TMI Blog1984 (5) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... ere being separate penalty orders for the two years and separate appeals by the assessee before the AAC, Ranchi Range, Ranchi, and the Income-tax Appellate Tribunal, " B " Bench, Patna, and two references, although by a common order, have been made by the Tribunal, in this court also the references in question have been registered as two taxation cases, one for the assessment year 1965-66 and the other for the assessment year 1966-67. A Bench of this court consisting of S. K. Jha and A. K. Sinha JJ. heard the matter and on March 31, 1983, noticed that on the question as to what should be the period for which there can be said to be a default for levying penalty in terms of s. 271(1)(a) of the I.T. Act, 1961, the two Hon'ble judges of this court, namely, S. P. Sinha J. (as he then was) and S. Sarwar Ali J. were in disagreement in the case of Addl. CIT v. Dongarsidas Biharilal [1979] 116 ITR 897. They, accordingly, thought it desirable that the matter should be heard by a Full Bench for an authoritative exposition of law. Admitted facts, inter alia are as follows: The assessee is a registered firm. As provided under s. 139(1)(a) of the I.T. Act, 1961 (hereinafter referred to as " t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1966-67, no penalty could be imposed upon it for that year and, accordingly, the penalty of Rs. 8,680 calculated as the amount of 2% of the tax assessed as an unregistered firm could not be levied. Third question under reference is, therefore, confined to the assessment year 1966-67 only. Mr. K. N. Jain, learned counsel appearing for the assessee, at the first instance suggested that the question, " whether penalty under section 271(1)(a) could be imposed even after charging interest under section 139 for the delayed submission of return, " requires reframing so as to include other aspects of law. According to him, the wider and real issue involved in the case is: " Whether, on the facts and in the circumstances of the case, penalty under section 271(1) is leviable or not ? " As to whether penalty under s. 271(1)(a) could be imposed even after charging interest under s. 139 or not, is only one of the aspects of the real question as to whether, on the facts and in the circumstances of the case, exercise of power to impose penalty under s. 271(1)(a) is legal or not. Penalty can be levied after interest is charged upon the tax payable, at the best, is aground like se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing out of its order. (3) When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order. (4) When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the findings given by it. Stating the position compendiously, it is only a question that has been raised before or decided by the Tribunal that could be held to arise out of its order. " While applying the above said law to the facts of the case before them, the Supreme Court further observed (p. 611): " Now the only question on which the parties were at issue before the income-tax authorities was whether the sum of Rs. 9,26,532 was assessable to tax as income received during the year of account 1945-46. That having been decided against the respondents, the Tribunal referred on their application under section 66(1), the question, whether the sum of Rs. 9,26,532 was properly included in the assessee-company's total income for the assessment year 1946-47, and that was the very question which was argued and decided by the High Court. Thus it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... narrowing down the controversy to only one of the several contentions which can be raised to question the validity of the imposition of penalty under s. 271(1)(a), applying the law laid down by the Supreme Court, it must be held that the real issue may escape if other or alternative contentions are not permitted to be raised. As the question referred to us in the inhibited form covers only a part of the real controversy, it is pertinent and reasonable to argue that the question should be reframed, so that the real issue arising out of the order of the Tribunal may be decided. Some contentions like the one, to which I shall presently advert, although arise out of the order of the Tribunal, were not argued before it. The real controversy relates to the question as to whether the assessee is liable to penalty under s. 271(1)(a) or not. M contentions were not raised before the Tribunal, the assessee cannot be denied the opportunity to raise such contentions. Mr. Rajgarhia placed reliance on the judgment in the case of Kusumben D. Mahadevia v. Commissioner of Income-tax [1960] 39 ITR 540 (SC) as also on some judgments of the High Courts and contended that a question of law which may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oached from another angle. In such a situation, on being reframed, it will not be a new question of law, rather it shall be a new point of view on the same question which has been decided by the Tribunal. Both Mr. Jain and Mr. Rajgarhia addressed us at length on the question as reframed, i.e., whether, on