TMI Blog1976 (2) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... led its return of income of Rs. 42,851, on the basis of which the ITO passed the order on March 13, 1964, computing the assessee's income at Rs. 45,527. This order was passed under s. 143(3) of the I.T. Act, 1961. On the same date the ITO also issued a penalty notice under s. 271 (1)(a) for filing the return after the time allowed under s. 22(1) of the Indian I.T. Act, 1922. In its reply dated June 7, 1965, the assessee requested the ITO to drop the penalty proceedings. By his order dated August 2, 1965, the ITO, while rejecting the assessee's request, imposed a penalty of Rs. 6,856 under s. 271(1)(a) of the I.T. Act, 1961. The assessee's appeal was dismissed by the AAC. On a further appeal, the Tribunal rejected the assessee's contentions, which may be summed up thus : (i) No penalty could be levied inasmuch as it was obligatory upon the department to issue a notice for filing the return, the appellant being a regular assessee. Therefore, there was reasonable cause for not filing the return in time. (ii) No penalty could be imposed for delay in filing the return in response to the public notice under s. 22(1) of the Indian I.T. Act, 1922, inasmuch as those proceedings bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO directed penalty notice to be issued for late filing of the return. Four questions have been referred in Misc. Civil Case No. 165 of 1972 and the same four questions are referred in Misc. Civil Case No. 116 of 1972, which read as follows : " 1. Whether on the facts and circumstances of the case, when return was filed within four years and before the assessment under s. 139(1), the provisions of the proviso to section 139(1)(b)(iii) will apply and the time for filing the return will be extended and interest alone will be charged and no penalty is leviable? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in retaining the penalty under s. 271(1)(a) of the Income-tax Act, 1961, when notice under section 148 read with section 139(2) has been served upon the assessee and by reading section 139(7) the assessee-firm cannot be treated in default of section 22(1) of the old Act or section 139(1) of the new Act ? 3. Whether, on the facts and in the circumstances of the case, the delay was from 30th June, 1960, or from 15th March, 1963, when the notice under section 148 of the Income-tax Act was issued ? 4. Whether the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of the income in respect of which the particulars have been concealed or inaccurate particulars have been furnished ........" The language of the section is abundantly clear and certain. Penalty can be imposed only under one or more of the circumstances mentioned in cls. (a), (b) and (c) of sub-s. (1) of s. 271 of the I.T. Act, 1961, and the quantum of penalty is prescribed in cls. (i), (ii) and (iii) of the same sub-section. Much argument was constructed on the words " may " and " shall " (which have both been applied in the same sense in the sentence) to urge that the first is discretionary, while the quantum of penalty is fixed, certain and mandatory. In our opinion, nothing much turns upon the use of the word " may ". The income-tax authorities have been empowered to impose penalty only if there exists one or more of the circumstances enumerated in cls. (a), (b) and (c), but not otherwise. But, where any of these circumstances exist, the authority has power to impose penalty. The element of discretion steps in when, under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due on a particular date, then also the assessee becomes liable to pay interest, but he is not liable to pay any penalty because, time having been extended, it cannot be said that he is in default. But interest becomes payable because, by reason of extension of time, the filing of the return would be delayed, which, in its turn, will entail delay in assessment and consequent delay in realisation of tax from the assessee. Thus, interest is by way of compensation for the delay in the realisation of tax. It is not penalty for committing default in filing the return of income within the time allowed, under sub-s. (1) or sub-s. (2) of s. 139 of the Act. Penalty is punishment : it is in terrorem. Therefore, no question arises for imposition of double penalty. The view we take was also taken in K. C. Vedadri v. CIT [1973] 87 ITR 76 (Mad), Express Newspapers (P.) Ltd. v. ITO [1973] 88 ITR 255 (Mad), Addl. CIT v. Santosh Industries [1974] 93 ITR 563 (Guj), Narandas Paramanand Das v. ITO [1975] 98 ITR 453 (Cal) and D. B. Navalgundkar Co. v. CIT [1975] 98 ITR 675 (Kar). See also the principle laid down in Gursahai Saigal v. CIT [1963] 48 ITR 1 (SC). In CIT v. Kulu Valley Transport Co. P. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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