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TMI Blog1972 (8) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee failed to do so and filed its return of income as late as 31st January, 1966. By that time the old Act was repealed and the new Act had taken its place and section 297(2)(b) of the new Act required that since the return of income was filed by the assessee after the commencement of the new Act, the assessment of the assessee for the assessment year 1961-62 should be made in accordance with the procedure specified in the new Act. The return of income being filed before the expiration of four years from the end of the assessment year 1961-62, it was regarded as a voluntary return under section 139, sub-section (4), and the Income-tax Officer processed it and assessed the assessee to tax under section 143. The Income-tax Officer in the course of the assessment proceedings was prima facie satisfied that the assessee had without reasonable cause failed to furnish its return of income within the time allowed by the notice under section 22, sub-section (1) of the old Act and he, therefore, issued a notice under section 274 calling upon the assessee to show cause why penalty should not be levied upon it under section 271(1)(a). The assessee submitted its explanation giving variou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the true interpretation of two sections of the new Act, section 139 and section 271(1)(a). Section 139 provides for filing a return of income and the material portion of this section reads as under : " 139. (1) Every person if his total income. . . . during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall furnish a return of his income. . . . 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. . . includes any income from business or profession, before the expiry of six months from the end of the previous 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--- (i) in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired on or before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) of section 73, or sub-section (1) of section 74, he may furnish, within the time allowed under sub-section (1), a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under sub-section (1). (4) (a) Any person who has not furnished a return within the time allowed to him under sub-section (1) or sub-section (2) may, before the assessment is made, furnish the return for any previous year at any time before the end of the period specified in clause (b), and the provisions of clause (iii) of the proviso to sub-section (1) shall apply in every such case; (b) the period referred to in clause (a) shall be- (i) where the return relates to a previous year relevant to any assessment year commencing on or before the 1st day of April, 1967, four years from the end of such assessment year ;. . . . (5) If any person having furnished a return under sub-section (1) or sub-section (2), discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the assessment is made." Section 271 provides for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to furnish the return within the time allowed to him under section 139, sub-section (1). The default would fall fairly and squarely within the plain language of section 271(1)(a) and would be punishable by imposition of penalty under that provision. The revenue conceded that the first part of section 271(1)(a) would not apply in the present case since a valid return was filed by the assessee under section 139, sub-section (4), but the second part of the section was clearly, in the submission of the revenue, applicable, because the assessee had without reasonable cause failed to furnish a return within the time allowed under section 139, sub-section (1), and furnished it only under section 139, sub-section (4), after the expiration of such time. The assessee was, therefore, said the revenue, liable to penalty under the second part of section 271(1)(a). The assessee, on the other hand, urged that sub-section (4) was in the nature of a proviso to sub-section (1) of section 139 ; it had the effect of extending the time specified in section 139, sub-section (1). Therefore, if the assessee filed the return in conformity with section 139, sub-section (4), he should be deemed to have fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . per annum depending upon the date to which time is extended by the Income-tax Officer. The assessee must file his return of income before the date specified in sub-section (1) of section 139 or within the extended time, if extension of time has been granted by the Income-tax Officer, and if he does so, his return of income would be clearly within the time allowed under sub-section (1) of section139. The Income-tax Officer may also, in the case of any person who in his opinion is assessable under the Act, serve upon him notice under section 139, sub-section (2), requiring him to furnish a return of his income within thirty days from the date of service of the notice upon him. This notice may be served at any time but before the end of the assessment year. If the assessee is unable to file his return of income within thirty days from the date of service of the notice upon him, he may apply for extension of time under the proviso to sub-section (2) of section 139, and the Income-tax Officer may, in his discretion, extend the date for furnishing the return, subject to the provisions of sub-clause (iii) of the proviso to subsection (1) of section 139. The assessee must file his retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision in the new Act under which return of income can be filed by the assessee. The only provision in the new Act which provides for filing of a return of income is section 139 and that does not contemplate any return of income which may be filed after the expiration of four years from the end of the assessment year. If a return of income is purported to be filed after the expiration of four years from the end of the assessment year, it would be a mere scrap of paper without any legal consequence. It would indeed be a misnomer to call it a return of income, because there is no provision of law under which it could be filed. It would not be a return in the eye of the law. We may now turn to examine the language of section 271(1)(a) which is the section which primarily falls for interpretation. Section 271(1)(a) consists of two clauses : each clause sets out the ingredients which, if fulfilled, would immediately attract penalty. The first clause refers to a case where a person has without reasonable cause failed to furnish the return of 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, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retation, we will now proceed to examine the language of section 271(1)(a). It is obvious on a plain reading of the language of section 271(1)(a) that the two clauses of the section deal with two different situations. The first clause deals with a situation where a person has, without reasonable cause, failed to furnish a return of 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, or section 148. That would be a case where no return of income has been filed by a person though required to do so under sub-section (1) of section 139, or by notice given under sub-section (2) of section 139, or section 148. Where there is failure to file the return of income altogether without reasonable cause such default would be covered by the first clause. The second clause deals with a different situation where there is no failure to furnish the return of income altogether but the return of income has been furnished outside the time allowed under sub-section (1) of section 139, or by notice given under sub-section (2) of section 139, or section 148. The emphasis in the second clause on failure to furnish the retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary natural sense, unless of course there is something in the context which compels the court to adopt a different construction. Here, not only there is nothing in the context to indicate that the legislature intended to use the words " within the time allowed. . . . . by sub-section (1) of section 139 ", as including the time within which return of income may be filed under section 139, sub-section (4), but, as we