the facts and in the circumstances of the case, penalty under s. 271(1)(a) is leviable or not. According to Mr. Jain, s. 271(1)(a) speaks of the default in furnishing the return of total income under sub-s. (1) of s. 139 or by notice given under sub-s. (2) of s. 139 and the failure to furnish it within the time allowed and in the manner required by sub-s. (1) of s. 139 or by such notice, as the case may be. Under s. 139(1), every person, if his total income or the total income of any other person in respect of which he is assessable under the Act exceeded the maximum amount which is not chargeable to income-tax during the previous year is obliged to furnish a return of his income or the income of such other person during the previous year in accordance with law before the expiry of four months from the end of the previous year or where there is more than one previous year from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment of penalty must also remain confined to an assessment year ", as it is. The very purpose for which we constituted the Full Bench would stand defeated if we do not predicate into this question. I propose, therefore, to deal briefly, but not dismissively, with this aspect. Mr. Jain started by reminding us the well-settled principle of construction of taxing statutes that when a provision is ambiguous or is capable of two meanings, the construction beneficial to the citizen should be adopted and referred to a Division Bench decision of the Calcutta High Court in CIT v. Vegetable Products Ltd. [1971] 80 ITR 14 and the judgment of the Supreme Court affirming the said Calcutta decision in CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 for this purpose. Without disputing this rule of interpretation of statutes, Mr. Rajgarhia, on the other hand, drew our attention to the judgment of the Supreme Court in Rajputana Agencies Ltd. v. CIT [1959] 35 ITR 168 to read a passage from Maxwell on the Interpretation of Statutes, 10th edition, page 284, which is quoted with approval in the said case: " The tendency of modern decisions, upon the whole, is to narrow down materially the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 31st day of December of the year immediately preceding the assessment year, and in the case of any person referred to in clause (b), up to a period not extending beyond 30th day of September of the assessment year without charging any interest ; (ii) in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired after the 31st day of December of the year immediately preceding the assessment year up to the 31st day of December of the assessment year without charging any interest; and (iii) up to any period falling beyond the dates mentioned in clauses (i) and (ii), in which case, interest at six per cent. per annum shall be payable from the 1st day of October or the 1st day of January, as the case may be, of the assessment year to the date of the furnishing of the return (a) in the case of a registered firm or an unregistered firm which has been assessed under clause (b) of section 183, on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm ; (b) in any other case, on the amount of tax payable on the total income, reduced by the advance tax, if any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn 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 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 : ... (2) In the case of any person who, in the Income-tax Officer's opinion is assessable under this Act, whether on his own total income or on the total income of any other person during the previous year, the Income-tax Officer may, before the end of the relevant assessment year, issue a notice to him and serve the same upon him requiring him to furnish, within thirty days from the date of service of the notice, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s due by June 30, 1965, and it was filed on October 17, 1966, and for the year 1966-67, the return was due on June 30, 1966, and it was filed on August 28, 1968. Evidently the law applicable was as existed for the years 1965-66 and 1966-67 as quoted above. Mr. Jain has submitted that in a case in which there is a default in furnishing the return under sub-s. (1) or sub-s. (2) of s. 139, for the purpose of interest, the terminus is indicated in the words " reckoned from the date immediately following the specified date to the date of the furnishing of the return or where no return has been furnished, the date of completion of the assessment under s. 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source ", in sub-s. (8)(a) of s. 139. Under the Explanation at the foot of sub-s. (8)(a) of s. 139, " I specified date ", in relation to a return for an assessment year, has been defined. Thus, according to Mr. Jain, both the date from which the interest shall be reckoned and the date up to which it shall be charged are indicated and this leaves no ambiguity in so far as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome, he may direct that such person shall pay by way of penalty, (i) in the cases referred to in clause (a), (a) in the case of a person referred to in sub-section (4A) of section 139, where the total income in respect of which he is assessable as representative assessee does not exceed the maximum amount which is not chargeable to income-tax, a sum not exceeding one per cent. of the total income computed under this Act without giving effect to the provisions of sections 11 and 12, for each year or part thereof during which the default continued; (b) in any other case, in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent. of the assessed tax for every month during which the default continued. Explanation.