TMI Blog1971 (7) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. He got such a notice on 8th September, 1963, and sumitted his return in the prescribed form on 3rd October, 1963. Prior to the issuance of the notice under section 139(2) by the Income-tax Officer, he had received notices for payment of advance tax and he has also paid advance tax in pursuance of those notices. After the filing of the return, on 24th December, 1963, the Income-tax Officer assessed him provisionally under section 140 of the Act. On 22nd April, 1964, the Income-tax Officer made the assessment order holding that the petitioner was liable to pay a tax of Rs. 60,133.86. Out of this amount, he deducted the amounts paid under sections 210 and 141 and arrived at Rs. 1,998.07 as the balance payable. To that he added interest for two days under section 139 arriving at the total figure of Rs. 2,015'71. He further adjusted a sum of Rs. 57.27 being the refund for 1960-61 and also an amount of Rs. 1,958.44, being a part of refund for 1962-63. Thus he held that the net tax payable by the petitioner was "nil". On the same day on which the Income-tax Officer passed the assessment order, he issued a notice under section 271 of the Act stating that the petitioner had without reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8th September, 1963, pursuant to which he filed the return, the assessee could be considered as having reasonable cause for not filing the return under section 139(1). He, therefore, held that the period of default was from 30th June, 1963, to 8th September, 1963, i.e., the date on which the notice under section 139(2) was issued by the Income-tax Officer. Accordingly, the Appellate Assistant Commissioner fixed the period of default as two months and reduced the penalty from Rs. 3,687 to Rs. 2,458. Against the order of the Appellate Assistant Commissioner, both the Income-tax Officer as well as the assessee came up in appeal before the Tribunal. The Tribunal allowed the appeal filed by the department and dismissed the appeal filed by the assessee. In the result, the order of the Income-tax Officer was upheld and that of the Appellate Assistant Commissioner set aside. The petitioner seeks to set aside the aforesaid orders of the income-tax authorities levying penalty on him. The contentions raised by the petitioner are : (1) Section 139(1)(a) and (b) of the Act are violative of article 14 of,the Constitution. (2) Section 271(1) also infringes article 14 of the Constitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned counsel for the petitioner that this section divides the assessees into two, classes ; (i) whose income includes income from business or profession, and (ii) others who are not in that category. By clause (a) of sub-section (1), a period of six months has been prescribed for the assessees whose income includes income from business or profession from the end of the previous year or before the 30th day of June of the assessment year, whichever is later. In the case of assessees whose income does not include an income from business or profession, the last day for filing of the return is 30th day of June, of the assessment year. The argument is that persons coming under clause (a) get a period of six months whereas persons who come under clause (b) get only a period of three months from the date of the commencement of the assessment year, ie., 1st of April. It is argued that there is no reasonable classification in making this distinction and, even if there is any classification, there is no nexus between the classification and the object sought to be achieved by this classification. It is urged that the object in enacting section 139(1) is the speedy collection of income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y can file the returns is the same and no different periods have been prescribed in those cases. It is only in the cases of assessees who belong to the third class that the period for filing the return may vary from assessee to assessee depending upon the fact where the previous year ends between April and November. In such cases, if a period of six months alone is calculated from the end of the previous year, it may fall even before the beginning of the assessment year. It was, therefore, thought fit by the legislature to fix a particular date before which the assessees belonging to the third class should file their returns. The variation in the period is a result of the circumstance that the previous years vary. As the assessees belonging to the third category get a minimum period of six months, it cannot be said that they are in any manner discriminated against other assessees belonging to classes 1 and 2. It is only the persons belonging to classes 1 and 2 who can complain about a longer period given to the assessees belonging to the third class. The petitioner who belongs to the third class cannot be heard to say that he has been in any manner adversely affected by the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any particular period from the end of the previous year. The legislature, therefore, had to fix a particulur date after the commencement of the previous year during which the said class of assessees should file their returns. The legislature in its wisdom thought it fit to give a period of three months even to such assessees from the commencement of the assessment year so as to enable them to file the returns. It is a matter of common knowledge that the Finance Act is usually passed in the month of May, after the financial year and after the assessment year starts and sometimes it becomes necessary to file the returns after taking into consideration the provisions of the new Finance Act. It is with the intention of facilitating the filing of the returns by the assessees and also from the point of convenience to the income-tax department that the legislature has fixed 30th June of the year as the date by which the assessees belonging to the third class have to file their returns. The object of section 139(1) is to give a reasonable time to the assessees to file the returns and at the same time enable the department to complete the assessment proceedings and collect the tax. