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1981 Supreme(Ori) 157
IN THE HIGH COURT OF ORISSA
R.N. Misra, B.K. Behera, JJ.
COMMISSIONER OF INCOME TAX - APPELLANT
Versus
RAVI TALKIES - RESPONDENT
S.J.C. Nos. 207 and 208 of 1977
Decided On : 16-12-1981
A.K. Ray, for the Respondent
The liability to penalty u/s 271(1)(a) for default u/s 139(1) is not wiped out by issue of notice u/s 139(2).
Headnote:
INCOME TAX - Penalty - Default in furnishing return - Voluntary return u/s 139(1) - Notice u/s 139(2) - Whether liability to penalty u/s 271(1)(a) for default u/s 139(1) is wiped out by issue of notice u/s 139(2) - Held, no.
Fact of the Case:
Assessee failed to file returns for the assessment years 1968-69 and 1969-70 within the time prescribed u/s 139(1) of the Income Tax Act, 1961. Notices u/s 148 and 139(2) were served on the assessee on February 19, 1970, for the first year and second year respectively. Returns were filed on May 6, 1970, for the first year and on October 3, 1970, for the second year. The ITO initiated penalty proceedings u/s 271(1)(a) of the Act and imposed penalty. The AAC and the Tribunal affirmed the imposition of penalty.
Finding of the Court:
The Tribunal held that the assessee's liability to be penalized had to be confined to the period of default in complying with the notice u/s 139(2) of the Act and the earlier default was wiped out when the notice u/s 139(2) is issued.
Issues: Whether the liability to penalty u/s 271(1)(a) for default u/s 139(1) is wiped out by issue of notice u/s 139(2).
Ratio Decidendi: The obligation to make a voluntary return was for the first time introduced in the Act of 1961. Under the previous Act of 1922, the scheme was of a general notice u/s 22(1) and individual notice under Sub-section (2). For the first time, the 1961 Act imposed a liability upon every taxpayer to suo motu submit a return of his income for each assessment year as it came along. In keeping with the scheme which threw the responsibility on the taxpayer to make a return of his income suo motu, the Act made a provision for the levy of interest on an assessee who did not file the return within the specified time. It also made provision to subject him to penalty. The exposure obtained by an assessee on account of his omission to discharge the obligation to make a suo motu return has no connection with the notice under Sub-section (2), but an accrued liability for default under Sub-section (1) of Section 139 cannot be wiped out because a notice has been issued. Default under Sub-section (1) of Section 139 could land the assessee in being exposed to the realm of penalty. It brought in no liability of interest nor to be visited with an ex parte assessment as contemplated u/s 144 of the Act. It also does not bring in a liability for being prosecuted. These are eventualities connected with failure to comply with a notice under Sub-section (2) of Section 139. It is thus clear that the scheme stipulates one course for a default of non-compliance with notice under Sub-section (1) and a different consequence ensues when there is default in complying with the notice under Sub-section (2). One is not a substitute for the other.
Final Decision: The Tribunal went wrong in directing the ITO to recompute the penalty by confining the default to the period after the issue of the notice u/s 148 of the Act for the assessment year 1968-69 and the notice u/s 139(2) of the Act for the assessment year 1969-70. The issue of a notice u/s 139(2) of the Act did not wipe out the accrued default of non-compliance with the statutory obligation u/s 139(1) of the Act.
JUDGMENT :
R.N. Misra, C.J. - These are references made by the Cuttack Bench of the Income Tax Appellate Tribunal u/s 256(1) of the I. F. Act at the instance of the revenue and the following common question has been referred for our opinion :
"Whether, on the facts and in the circumstances of the case, and on a true interpretation of Sections 271(1)(a), 139 (1) and (2) of the Income Tax Act, the Tribunal was right in directing that penalty should be calculated only from the date of filing the return fixed by the service of the notices under Sections 148 and 139(2)?"
2. Assessee is a firm, its principal business being the running of a cinematograph exhibition hall. The relevant years are 1968-69 and 1969-70. Admittedly, the assessee had taxable income for both the years. Returns for these years were due by 30th of June, 1968, and 30th of June, 1969. Notices for both the years were served on the assessee on February 19, 1970, for the first year u/s 148 and for the second year u/s 139(2) of the Act. It may be pointed out that for the first of the two years under consideration, notice was also issued u/s 148 of the Act, Return for the first year was filed on May 6, 1970, and for the second year on October 3, 1970. While making assessments for the two years, the ITO initiated proceedings u/s 271(1)(a) of the Act and, after hearing the assessee, imposed penalty.
3. Assessee challenged the imposition by preferring appeals. The AAC refused to interfere and affirmed the imposition. Assessee went in appeal before the Appellate Tribunal against the imposition of penalty in these two years as also an earlier year. The Tribunal relied upon the decision of the Patna High Court in the case of Additional Commissioner of Income Tax Vs. Bihar Textiles, and came to hold :
"..............the undisputed fact in this case is that notices u/s 148 and u/s 139(2) for the assessment years 1968-69 and 1969-70 were served on the assessee on 19-2-70 and 9-2-70, respectively. But no such notice was served for the assessment year 1967-68. In view of that fact, we are of the opinion that the quantum of the penalties computed for the assessment years 1968-69 and 1969-70 was not in accordance with law and, accordingly, we direct the Income Tax Officer to recompute the same after taking into consideration the default commencing from the expiry of the time fixed u/s 148 for the assessment year 1968-69 and u/s 139(2) for the assessment year 1969-70. In our opinion, there is no difference between the notice u/s 148 and u/s 139(2)......"
4. Before we proceed to refer to the authorities placed before us, we think it appropriate to make a reference to the relevant statutory provisions. Section 139(1) provides:
"Every person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to Income Tax, shall furnish a return 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:....."
5. Sub-section (2) makes the following provisions :
"(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 Incom