-In this clause , 'assessed tax' means tax as reduced by the sum, if any, deducted at source under Chapter XVII-B or paid in advance under Chapter XVII-C." According to Mr. Jain, his case will be one falling under s. 271(1)(a)(i)(b). " A sum equal to 2 per cent. of the assessed tax for every month during which the default continued ", can be determined and quantified only if the date on which the default shall cease is known. Sub-s. (4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confined to an assessment year, the default shall also remain circumscribed within 12 months of the relevant assessment year ? According to S. P. Sinha J. (as he then was), in the case of Addl. CIT v. Dongarsidas Biharilal [1979] 116 ITR 897 (Pat), the default cannot be carried over beyond the 12 months of the relevant assessment year. According to S. Sarwar Ali J., in that very case, the period of default for the purpose of levying penalty cannot be confined to an assessment year. Before I deal with the question posed above, I propose to advert to yet another aspect of the matter. Mr. Jain has emphasised that the imposition of penalty is linked with the tax payable. If the tax is not payable by the assessee, no penalty can be imposed. As I have pointed out earlier, the assessee is a registered firm. Admittedly, the assessee paid advance tax for the assessment year 1965-66 as also assessment year 1966-67. For the assessment year 1966-67, the advance tax paid was enough to discharge the -tax liability of the firm. As to whether the quantification of the penalty for the said assessment year is in accordance with the law or not, I shall separately examine while examining the third q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it was amended in 1956, in the case of a registered firm, the tax payable by the firm itself was not required to be determined but the total income of each partner of the firm including therein the share of its income, profits and gains of the previous year was required to be assessed and the sum pay able by him on the basis of such assessment was to be determined. But this was merely a method of collection of tax due from the firm. The penalty provisions under section 28 would, therefore, in the event of the default contemplated by clause (a), (b) or (c) be applicable in the case of assessment of a registered firm. If a registered firm is exposed to liability of paying penalty, by committing any of the defaults contemplated by clause (a), (b) or (c) by virtue of section 44, notwithstanding the dissolution of the firm, the assessment proceedings are liable to be continued against the registered firm, as if it has not been dissolved." It is noticeable that in computing the quantum of penalty, the amount of the tax payable has to be kept in mind and as provided under subs. (3), clause (d) of s. 271, the penalty imposed must not exceed in the aggregate twice the amount of the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. It was submitted that if that is not the true construction, then the effectiveness of the section may be taken away by the assessee paying the tax due by him a day before the demand notice is served on him. This contention found support from the decisions of the Lahore High Court in Vir Bhan Bansi Lal v. CIT [1938] 6 ITR 616 and the Delhi High Court in CIT v. Hindustan Industrial Corporation [1972] 86 ITR 657. Assessee's contention on the other hand was that the penalty can be imposed only on the amount payable under s. 156. This view found support from a decision of the Mysore High Court in Annaiah v. CIT [1970] 76 ITR 582 (Mys). Submission on behalf of the assessee further was that if the interpretation placed by the Revenue on s. 271(1)(a)(i) is accepted as correct, the result would be that the advance tax paid or taxes deducted at the source cannot be taken into consideration in determining the penalty payable. The Supreme Court observed (p. 195) : " There is no doubt that the acceptance of one or the other interpretation sought to be placed on section 271(1)(a)(i) by the parties would lead to some inconvenient result, but the duty of the court is to read the section, unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, payable' (by the assessee) mentioned in the earlier part of the section. It is true that the Lahore and Delhi High Courts have taken a different view. But the view taken by the Calcutta and Mysore High Courts cannot be said to be an untenable view. Hence, particularly in view of the fact that we are interpreting not merely a taxing provision