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return at a particular period from the commencement of the assessment year. Even if the legislature were to fix any such period it would have resulted in different periods if the end of the previous year of the assessees concerned is to be taken into consideration. Looked at from any angle, the result would have been the same. Parliament, therefore, thought it fit to take into consideration the end of the previous year, the income of the previous year being assessable to tax. When two modes of fixing the period were available to Parliament, a court cannot say that one of such periods is discriminatory unless it comes to the conclusion that the fixing of such periods is arbitrary and has been done by the legislature with an "evil eye". We may also note that the petitioner who gets a longer period than six months cannot be heard to complain that the provisions of clause (a) have resulted in a disadvantage to him. We will now consider the decisions cited before us in this context. The learned counsel for the petitioner relied upon the decisions where general observations have been made in regard to the contravention of article 14 of the Constitution. The first case relied upon by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the dctrine of classification." The conclusion arrived at by us is after taking into consideration the dicta of the Supreme Court referred to in the above three cases. We have not over-emphasised the doctrine of classification nor have we shown any anxiety to discover some basis for classification. The basis for the classification is evident from the section itself which speaks of the end of the previous year. Section 139(1) has not made any difference where there was none nor has it overlooked the difference where there is one. It cannot be gainsaid that there are assessees with different previous years and Parliament had to make a provision taking into consideration all such assessees. The three decisions cited do not persuade us to hold that section 139(1), clauses (a) and (b), are violative of article 14 of the Constitution. The view we have taken is supported by a decision of the Supreme Court relied upon by the learned counsel for the department. The decision is Khandige Sham Bhat v. Agricultural Income-tax Officer, wherein their Lordships of the Supreme Court observed as follows: "..........it is not the phraseology of a statute that governs the situation but the ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by sub-section (1) of section 139 or by such notice, as the case may be, or ...... 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 ........ It is argued that a plain reading of this section shows that the Income-tax Officer, even after coming to the conclusion that an assessee has violated the provisions of section 139(1) of the Act, need not in every case levy penalty as contemplated in clause (i). He can, therefore, choose between the assessees similarly situated and thus the section infringes article 14 of the Constitution. We cannot agree with this contention of the learned counsel for the petitioner. It has to be remembered that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 139(1)(a) of the Act, and not in cases where there was a mere omission on the part of the assessee to do so. The argument is that in the instant case there was merely an omission on the part of the assessee to file the return and as there was no failure on his part, section 271(1) is not attracted. To distinguish between the connotation of the word "failure" and the word "omission" reliance is placed on a decision of a Division Bench of the Bombay High Court in Pannalal Nandlal Bhandari v. Income-tax Commissioner . The learned judges were considering the provisions of section 34(1) of the Indian Income-tax Act, 1922, where both the expressions "omission" and "failure" were used in the same section. Where the legislature had advisedly used the two expres. sions it was observed : " Failure must connote that there is an obligation which has not been carried out and if there was no obligation upon the assessee lo make a return then it would not be a failure on his part to carry out that obliga- tion. But the legislature has also used the expression 'omission' ; and itis clear that the expression 'omission' does not connote any obligation as the expression 'failure' does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee under section 139(1)(a) of the Act, the default continued indefinitely and no definite Period could have been arrived at by the Income-tax Officer to determine the quantum of penalty. It is also argued that the Income-tax Officer in his Order has not held that the default which occurred because of the non-compliance with the provisions of section 139(1)(a) of the Act ceased on a particular day. There is absolutely no merit in this contention. A reading of section 139 clearly shows that it contemplates the filing of a return in three circum- stances : one provided for in sub-section (1) ; the other provided for in sub- section(2) and the third provided for in sub-section (4). The argument that as no return was filed under section 139(1)(a) the default has never ceased, does not deserve any consideration because once the return is not furnished, the default occurs on the non-compliance with the provisions of section 139(1) and once it is not complied with, there is no question of furnish. ing any return under that section. The continuance of default, therefore, can only be up to the date on which either the return under section 139(2) or 139(4) is filed. The petitioner filed his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en enacted. According to that sub-section, if an assessee has already furnished his return of income in accordance with the provisions of sub-section (2) no return under sub-section (1) need be furnished