Back
1981 Supreme(MP) 583
IN THE HIGH COURT OF MADHYA PRADESH
H.G. MISHRA, R.K. VIJAYVARGIYA, JJ.
Commissioner of Income-tax
Vs.
Marfatia and Co.
Misc. Civil Case No. 52 of 1980
Decided On: 13.10.1981
For Appellant/Petitioner/Plaintiff: R.C. Mukati, Adv.
For Respondents/Defendant: G.K. Puranik, Adv.
The period of delay for the purpose of imposing penalty under Section 271(1)(a) of the Income Tax Act, 1961, is to be calculated only from the date of service of notices under Section 148 of the Act.
Headnote:
INCOME TAX - PENALTY - LEVY - DELAY IN FILING RETURNS - PERIOD OF DELAY - CALCULATION - SECTION 271(1)(A) OF THE INCOME TAX ACT, 1961 - ONLY THE PERIOD OF DELAY IN FILING RETURNS OF INCOME IN RESPONSE TO NOTICES UNDER SECTION 148 SHOULD BE TAKEN INTO ACCOUNT.
Fact of the Case:
The assessee failed to file returns of income within the time allowed under Section 139(1) of the Income Tax Act, 1961 (the Act). The Income Tax Officer (ITO) issued penalty notices to the assessee, but no penalty was actually levied in the course of the original assessment proceedings. Later, the ITO issued notices under Section 148 of the Act and directed the assessee to file returns of income. The assessee filed returns of income after a delay of 10 months. The ITO initiated penalty proceedings under Section 271(1)(a) of the Act, taking into account the delay in filing returns under both Section 139(1) and Section 148.
Finding of the Court:
The Income Tax Appellate Tribunal (ITAT) held that for the purposes of calculating penalty under Section 271(1)(a) of the Act, only the period of delay in filing returns of income in response to the notices under Section 148 should be taken into account. The ITAT found that the period of delay was only 10 months for each of the assessment years in dispute.
Issues: Whether the ITO was justified in taking into account the delay in filing returns under Section 139(1) of the Act for the purposes of imposing penalty under Section 271(1)(a) of the Act.
Ratio Decidendi: The court held that the ITO had no jurisdiction to take into account the delay anterior to the service of the notices under Section 148 on the assessee for the purposes of imposing penalty under Section 271(1)(a) of the Act. The court observed that Section 271(1)(a) of the Act confers power on the ITO to impose penalty only if the assessee has failed to furnish the return of total income required under Section 148.
Final Decision: The court answered the question referred to it in the affirmative, holding that the ITAT was justified in law in holding that the penalty under Section 271(1)(a) of the Act was leviable only for the delay of 10 months relating to the default on notices under Section 148 and that no penalty was leviable for the default committed under Section 139 in the course of the original proceedings.
Mishra, J.
1. This is a reference under Section 256(1) of the I.T. Act, 1961, made by the Income Tax Appellate Tribunal, at the instance of the department, whereby the following question has been referred for our opinion :
"Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in law in holding that penalty under Section 271(1)(a) of the I.T. Act, 1961, for the A.Ys. 1965-66, 1968-69 and 1969-70 is leviable for the delay of only 10 months relating to the default of notices under Section 148 and that no penalty is leviable for the default committed under Section 139 in the course of the original assessment proceedings, nor such penalty proceedings could be initiated at the time of reassessments for the above years ?"
2. The reference has been made to us in the following circumstances: Originally, assessments of the assessee, M/s. Marfatia & Co., for the assessment years (for short A.Ys) 1965-66, 1968-69 and 1969-70 were completed by the ITO under Section 143(3) of the I.T. Act, 1961 (for short, "the Act"), on January 13, 1970, January 21, 1970, and January 21, 1970, respectively. There was some delay on the part of the assessee in filing the returns of income for the aforesaid years. Accordingly, penalty notices were issued to the assessee. However, no penalty was actually levied on the assessee in the course of the original assessment proceedings. Later on the ITO issued notices under Section 148 of the Act in respect of the aforesaid assessment years and directed the assessee to file returns of their income in respect of the aforesaid assessment years on or before October 20, 1970. The assessee, however, filed returns of income for the aforesaid years on August 30, 1971, and, hence, there was a delay of 10 complete months in filing the returns of income in pursuance of the aforesaid notices under Section 148 of the Act. Accordingly, the ITO initiated penalty proceedings under Section 271(1)(a) of the Act, but while levying penalty for the assessment year 1965-66, he treated the period of delay as 31 months. Similarly, for the A.Y. 1968-69, the period of delay was taken as 21 months. For the A.Y. 1969-70, however; the period of delay was taken as 10, months only. It appears that while levying the penalty for the A.Ys. 1965-66 and 1968-69, the ITO also took into consideration the delay on the part of the assessee in submitting the returns of income as required under Section 139(1) of the Act during the course of the original assessment proceedings. Thus, he imposed the penalties of Rs. 15,131, Rs. 2,827 and Rs. 4,001 in respect of the A.Ys. 1965-66, 1968-69 and 1969-70, respectively.
3. Against the levy of penalties by the ITO under Section 271(1)(a) of the Act, the assessee preferred an appeal before the AAC and contended that the assessee was under an honest impression that notices under Section 148 were invalid and that the period of delay could not be reckoned in the aforesaid manner by the ITO and at best it ought to have been held that there was a delay of 10 months only after service of notices under Section 148 of the Act. The AAC did not accept the assessee's contention that he was under an honest impression that notices under Section 148 were invalid. As regards the period of delay the AAC found that the total delay on the part of the assessee for the A.Ys. 1965-66, 1968-69 and 1969-70 was 43 months, i.e., 33 months in respect of the original assessment proceedings and a further period of 10 months after issue of notices under Section 148 of the Act. He, therefore, upheld the levy of penalty in respect of A.Y. 1965-66. As regards A.Y. 1968-69, the AAC found that the delay on the part of the assessee in the submission of the return of income was only of 10 months. Accordingly, he reduced the amount of penalty from Rs. 2,827 to Rs. 1,360. As regards the A.Y. 1969-70, he upheld the period of delay taken by the ITO at 10 months.
4. Against the aforesaid order of the