but a penalty provision as well, the interpretation placed by the Calcutta and Mysore High Courts cannot be rejected. Further, as seen earlier, the consequences of accepting the interpretation placed by the Revenue may lead to harsh results. " There is no difficulty in recognising as to when the default would arise. Section 271(1)(a) has indicated the three situations, namely, (i) non-furnishing of return as required under sub-s. (1) of s. 139, or (2) non-furnishing of return even after notice under sub-s. (2) of s. 139 or s. 148, or (3) non-furnishing of return within the time allowed by the ITO. Similarly clause (b) of the said section states about the default caused by non-compliance with a notice under sub-s. (1) of s. 142 or sub-s. (2) of s. 143 or a direction issued under sub-s. (2A) of s. 142. Clause (c) of the said section refers t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er s. 271(1)(a), the quantum of penalty shall be 2% of the assessed tax for every month of default and may go up to 50% of the assessed tax. The said provision only describes the limits within which the quantum of penalty would vary. It has no bearing on the question as to how long could the default go. I, therefore, think that the provisions contained in sub-clause (i) under s. 271(1)(a) do not provide the answer to the question in issue. " After saying so, Sinha J. proceeded further and said (p. 907): I, therefore, think that the period of default for the purpose of levying penalty in terms of section 271(1)(a)(i) is determinable. " " In substance, therefore, think, for levying penalty in terms of section 271(1)(a) of the Act, the period of default starts on the day following the due date for compliance with the terms of s. 139(1) or s. 139(2) of the Act and remains circumscribed within the twelve months of the relevant assessment year. Similar would be the position where steps have been taken to tax an escaped income under section 148 of the Act. There also the period of default in filing the required return of income will remain circumscribed within twelve months of the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst it (See Chunnilal Bros. v. CIT [1979] 119 ITR 199 (MP); 1979 Tax LR 101). Commenting upon the said Patna view, the Bombay High Court said in CIT v. D.V. Save [1979] 119 ITR 266 276-278 (Bom): " However, in the face of all the above catena of decisions, a discordant note was struck by the Patna High Court ... The arguments which appealed to the Patna High Court which have been extracted in the paragraph quoted above have been fully dealt with in the judgments of the Rajasthan, Delhi and Andhra Pradesh High Courts. All the other refinements of the various arguments and their several facets which could have been urged on behalf of the assessee, have been studiously considered by these High Courts and properly dealt with. None of these arguments, nor any of the facets thereof, have been accepted by these High Courts and in our view these three High Courts have taken the correct view of the statutory provision and the interpretation put on the provision and the view taken by the Patna High Court applying the same does not qualify as a reasonable and possible interpretation which would bring into play the principle in Vegetable Products Ltd.'s case [1973] 88 ITR 192 (SC). " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hird question referred to us by the Tribunal, namely, whether, on the facts of the case, a penalty of Rs. 8,680 calculated on the basis of tax as on unregistered firm could be levied in this case when no tax was payable by it as a registered firm. This amount of penalty calculated on the basis of 2 per cent. of the tax for every month during which the default continued has been imposed for the assessment year 1966-67. The assessee's case in this regard is that it paid advance taxes as a registered firm and its entire tax liability for the assessment year 1966-67 had been fully discharged by the payment of advance taxes. In the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC), the Supreme Court has already held that if no tax is payable, no penalty can be imposed. According to Mr. Jain, the only mode of calculating the amount of penalty for the assessment year 1966-67 will be one provided under s. 271(1)(i)(b) read with the Explanation. The clear mandate of the Legislature is that the penalty will be a sum equal to 2 per cent. of the assessed tax for every month during which the default continued. The assessed tax has been defined in the Explanation to mean " tax as red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputing the penalty and answered it in the negative. Sabyasachi Mukharji J., speaking for the court, noticed the view of the Supreme Court that the expression I the amount of tax, if any, payable by him " in the earlier part of s. 271(1)(a)(i) referred to the tax payable under the notice of demand and the words "the tax " in the latter part of the provision would only refer to " the tax ", if any, " payable " by the assessee mentioned in the earlier part of s. 271(1)(a)(i) of the Act and a retrospective amendment subsequent