by him. The word "already" is of great significance and is the clue to the interpretation of that section. If that sub-section is read without the word "already", the argument advanced by the learned counsel for the petitioner may receive support. If the sub-section is read omitting the word " already ", it may mean that if a return is furnished in accordance with sub-section (2), no return need be furnished under sub-section (1). In that case it can be legitimately argued that the filing of a return under sub-section (2) is sufficient to discharge an assessee from the liability to furnish a return under section 139(1). But the word "already" has been used so that the section may not have the said effect. The word "already", to our mind, Very clearly means that the return furnished under sub-section (2) is within the period prescribed by sub-section (1). After the filing of the return under sub-section (2), two situations can be envisaged. One is that the said return is furnished w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in section 22 of the 1922 Act, sub-section (7) of section 139 cannot be given the meaning sought to be given by the petitioner. To our mind, there is no ambiguity in sub-section (7) of section 139 to require us to go into the history of the legislation and determine its meaning. This contention, therefore, of the learned counsel fails. The view we have taken is supported by a Division Bench decision of the Rajasthan High Court in Commissioner of Income-tax v. Indra Co. The question for consideration was whether an assessee is liable to penalty for not submitting a return as required under section 139(1) of the Act, even though he subsequently filed his return in pursuance of a notice issued under section 139(2) and an assessment is made on the basis of that return. The provisions of section 139(7) were referred to and the learned judges held that the assessee before them was liable to penalty for not submitting his return as required under section 139(1) of the Act. The fifth contention is that the penalty proceedings are vitiated because, before the passing of the assessment order, the Income-tax Officer had not satisfied himself that the petitioner had failed to furnish his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on if the date originally fixed for furnishing the return falls beyond the 30th day of September, interest is chargeable at the rate of 9 per cent. from the 1st day of October. The return in the instant case was filed on the 3rd October, 1963, which attracted the proviso to sub-section (2) of section 139 and interest was payable for two days. That is the interest which is charged in the assessment order. On a careful consideration of the material before us, we have come to the conclusion that the Income-tax Officer had passed an order for issuance of notices for penalty proceedings before making the assessment order. This contention also fails. The sixth contention advanced is that the Income-tax Officer was biased against the petitioner, and therefore, the order made by him is void and illegal. The argument is that under the provisions of section 271 (1), no penalty can be levied unless the Income-tax Officer comes to the conclu- sion that there was no reasonable cause for the delay in filing the return. The notice issued by the Income-tax Officer under section 271 shows that he had already made up his mind to levy the penalty contemplated under section 271(1)(a). He was, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner could not have been penalised for his failure to file the return. The aforesaid decision of the Supreme Court in Nathulal's case relates to an offence committed under the Essential Commodities Act of 1955. A dealer was charged for having in stock wheat for the purpose of sale with- out a licence and for having thereby committed an offence under section 7 of the said Act. The appellant pleaded that he did not intentionally con- travene the provisions of the said section on the ground that he stored the said grains after applying for a licence and was in the belief that it would be issued to him. Subba Rao J. (as he then was), restated the principles applicable to such a case at page 45 thus : " Mens rea is an essential ingredient of a criminal offence. Doubtless a statute may exclude the element of mens rea, but it is a sound rule of construction adopted in England and also accepted in India to construe a statutory provision creating an offence in conformity with the common law rather than against it unless the statute expressly or by necessary implication excluded mens rea. The mere fact that the object of the statute is to promote welfare activities or to eradicate a gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal discipline will furnish him with a sufficient motive to choose the right instead for the future. If, on the other hand, he committed the forbidden act without wrongful intent, but yet for want of sufficient care devoted to the avoidance of it, punishment will be an effective inducement to carefulness in the future. But if his act is neither intentional nor negligent, if he not only did not intend it, but did his best as a reasonable man to avoid it, there can be no good purpose fulfilled in ordinary cases by holding him liable for it." Applying the aforesaid principle, it will have to be determined whether the non-compliance with the provisions of section 139(1) of the Act was with a wrongful intention or culpable negligence. In order to determine whether there was culpable negligence, it will have to be determined whether the assessee did his best as a reasonable man to avoid the non-com pliance. The provision in section 271(1) of the Act, when it says that a penalty can be levied only in cases where an assessee has without reasonable cause failed to furnish the return in accordance with sub-section (1) of section 139, points out the necessity for determination whether he h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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