. 7,564, the tax payable by the assessee was determined at Rs. 9,101.84. The Income-tax Officer also levied penal interest in the sum of Rs. 596 under section 139(1) of the Act. The assessee having failed to file its return of income by 30th June, 1962, the Income-tax Officer started penalty proceedings against it. The assessee explained its failure to file the return in time on the ground that its books of account were not audited. This explanation was not accepted by the Income-tax Officer as showing a reasonable cause for not having filed the return in time and he levi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that since the notice under section 139(2) was served upon it on the 14th March, 1963, and it submitted its return of income on 15th April, 1963, the intervening period could not be treated as period of default as it could file the return within thirty days from the date of service of notice. It may be stated here that for imposing penalty the firm was treated as unregistered firm. Another contention raised was that in computing the quantum of penalty, all the tax paid by the firm as well as by its partners should be taken into account. The Tribunal held that the assessee's default for non-compliance of the provisions of section 139(1) of the Act continued from 21st October, 1962, till 13th March, 1963, on which date the notice under section 139(2) of the Act was served on the assessee. In other words, the Tribunal held that for the purposes of computation of penalty the default of the assessee in terms of section 139(1) of the Act would be for four months only. The Tribunal further held that the assessee had been treated as an unregistered firm, all the taxes that were paid by the firm as well as by its partners were to be taken into account for the determination of tax on whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion by not filing the return suo motu and sit tight and wait for a notice from the Income-tax Officer in pursuance of the provisions of sub-section (2) of section 139 of the Act, and on the receipt of such a notice urge that he had not committed any default in not filing the return suo motu and such a person cannot be heard to say that in submitting the return of income in response to the notice he had complied with the statutory obligation cast upon him to submit his return of income before the 30th June of the assessment year as contemplated by sub-section (1) of section 139 of the Act. In this view of the matter it was submitted that the assessee had committed default from 1st December, 1962, till 15th April, 1963, when the return was filed. From June 30,1962, till November 30, 1962, the period of default is to be condoned in view of the automatic extension of time granted in the circular letter issued by the Central Board of Direct Taxes which enabled an assessee to file the return of income up to 30th November, 1962, for the assessment year 1962-63. To substantiate this argument the learned counsel drew support from Commissioner of Income-tax v. Indra and Company. In the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w?" was referred to the Rajasthan High Court. A Bench of the said High Court, while considering the approach of the Tribunal to the question, observed as follows at page 706 : "If the view taken by the Tribunal is adopted, the result will be that if a person has not filed any return under section 139(1), he cannot be penalised if he has filed a return after a notice has been given under sub-section (2) of section 139. It may be pointed out that before taking any assessment proceedings, it is incumbent on the Income-tax Officer to issue notice under sub-section (2) of section 139. Such a view would mean that any person liable to pay income-tax may sit comfortably without any fear of the imposition of penalty and not furnish his return as required under section 139(1) and wait till a notice is given to him under section 139(2) and then file a return within the time mentioned in that notice. This view does not appeal to us. An argument has been addressed to us that as soon as a notice is issued under sub-section (2) of section 139 giving time for furnishing the return, it must be taken that the Income-tax Officer had condoned whatever the default may have been in not furnishing, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of notice under section 139(2) of the Act by the Income-tax Officer calling upon him to submit the return of his income and thereby say that as soon as he complied with the orders of the Income-tax Officer and filed the return within 30 days of the service of the notice, he has also complied with the provision of section 139(1) of the Act. In this connection it would be relevant to examine the case, Tarzan Hosiery Private Ltd. v. Income-tax Officer, District I(B) Ward, Kanpur. In that case the assessee, on 22nd June, 1964, received a notice under section 139(2) of the Act directing it to file a return of its total income for the assessment year 1964-65. It was required to file the return by 25th July, 1964. On 24th July, 1964, he filed an application seeking extension of time by 30th August, 1964. The application was not granted. Since the appellant had not filed a return within the time allowed it became liable for payment of interest as also to the imposition of penalty. A contention was raised by the assessee that according to section 139(1) of the Act it was entitled to file the return of his income for the relevant assessment year up to 30th September, 1964, and that the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal income of a person which he otherwise is under obligation to file voluntarily under section 139(1) of the Act. That being so, if an assessee does not file a return voluntarily as is required of him under section 139(1), the default would start from the date when the return ought to have been filed and not from the day when he files the return in pursuance of the directions issued by the Income-tax Officer in the exercise of his discretion under section 139(2). In this view of the matter the default in the instant case was committed by the assessee with effect from 1st December, 1962, as an automatic extension of time to submit the return stood granted up to 30th November, 1962, on the basis