to the decision of the Supreme Court in the Act by the Direct Taxes (Amendment) Act, 1974, under which Explanation was added to s. 271(1)(i) defining assessed tax to mean tax as reduced by the sum, if any, deducted in advance. The legal fiction that is created by sub-s. (2) of s. 271 was noticed by him upon which he concluded (p. 781): "Therefore, for the purpose of imposition of penalty, the firm, even if it is registered, and if it has committed a default as contemplated under s. 271, it would be treated on the same basis as if it was an unregistered firm ". Before the Calcutta High Court, it was a case in which at the date when the penalty was imposed, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y had it been an unregistered firm. Once a firm is treated for the purposes of penalty as an unregistered firm, there is no reason why it should be denied such benefits by way of deduction as are available to an unregistered firm. It is true that, being a registered firm, it was really not required to pay any annuity deposit at all, but that, to our mind, would make no difference and it would be entitled to a deduction, in the computation of its total income for the purposes of determination of the tax payable, on which penalty is based, of the amount of the annuity deposit which it would have been required to pay, had it, in fact, been an unregistered firm." The Bombay High Court was really considering the question as to whether deduction under s. 280-0 of the amount of annuity deposit which the assessee might have paid if it was an unregistered firm, whether paid or not, could be permitted to be deducted or not in computing the penalty imposable on the assessee (registered firm) under s. 271(1)(a) read with s. 271(2) of the I.T. Act. The Punjab High Court in CIT v. Hari Chand Hans Raj [1981] 128 ITR 467 at p. 471, has held even though registered firm has been granted certain co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be accepted. Legal fiction which is created by sub-s. (2) of s. 271 is independent of the tax liability. Once it is found that there is a default so as to attract the penal provisions under s. 271(1)(a), sub-s. (2) of s. 271 shall come into play. If the assessee is a registered firm, the legal fiction created by it shall not permit to give to the assessee benefits of its being a registered firm. The assessee must answer the requirements as if it is not a registered firm. Its assessed tax for the purpose of imposition of penalty shall be that which shall be determined on the footing that it is not a registered firm. There is no abuse of the non-obstante clause involved if it is applied in this manner. Person liable to penalty is one who has committed a default as envisaged under s. 271(1). If it is a registered firm, it shall be in the same equation with unregistered firms as a person liable to penalty. Section 271(1)(a)(i) has to be read along with s. 271(2) and not separately as if s. 271(1)(a)(i) has got a different purpose. In my view, s. 271 shall operate in the case of a registered firm at the time of quantification of the penalty under s. 271(1)(i)(b) and tax determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him that Mr. K. N. Jain, learned advocate appearing for the assessee, at first suggested that question No. 1, as mentioned above, requires a reframing. He wanted a reframing of the question as follows : " Whether, on the facts and in the circumstances of the case, penalty under section 27 l(1)(a) is leviable having in view the provisions of section 139 of the Income-tax Act, 1961 ? " P. S. Mishra J. has pointed out the contention raised by Mr. Jain. His contention was that s. 271(1)(a) of the I.T. Act, 1961 (hereinafter referred to as the said " Act "), speaks of the default in furnishing the return of total income under sub-s. (1) of s. 139 or by notice given under sub-s. (2) of s. 139 and the failure to furnish it within the time allowed and in the manner required by sub-s. (1) of s. 139 or by such notice, as the case may be. According to Mr. Jain, under s. 139(1), a definite period has been fixed for filing the return and if no return is filed on or before the due date, there is a default, and so a return filed under s. 139(2) or under s. 139(4) cannot be said to be a return filed under s. 139(1) of the said Act and, thus, even if the return is filed under s. 139(4), the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now raised goes to the root of the jurisdiction of the ITO to impose a penalty. Challenging the jurisdiction of the ITO is not a different aspect of the same question but a different and new question altogether. Moreover, P. S. Mishra J. has also clearly pointed out towards the end of paragraph 7 that Mr. Jain indicated that he was not pressing his contention and thus Mr. Jain ultimately withdrew his claim for reframing question No. 1 as suggested by the Tribunal. This will be another point to be considered whether when the assessee does not raise an issue, can this court suo motu raise a question and decide the same. The Allahabad High Court in the case of Amrit Banaspati Co. Ltd. v. CIT [1964] 