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1971 (9) TMI 58

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.... Whether, on the facts and in the circumstances of the case, the Income-tax Officer had the power to levy a penalty under section 271(1)(a) of the Act when he had already levied interest under section 139 ? and (4) Whether, on the facts and in the circumstances of the case, the 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 ? " In order to appreciate the scope of the questions it is necessary to refer briefly to the material facts that gave rise to them. For the assessment year 1963-64, relevant to the accounting year ending on, December 31, 1962, the assessee, a registered firm of six partners carrying on business in tobacco, had to file its return of income under section 139(1) of the Act on or before June 30, 1963. As the asessee did not file its return before the due date, a notice under subtraction (2) of section 139 issued by the Income-tax Officer was served on the assessee on August 16, 1963, calling upon it to file the return of its income for that year on or before September 16, 1963. No return of income was....

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.... get the statements prepared and file returns of income within the time prescribed by law; and it is for the assessee to make proper and appropriate arrangements to comply with the statutory provisions of section 139.The fact that the assessee-firm had the assistance of a chartered accountant also was one of the factors taken into consideration by the Income-tax Officer to arrive at the conclusion that the assessee has without reasonable and sufficient cause failed to file the return of income within the prescribed time and levied a penalty of Rs. 20,222 under section 271(1)(a) of the Act. On appeal to the Appellate Assistant Commissioner against the order of penalty passed by the Income-tax Officer, it was contended that the failure on the part of the assessee to furnish the return within the time was due to illness of its accountant, that the previous record of the firm was very good, that the Income-tax Officer must be presumed to have granted extension of time when no order had been passed by him on its application dated September 16, 1963, that the Income-tax Officer must be presumed to have condoned the delay in filing the return when he levied penal interest under clause (ii....

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....answers to the questions turn upon the scope of the provisions of section 271(1)(a) and sub-sections (1), (2) and (4) of section 139 read with other material provisions of the Act which we shall presently consider and their application to the facts of the present case. Chapter IV comprising of sections 139 to 158 deals with the procedure for assessment. Section 139 prescribes the procedures for the filing of a return of total assessable income and the consequences of the failure or omission to file the same within the time allowed thereunder. Unlike the corresponding section 22 of the Indian Income-tax Act, 1922, sub-section (1) to section 139 does not provide for the issuance of the general or public notice. It expressly requires every person to furnish voluntarily a return of his total income or the income of any other person in respect of which he is assessable under the Act. If the income of any previous, year exceeded the maximum amount exigible to tax, the return must be in the prescribed form and verified in the prescribed manner and shall furnish the requisite material particulars relating to income. The assessee under the present Act has a statutory duty and obligation to ....

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.... the furnishing of the return if the same, whether fixed originally or on extension, falls beyond the 30th day of September or the 31st day of December, as the case may be, of the assessment year on payment of interest as per the provisions of clause (iii) of the proviso to sub-section (1). Sub-section (4) provides for the furnishing of a return by an assessee who failed to file the same within the time allowed to him under sub-section (1) or subsection (2) but he must do so before the completion of the assessment. In such a case the provisions of clause (iii) of the proviso to sub-section (1) empowering the Income-tax Officer to levy interest are attracted. Sub-section (5) provides for the furnishing of a revised return by the assessee at any time before the assessment is made. Sub-section (8) has invested the Income-tax Officer with a power to reduce or waive the interest payable by any person under any provision of section 139 in such cases and under such circumstances as may be prescribed therefore. Hence, it admits of no doubt that the Income-tax Officer is competent to waive or reduce the interest payable by any assessee under any provision of section 139 in proper and approp....

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.... by the assessee is to make the assessees feel their responsibility and statutory obligation to furnish the return of their incomes within the time provided under section 139 of the Act. To put it differently, the assessees will not gain in any way by their failure in, or postponement of, furnishing the returns of their income with the hope that they can postpone the payment of tax to a later date and have the advantage of utility of such amount of tax during such period as they are made to pay interest on such tax demands. We shall now advert to section 271 comprised in Chapter XXI dealing with penalties imposable under the Act. Section 271 empowers the Income-tax Officer and the Appellate Assistant Commissioner to impose penalty on such of the assessees if the conditions specified in clause (a) or clause (b) or clause (c) thereof have been satisfied. Under clause (a) of subsection (1) to section 271 the Income-tax Officer or the Appellate Assistant Commissioner is competent to levy a penalty of a sum equal to 2% of the tax for every month during which the default continued. The aforesaid sum of penalty is in addition to the amount of tax payable by the assessee. However, the pen....

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....ee has been given a reasonable opportunity of being heard. Section 275 bars the income-tax authorities from imposing a penalty under Chapter XXI after the expiration of two years from the date of completion of the proceedings in the course of which the proceedings for the imposition of penalty have been commenced. Unlike under the 1922 Act, section 275 of the present Act provides for the limitation of two years from the date of the completion of the proceedings in the course of which the proceedings for the imposition of penalty have been commenced for passing the order of penalty. Under section 28 of the old Act, there was no time limit to pass the order of penalty, if the Income-tax Officer or the Appellate Assistant Commissioner was satisfied in the course of any proceedings under the Act that the requisite conditions of clause (a), (b) or (c) thereof have been established. The provisions of sections 276 to 280 comprised in Chapter XXII provide for prosecutions and offences. The making of a false statement in a declaration under the Act is punishable under section 277 with rigorous imprisonment for a period of not less than 6 months but which may extend up to two years. The per....