shall presently show, the context clearly gives a contrary indication and there is no reason why we should add anything to the words used by the legislature or read them in a sense different from their ordinary grammatical sense. If the legislature intended that a person should be punishable under the second clause, only if he failed to furnish a return of income within a period of four years from the end of the assessment year, there is no reason why the legislature should have used the words "within the time allowed. . . by sub-section (1) of section 139 ". The legislature could have very well said that if a person without reasonable cause fails to furnish the return of income within four years from the end of the assessment year, he shall be liable to penalty. But th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year would not be a return contemplated under the new Act and an assessee cannot resist the first clause by saying that he has not failed to furnish the return of income which he was required to furnish under sub-section (1) of section 139, because he has furnished what is an invalid return, a return not contemplated by the new Act, a return which is no return in the eye of the law. When the first clause speaks of failure to furnish return of income, it has obviously reference to section 139, which provides for furnishing of return of income and it is with reference to the provisions of section 139, that it must be judged whether there is failure to furnish the return of income. Where the assessee furnishes the return of income after the expiration of four years from the end of the assessment year, the return of income so furnished would be no return at all within the contemplation of section 139, and, therefore, it would be logically correct to say that the assessee has failed to furnish the return of income and if that be so, he would be liable to penalty under the first clause. But, then, the second clause would be rendered superfluous because, on the construction contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not already made. The object of giving locus poenitentiae to an assessee is that, so long as the assessment is not made, he may file a return of income and if he files it, the Income-tax Officer would be bound to process it and make assessment under section 143. But that does not mean that the assessee ceases to be liable for the other consequences of the default. But for sub-section (4) of section 139, the assessee would not have been able even to file a return of income after the expiration of the time allowed to him under sub-section (1) or sub section (2) of section 139. That would have caused great hardship to the assessee for it would have enabled the Income-tax Officer to make best judgment assessment which might be highly prejudicial to the assessee. The legislature, therefore, gave one more opportunity to the assessee to file a return of income despite the default committed by him. But, if the default committed by him attracted any other consequences, they were not obliterated by sub-section (4) of section 139. There is no doubt that sub-section (4) of section 139 has to be read with sub-section (1) of section 139, so as to permit the filing of a valid return, whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egislature could not have intended to impose such double penalty for the same default. We do not think this objection is well founded. It suffers from several defects. In the first place, it is not correct to say that interest chargeable to a person who files his return of income under section 139, sub-section (4), is " penal interest ", though that is an expression which is commonly in use in income-tax parlance. It is not by way of penalty that interest is chargeable from a person who does not file his return within the time allowed to him under sub-section (1) of section 139. If we look at clause (iii) of the proviso to sub-section (1) of section 139, it is clear that even where the Income-tax Officer grants extension of time to a person to file his return of income, the person to whom extension of time is granted is liable to pay interest, if the extended date falls beyond a particular date. There is no question in such a case of levying any penalty on the person concerned, because extension of time having been granted to him, he is not in default. Interest is not charged to him by way of penalty but he is required to pay it, because by reason of extension of time, the filing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified in the general notice given under sub-section (1) of section 22 of the old Act, the revenue was bound to determine the loss and allow it to be carried forward under section 24(2) of the old Act. The judges were divided in opinion on this question and the majority took the view that the Income-tax Officer was bound to determine the loss returned by the assessee and to allow it to be carried forward after being set off under section 24(2). Grover J. speaking on behalf of the majority, pointed out that the question which was submitted for opinion consisted of two parts, namely, (1) whether the loss returned by the assessee was required in law to be determined by the Income-tax Officer ; and (2) whether it could be carried forward after being set off under section 24(2) of the Act. The first part of the question raised the point whether a loss return could be filed by an assessee under section 22, sub-section (3). The argument was that since the public notice under section 22, sub-section (1) required only a person whose total income during the previous year exceeded the maximum amount not chargeable to tax, to furnish a return of income, a loss return was not within the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of section 24(2) the assesse must submit his loss return within the time specified by section 22(1). That provision must be read with section 22(3) for the purpose of determining the time within which a return has to be submitted. It can well be said that section 22(3) is merely a proviso to section 22(1). Thus, a return submitted at any time before the assessment is made is a valid return. In considering whether a return made is within time, sub-section (1) of section 22 must be read along with sub-section (3) of that section. A return whether it is a return of income, profits or gains or of loss must be considered as having been made within the time prescribed if it is made within the time specified in section 22(3). In other words, if section 22(3) is complied with, section 22(1) also must be held to have been complied with. If compliance has been made with the latter provision the requirements of section 22(2A) would stand satisfied." These observations read superficially might seem to support the contention of the assessee, but if we examine them closely, it will be apparent that they do not lay down any absolute proposition which can be applied in all situations where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 22, sub-section (3), and if such return was filed, the Income-tax Officer would be bound to determine the loss and allow it to be set off and carried forward under section 24, sub-section (2). Sub-section (2A) was introduced in section 22 merely with a view to clarifying this position. It was not intended to alter the law against the assessee by providing that in order to be entitled to the benefit of set-off and carry-forward of loss, the assessee must file a loss return within the time strictly allowed under sub-section (1) of section 22 and if he failed to do so, he should be disentitled to such benefit. It was in this context that Grover J. made the aforesaid observations interpreting section 22, sub-section (2A). It is difficult to see how these observations made in the context of section 22, sub-section (2A), can be applied blindly and mechanically, when we are interpreting a wholly different section in a totally different context. It is unsafe and contrary to logic and reason to try to interpret the words used in one statutory provision by reference to the interpretation placed on similar words in another statutory provision. It must be remembered, as pointed out by that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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