54 ITR 229 has pointed out that the Tribunal in that case referred the following question (p. 230) : " Whether, on the facts and in the circumstances and on a true interpretation of the provisions of clause (ii) of sub-section (2) of section 10 of the Income-tax Act, the assessee was entitled to deduction of the expenses of a capital nature included in the cost of repairs to the premises of which he was a tenant ?" In this decision, it was suggested that the question referred by the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant must set out the questions which he desires the Tribunal to refer and that, further, those questions must arise out of the order of the Tribunal, and that under s. 66(2), the court cannot direct the Tribunal to refer a question unless it is one which arises out of the order of the Tribunal and was specified by the applicant in his application under s. 66(1). At page 602 of this decision an observation has been quoted with approval of the Patna High Court in the case of Maharaj Kumar Kamal Singh v, CIT [1954] 26 ITR 79, to the effect that the provisions of ss. 66(1) and 66(2) do not confer upon the High Court a general jurisdiction to correct or to decide a question of law that may possibly arise out of the income-tax assessment and that the section, on the contrary, confers a special and limited jurisdiction upon the High Court to decide any specific question of law which has been raised between the assessee and the Department before the Income-tax Tribunal and upon which question the parties are at issue. At page 603 of this decision, an observation has been quoted with approval from the case of Chainrup Sampatram v. CIT [1951] 20 ITR 484 (Cal), that the Indian I.T. Act has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question, and the High Court rightly entertained it. Thus, from this decision, it is evident that unless question is at issue between the parties, it cannot be redrafted by this court. When Mr. K. N. Jain withdrew his claim for re-drafting the question, the court has no right to re-draft the question, specially when the effect of re-drafting will be that the assessee claims that the ITO had no jurisdiction to impose penalty in view of the provisions of s.271(1)(a) read with s. 139 of the I.T. Act, 1961. This clearly goes to show that it is not a different aspect of the same question but the two questions are independent of each other. In the case of Iranee v. CIT [1966] 60 ITR 437 (SC), it has been held that though in the assessee's application under s. 66(2) of the I.T. Act, one of the questions raised related to the earlier losses ascertained in 1946 and the facts relating thereto were narrated, the High Court directed the Tribunal to refer only the question whether the Tribunal erred in law or misdirected itself in rejecting the assessee's claim to set off the alleged losses of 1941 of the Hong Kong business against the income of the assessment year 1947-48. On a reference, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Lordships of the Supreme Court at pages 756 and 757 that it is well settled that the High Court may decline to answer a question of fact or a question of law which has no bearing on the dispute between the parties or though referred by the Tribunal does not arise out of its order. It has been observed at page 757 that the power to reframe question may be exercised to clarify some obscurity in the question referred or to pinpoint the real issue between the taxpayer and the Department or for similar other reason ; it cannot be exercised for reopening an enquiry on questions of fact or law which are closed by the order of the Tribunal. It has been held in the case of CIT v. Krishna and Sons [1968] 70 ITR 733 (SC) by their Lordships of the Supreme Court that the jurisdiction of the Supreme Court arising in appeal over the judgment of the High Court on a reference under the I.T. Act is also advisory, and the Supreme Court can only record its opinion on questions which are referred; not o questions which could have been, but have not been referred. It has been held by their Lordships of the Supreme Court at page 196 in the case of CIT v. Devi Prasad Vishwanath Prasad [1969] 72 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h it had reached in the assessment proceeding. The Supreme Court held that the form of the question submitted clearly shows that what the Tribunal was asked to do was to submit a case to the High Court on the question whether the Tribunal was justified in coming to the conclusion on the facts and in the circumstances of the case that no concealment was proved by the department and that question cannot include an enquiry whether the Tribunal had jurisdiction to reach a question different from the conclusion it had reached in the proceeding for assessment. In the case of Karnani Properties Ltd. v. CIT [1971] 82 ITR 547 (SC), the question referred was: " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the services rendered to the tenants by supplying electrical energy, hot and cold water and maintenance of lifts and other amenities, constituted a business activity of