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....hat the Income-tax Officer must be deemed to have granted extension of time for filing the return when he did not pass any order on its application dated September 16, 1963. As pointed out earlier the application though dated September 16, 1963, was in fact received by the Income-tax Officer only on September 18, 1963. As the application for extension of time was not received by the Income-tax Officer on or before September 16, 1963, within which time the assessee was required as per the notice under sub-section (2) to section 139 to file his return, the Income-tax Officer was not bound under the provisions of the Act or any rules made thereunder to pass any order thereon. It is not open to the assessee to file an application beyond the period within which it was required to file its return as per the notice under section 139, and, thereafter, make no effort to know what happened to its application. The assessee should not assume or presume that any application filed by it for extension of time to file the return of income would automatically be granted. It is the duty of the assessee to file in advance an application for extension of time and obtain the extension on or before the ....

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.... extension of time by one month. For all these reasons, our answer therefore, to question No. 1 must be in the negative and against the assessee. We shall now turn to questions Nos. 2 and 3. The contention of Sri Ramachandra Rao that the Income-tax Officer having levied interest under clause (iii) of the proviso to sub-section (1) of section 139 must be deemed to have condoned the delay in filing the return of income of his client cannot be given effect to for reasons more than one. The Income-tax Officer is n doubt empowered to extend the time for furnishing the return of any person on his application in the prescribed manner beyond the dates within which he has to file the same. In cases failing under clauses (i) and (ii) of the said proviso, the officer may extend the time without charging any interest. However, where the case falls under clause (iii) he shall levy interest as provided therein. The levy of interest, as stated earlier, does not ipso facto make the filing of the return by the assessee within the prescribed time. The Income-tax Officer, in his discretion, is competent to extend the date for furnishing the return up to any period falling beyond the dates mentioned ....

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....d as to tax the subject twice over to the same tax ..... The Constitution does not contain any prohibition against double taxation even if it be assumed that such a taxation is involved in the case of a firm and its partners after the amendment of section 23(5) by the Act of 1956. Nor is there any other enactment which interdicts such taxation ...... If any double taxation is involved the legislature itself has, in express words, sanctioned it. It is not open to any one thereafter to invoke the general principles that the subject cannot be taxed twice over." It is profitable to refer in this context to N. A. Malbary and Brothers v. Commissioner of Income-tax, wherein it has been held that the jurisdiction of the Income-tax Officer to pass a second order of penalty was not lost because he had omitted to recall the earlier order even though both the orders could not be enforced simultaneously. In the light of the foregoing discussion, we express our inability to agree with Mr. Ramachandra Rao, counsel appearing for the assessee, that the Income-tax Officer is not empowered to levy penalty under section 271(1)(a) when once he has levied interest under the provisions of clause (iii) o....

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....ax Officer within the year of assessment. Pursuant to the notice under section 34, a return of income was filed by the assessee within the time given by the officer. Howeever, after completing the reassessment, the Income-tax Officer levied penalty under section 28(1)(a) corresponding to section 271(1)(a) of the present Act for failure without reasonable cause to furnish a return pursuant to the notice under section 22(1). The contention advanced on behalf of the assessee that as there was no notice under section 22(2) and no action was taken by the Income-tax Officer during the year of assessment, the general notice under section 22(1) and the default committed by him in not filing the return lapsed by the end of the year and hence no penalty could be levied under section 28(1)(a) in the course of the reassessment proceedings, was rejected by the High Court. It was held therein that the assessment proceedings commenced with the general notice issued under section 22(1) and where no order of assessment or an order declaring that no assessment could be made was made the proceedings initiated under section 34 must be deemed to relate to the proceedings which commenced with the public....

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....) and the interest under clause (iii) of the proviso to sub-section (1) of section 139 are exigible and there is no illegality or unconstitutionality in the same. 'For III the reasons, our answer'to question No. 2 is in the negative and to question No. 3 in the affirmative and against the assessee. We shall now advert to question No. 4. Section 39(4) permits any person to furnish the return of his income for any previous year at any time before the assessment is made; but, however, he is made liable to pay interest from the date on which the return ought to have been filed under section 139(1) to the actual date of the furnishing of the return. The mere fact that a return is permitted to be filed before the assessment is made or a revised return under sub-section (5) of section 139 could be filed at any time before the assessment is made, will not absolve such an assessee from the levy of penalty under clause (a) of subsection (1) to section 271. Section 271(1)(a) is attracted the moment the ingredients of that provision are established. The very provisions of sub-section (4) will come into play only when no return has been furnished by the assessee within the time permitted under....