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1976 Supreme(Cal) 364
High Court Of Calcutta
Sankar Prasad Mitra, S. C. Deb
G.S.ATWAL AND CO. - Appellant
Versus
COMMISSIONER OF INCOME-TAX, CENTRAL - Respondent
Income-Tax Reference 190 Of 1974
Decided On : 11/25/1976
AJIT SEN GUPTA, D.PAL, PRANAB MAJUMDAR, PRANAB PAL, R.N.DATTA
The period of default for which the penalty under Section 271 (1) (a) of the Income Tax Act, 1961, is to be imposed starts from the date on which the return of income became due under Section 139 (1) of the Act, and not from the date on which the notice under Section 139 (2) was served.
Headnote:
INCOME TAX - Penalty for failure to furnish return of income - Period of default - Whether starts from the date on which the return of income became due under Section 139 (1) of the Act or from the date on which the notice under Section 139 (2) was served - Held, the period of default starts from the date on which the return of income became due under Section 139 (1) of the Act.
Fact of the Case:
The assessee, a registered firm, failed to file its return of income for the assessment year 1964-65 by the due date under Section 139 (1) of the Income Tax Act, 1961. A notice under Section 139 (2) was served on the assessee on 13th July, 1964, according to which the return was due to be filed in August, 1964. The assessee filed the return of income only on 27th October, 1965. The Income Tax Officer (ITO) imposed a penalty of Rs. 2,40,462 under Section 271 (1) (a) for the delay in filing the return.
Finding of the Court:
The court held that the assessee was liable to pay penalty for not submitting its return as required under Section 139 (1) of the Act, even though it subsequently filed a return in pursuance of a notice under Section 139 (2) and an assessment was made on the basis of that return. The court further held that the period of default for which the penalty under Section 271 (1) (a) is to be imposed starts from the date on which the return of income became due under Section 139 (1) of the Act, and not from the date on which the notice under Section 139 (2) was served.
Issues: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that penalty under Section 271 (1) (a) of the I. T. Act, 1961, could be imposed? 2. Whether the Tribunal was justified in holding that the period of the default for which the penalty under Section 271 (1) (a) is to be imposed should start from the date on which the return of income became due under Section 139 (1) of the Act?
Ratio Decidendi: The court relied on the plain language of Section 139 (2) of the Act, which does not absolve the assessee of its statutory obligation to file a return of income voluntarily under Section 139 (1). The court also noted that the ITO is bound to issue a notice under Section 139 (2) before making a best judgment assessment under Section 144, and therefore, the assessee cannot be allowed to wait till a notice is given under Section 139 (2) and escape the consequences of penalty imposable under Section 271 (l) (a).
Final Decision: The court answered both questions in the affirmative and in favor of the revenue. No order as to costs was made.
( 1 ) IN this reference under Section 256 (1) of the I. T. Act, 1961, the questions referred to this court are as follows:" (1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that penalty under Section 271 (1) (a) of the I. T. Act, 1961, could be imposed ? (2) Whether the Tribunal was justified in holding that the period of the default for which the penalty under Section 271 (1) (a) is to be imposed should start from the date on which the return of income became due under Section 139 (1) of the Act?"
( 2 ) THE assessee is a registered firm. The reference relates to the assessment year 1964-65.
( 3 ) FOR this assessment year, the return of income was due to be filed under Sub-section (1) of Section 139 of the 1961 Act by the 30th June, 1964. A notice under Section 139 (2) was served on the 13th July, 1964, according to which the return was due to be filed in August, 1964.
( 4 ) THE return of income was filed only on the 27th October, 1965. Hence the ITO in course of the assessment proceedings, initiated action for penalty under Section 271 (1) (a ). The ITO did not accept the assessee's contention that since the return of income had ultimately been filed before the completion of assessment no penalty could be imposed under Section 271 (1) (a ). The ITO also stated that even after the service of notice under Section 139 (2) the assessee continued to make default and the return was filed as late as on 27th October, 1965. He imposed a penalty of Rs. 2,40,462 under Section 271 (1) (a ). The assessee had lost both before the AAC and the Tribunal and, ultimately, the two questions set out above were referred to this court.
( 5 ) QUESTION No. 1 in this reference is fully covered by the judgment of this court in Income-tax Reference No. 133 of 1971 (Major (Dr.) S. K. Ghosh v. CIT) delivered on the 18th December, 1974, by the Hon'ble Mr. Justice Sabyasachi Mukharji sitting with the Hon'ble Mr. Justice R. N. Pyne. The argument advanced before this Bench appears to be more or less the same as those advanced before us. Mr. Justice Sabyasachi Mukharji has followed the decision of another Division Bench in Appeal from Original Order No. 59 of 1972 (Namin Das Paramanand Das v. ITO) delivered by the Hon'ble Mr. Justice Salil K. Roy Chowdhury on the 17th July, 1974 (since reported in [1979] 117 ITR 174 infra) to which I had concurred.
( 6 ) THE views expressed in these two judgments have also been expressed by other High Courts, e. g. , in K. P. Reddy v. CIT [1968] 68 ITR 638 (AP), K. C. Vedadri v. CIT , Addl. CIT v. Santosh Industries [1974] 93 ITR 563 (Guj), Poorna Biscuit Factory v. CIT and CIT v. Gangaram Chapolia [1976] 103 ITR 613 (Orissa) [fb].
( 7 ) THE law appears to be well settled and question No. 1 is accordingly answered in the affirmative and in favour of the revenue.
( 8 ) WE now come to question No. 2. Learned counsel for the applicant has referred us to a decision of the Patna High Court in Addl. CIT v. Bihar Textiles reported in [1975] 100 ITR 253 (Pat ). In this case, the Patna High Court has held that once a notice under Sub-section (2) of Section 139 of the I. T. Act, 1961, has been issued to an assessee during the relevant assessment year, there cannot be any penalty under Section 271 (1) for failure to furnish the return as required by Sub-section (1) of Section 139.
( 9 ) WE are unable to agree with the view of the Patna High Court. Our view is that once a default is committed under Section 139 (1), the fact that a notice under Section 139 (2) has been served would not make any difference to the date of imposition of penalty, namely, the date of default under Section 139 (1 ). This view was taken by the Rajasthan High Court in the case of CIT v. Indra and Co. reported in [1971] 79 ITR 702 (Raj ). The Rajasthan High Court has said that an assessee is liable to pay penalty for not submitting his return as required under Section 139 (1) of