the assessee and as such the income arising therefrom was assessable under section 10 of the Indian Income-tax Act, 1922 ?" It was held by the Supreme Court that in the absence of a question whether the findings were vitiated for any reason being before the High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether registration could be refused to a partnership business on the ground that the application for registration had not been signed by one of the partners was neither raised before nor considered by the Tribunal and the High Court could not go into the question on reference. It has been held in the case of Addl. CIT v. Dongarsidas Biharilal [1979] 116 ITR 897 (Pat) that it is an accepted principle of law that where the question referred for its opinion does not cover the real controversy in issue, the High Court can reframe the question and decide the real controversy Similar view has been taken in the case of CIT v. Chennabasappa [1959] 35 ITR 261 (AP). From the aforesaid decisions, it is evident that when Mr. R.N. Jain did not press the question which he argued and when he specifically mentioned that he did not want reframing of question No. 1 referred by the Tribunal and that the question referred by the Tribunal may be answered, then it cannot be said that there is any controversy between the assessee and the department in connection with the matter for which a redrafting of question No. 1 was suggested. Moreover, before the Tribunal the only dispute was that no penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordance with the provisions of law as it prevailed at the time of the commission of the offence. It has been held in the case of CWT v. Ram Narain Agrawal [1977] 106 ITR 965 by the Allahabad High Court that the law operative on the date when the infringement takes place is the law applicable unless it is made applicable ex post facto and that the default in cases of non-filing of returns takes place after the expiry of time or notice. It has been held in the case of CWT v. Chunni Lal Anand [1979] 116 ITR 355 by the Allahabad High Court that for the assessment year 1968-69, the wealth-tax return was due on or before June 30, 1968, and, therefore, for the purpose of levy of penalty for delay in submission of the return, the law as it stood on that date would be applicable and not the law as on the date of the beginning of the assessment year, namely, April 1, 1968, or the date on which the return was actually filed. It has been held in the case of Addl. CWT v. Manjuladevi Muchhal [1979] 119 ITR 43 by the Madhya Pradesh High Court that the assessee committed default in the filing of the returns on the dates fixed for filing the returns, i.e., 30th June, 1961, 30th June, 1962, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Jain, did not press it. The question which has been referred is to the effect whether the penalty under s. 271(1)(a) of the I.T. Act, 1961, could be imposed even after charging interest under section 139 for the delayed submission of return. In this connection, it has been held in the case of Express Newspapers (P.) Ltd. v. ITO [1973] 88 ITR 255 by the Madras High Court that when the statute provides a time-limit for filing a return, it can also provide a penalty for non-submission of the return in time and in addition, the statute can also provide as a compensatory measure that interest should also be paid on the amount of tax for the period of delay and, therefore, the provision for payment of penalty as well as interest for the delayed submission of return cannot be said to offend any constitutional provision. It has been held in the case of Venkatakrishnaiah and Co. v. CIT [1974] 93 ITR 297 by the Andhra Pradesh High Court that the ITO was competent to levy a penalty under s. 271(1)(a) although he had levied interest under clause (iii) of the proviso to s. 139(1) as the imposts are different and distinct and they have been provided to meet different situations and contingen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is in view of these aforesaid decisions that Mr. K. N. Jain, learned advocate for the assessee, did not press question No. 1 as referred by the Tribunal and so it is to be answered against the assessee and in favour of the Revenue. As regards the finding of P. S. Mishra J. that the period of default under s. 271(1)(a) reckoned from the due date of filing the return has to be taken to have come to an end with the filing of the return of income, if it is filed before the best judgment assessment under s. 144 and within the period prescribed under s. 139(4) and in a case of no return of income filed at all with the assessment of income as prescribed under s. 144 of the said Act. I agree with this finding. There are various decisions to support this view. It has been held in the case of Govindarajulu Iyer v. CIT [1948] 16 ITR 391 by the Madras High Court that once the assessment proceedings have commenced with the general notice under s. 22(1) of the Indian I.T. Act, 1-922, they can only come to an end by either an order of assessment or an order declaring that no assessment can be made and where there