of a circular letter issued by the Central Board of Direct Taxes and the default continued till 15th April, 1963, when the assessee submitted its return of income in compliance with the notice served upon it by the Income-tax Officer in pursuance of the provisions of section 139(2). The plain language of sub-section (2) of section 139 cannot be strained to hold that the assessee was absolved of its statutory obligation from filing a return of its income voluntarily under section 139(1) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) of section 143, or (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,- (i) in the cases referred to in clause (a) in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent. of the tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent. of the tax;. . . . " According to the above-quoted section the Income-tax Officer can direct that an assessee who has without reasonable cause failed to furnish the return of his total income which he was required to furnish under sub-section (1) of section 139 or by notice given under sub-section (2) of section 139, shall pay by way of penalty in addition to the amount of tax, if any, payable by him, a sum equal to 2% of the tax for every month during which the default continued, but not exceeding in the aggregate 50% of the tax. This brings us back to the question that we have already posed above, namely, what do the words "tax, if any, payable by him", mean? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as determined and the power could not be exercised at a time when the tax had already been paid. The court held that in their view the words "payable by him" without any unnecessary straining of language could be taken to mean "to which he has been assessed" whether the amount has been paid or not. The above-cited authority is earliest in point of time in which the words "payable by him" have been interpreted to mean "the amount of tax to which an assessee has been assessed." We are inclined to follow the view taken by the Punjab High Court. The words "tax, if any, payable by him" as used in section 271(1)(i) would, without doubt, mean "the tax which has been assessed on an assessee and is chargeable" and by no stretch of imagination it could mean the residuary of the tax to be paid by him after making adjustment of the tax already deposited by him. The word "tax" has been defined in section 2(43). According to the said section "tax" in relation to the assessment year commencing on the first day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be force in the contention of the learned counsel. All that sub-section (2) of section 271 says is that when the person liable to penalty is a registered firm for the purposes of imposing the penalty the said firm shall be treated as if it were an unregistered firm. The words of the sub-section are plain and it is not possible to read anything more in that or extend the fiction imported by law to any other purpose except to treat the registered firm as if it were an unregistered firm for the purposes of imposing penalty. It would be relevant here to examine a Bench decision in Commissioner of Income-tax v. Chhotelal Kanhaiyalal. In that case the assessee filed the return of income for the assessment year 1958-59 on 8th July, 1959. The return was filed 11 months after the due date by which it should have been filed. The firm was registered in the assessment year. The firm deposited a sum of Rs. 2,500 by way of advance tax. The firm was assessed on a total income of Rs. 85,797. The assessment was made on 25th May, 1965. Penalty proceedings were also started against the firm under section 271. A question arose in that case as to what amount of advance tax was to be deducted in ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the tax payable by the assessee and the assessee in the instant case is a firm which for the purposes of calculating penalty was treated as if it was an unregistered firm. Beyond this, section 271(2) cannot be stretched to confer any additional benefit such as giving allowance for the advance deposited by individual partners which is not warranted by law. At this stage the cases cited by the learned counsel for the respondent may be noted. The learned counsel for the respondent cited a case, Sahu Rajeshwar Nath v. Income-tax Officer, C-Ward, Meerut, in which their Lordships of the Supreme Court held that where a person does not dispute that he was a partner of the unregistered firm for the relevant accounting year, the Collector could lawfully proceed to execute the certificate for demand of income-tax under section 46(2) of the Income-tax Act, 1922, against that person and recover the income-tax from him. In that case the question that required determination was that when a firm not registered under the Act is assessed to income-tax and a notice of demand was issued against the firm, whether a separate notice of demand was necessary against the partner of the firm when the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A demand was made on the assessee for Rs. 1,16,601 after making a provisional assessment under section 23B of the 1922 Act. Later on, this demand was rectified under section 35 of the 1922 Act to Rs. 92,294.55. The amount was paid by the assessee on the 22nd February, 1961. The demand made under section 23(3) was also Rs. 1,59,180 but it was later on rectified to Rs. 1,26,512 minus Rs. 92,294.55, i.e., Rs. 34,217.55. In that event the amount of penalty levied at 2% per month for four months on Rs. 34,217.55 came to Rs. 2,737.44. The Tribunal accepted the contention of the assessee and held that tax payable by it was the tax ultimately determined to be so payable after giving credit for all the payments made towards the tax liability. The Tribunal, accordingly, reduced the penalty to Rs. 2,737. At the instance of the department a question of law, "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that in calculating the penalty leviable under section 271(1)(i) of the Income-tax Act, 1961, the amount paid by the assessee under the provisional. assessment under section 23B of the Indian Income-tax Act, 1922, was to be deducted from the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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