is no such order and eventually the proceedings are taken under s. 34 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that this can be done only by expressly condoning the delay. It has been held in the case of Laxmi and Co. v. CIT [1981] 128 ITR 259 by the Allahabad High Court that the default of not filing a return under s. 139(1) continues till the time when the return has been furnished or if no return has been furnished it continues till the assessment is made and that the assessee is liable to pay penalty under this provision for not having filed a return voluntarily under s. 139(1) even if he files a return subsequently in pursuance of a notice under s. 139(2). In the decision in the case of Addl. CIT v. Dongarsidas Biharilal [1979] 116 ITR 897 (Pat), a view has been taken by S. P. Sinha J. (as he then was), that there is no provision under the I.T. Act for carrying over the default in filing the return beyond the limits of an assessment year and that like an assessment of income to income-tax which must remain confined to an assessment year, the assessment of penalty must also remain confined to an assessment year, and that the default cannot be carried over beyond that assessment year. It has also been held in the decision that in terms of s. 271(1)(a), the period of default starting o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn voluntarily under s. 139(1) cannot be taken note of for initiating proceedings for imposition of penalty if a notice under s. 139(2) is issued, or that the period of default shall cease from the date when the notice under s. 139(2) is served on the assessee. It has been held in the case of Addl. CIT v. Santosh Industries [1974] 93 ITR 563 by the Gujarat High Court disagreeing with the Tribunal and rejecting the contention of the assessee, that the second clause of s. 271(1)(a) of the said Act applies where a person failed to furnish a return of income within the time allowed strictly under sub-s. (1) or sub-s. (2) of s. 139, and filing of the return after expiration of such time but before expiration of four years from the end of the assessment year under s. 139(4) did not save him from penalty for the default contemplated under the second clause to s. 271(1)(a) of the said Act and the words " within the time allowed by sub-s. (1) of s. 139 " in the second clause of s. 271(1)(a), according to their plain natural meaning, must be taken to refer to the time specified in sub-s. (1) of s. 139 or extended by the ITO under the proviso to that sub-section and not so as to include ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch of the Allahabad High Court that where the assessee did not file his return within the time prescribed by s. 139(1) of the said Act and where no notice was issued by the ITO to the assessee under s. 139(2) of the said Act, even if the assessee filed his return under s. 139(4), that is, within four years from the end of the assessment year and before the assessment Order was passed, the assessee is liable to pay the penalty under s. 271(1)(a) of the said Act for not having filed a return within the time prescribed in s. 139(1) of the said Act and the time given under s. 139(2). It has also been held in this decision that for the purpose of penalty, the filing of the return within the time prescribed by sub-s. (4) of s. 139 cannot be treated as a return filed within the time prescribed by sub-s. (1) and that the emphasis of s. 271(1)(a) is for checking evasion of the time prescribed by sub-s. (1) or sub-s. (2) of s. 139. It has also been held in this decision that if the time prescribed by sub-s. (1) or (2) passes, default takes place attracting the liability for penalty. It has been held in the case of Atwal and Co. v. CIT [1979] 117 ITR 171 by the Calcutta High Court that pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the notice under s. 139(2), and that it is true that in terms of s. 139(7), only one return is required to be filed, but that cannot have the effect of wiping out the earlier obligation to file the return suo motu under s. 139(1) of the said Act. It has been held in the case of Laxmi and Co. v. CIT [1981] 128 ITR 259 by the Allahabad High Court that the failure to furnish a return voluntarily under s. 139(1) of the said Act is distinct and separate from the failure to file a return in pursuance of a notice under s. 139(2) and the legal consequences of the omission or failure to file the return under s. 139(1) as well as that of not complying with the notice under s. 139(2) are dealt with in s. 271 and that an analysis of s. 271(1)(a) of the said Act shows that penalty becomes imposable the moment the default takes place and that an assessee is liable to pay penalty under this provision for not having filed return voluntarily under s. 139(1) even if he files a return subsequently in pursuance of a notice under s. 139(2) of the said Act. It has been held in the case of CIT v. Dehati Co-operative Marketing cum-Processing Society [1981] 130 ITR 504 by the Punjab and Haryana Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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