Vildirect: IncomeTax-caselaws-1974-VIL-353-KER-DT

1974-VIL-353-KER-DT

Equivalent Citation: [1976] 102 ITR 694

KERALA HIGH COURT

Date: 13.02.1974

PA ABDUL MUTHALIF ROWTHER

INCOME-TAX OFFICER, A-WARD, PALGHAT

BENCH

Judge(s) : K. BHASKARAN., V. P. GOPALAN NAMBIYAR

JUDGMENT

The judgment of the court was delivered by

GOPALAN NAMBIYAR J.--By this writ petition the petitioner seeks to quash the reassessment orders evidenced by exhibits P-1 to P-6 and the levy of penal interest on the petitioner, and seeks for appropriate directions directing the authorities to forbear from collecting the said interest from the petitioner, and if the amount of interest had already been appropriated, to direct a refund of the same to the petitioner. The reassessment was under the provisions of section 148 read with section 139, and the levy of penal interest was under section 217 of the Income-tax Act, 1961. The assessment years with which we are concerned are 1961-62 to 1966-67 (both inclusive). Among these, a portion of the period covered by the assessment year 1961-62 falls prior to the Income-tax Act, 1961. The earliest of the assessment orders of the petitioner was on October 10, 1967, as is seen recited in exhibit P-3 order for 1963-64 dated August 24, 1970. Sections 139 and 148, as they stood at the relevant time, are as follows :

"139. Return of income.--(1) 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 six 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 :

Provided that, on an application made in the prescribed manner, the Income-tax Officer may, in his discretion, extend the date for furnishing the return--

(i) in the cast of any person whose total income includes any income from business or profession the previous year in respect of which expired on or before the 31st day of December of the year immediately preceding the assessment year, and in the case of any person referred to in clause (b), up to a period not extending beyond the 30th day of September of the assessment year without charging any interest ;

(ii) in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired after the 31st day of December of the year immediately preceding the assessment year up to the 31st day of December of the assessment year without charging any interest ; and

(iii) up to any period falling beyond the dates mentioned in clauses (i) and (ii), in which case, interest at nine per cent. per annum shall be payable from the 1st day of 'October or from the 1st day of January, as the case may be, of the assessment year to the date of the furnishing of the return--

(a) in the case of a registered firm or an unregistered firm which has been assessed under clause (b) of section 183, on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm ; and

(b) in any other case, on the amount of tax payable on the total income reduced by the advance tax, if any, paid or by any tax deducted, at source, as the case may be.

(1A) Where as a result of an order under section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 264, the amount of tax on which interest was payable under clause (iii) of the proviso to sub-section (1), has been reduced, the interest shall be reduced accordingly, and the excess interest paid, if any, shall be refunded.

(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 Income-tax Officer may, before the end of the relevant assessment year, serve a notice upon him requiring him to furnish, within thirty days from the date of service of the notice, 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 :

Provided that on an application made in the prescribed manner the Income-tax Officer may, in his discretion, extend the date for the furnishing of the return, and when the date for furnishing the return, whether fixed originally or on extension, falls beyond the 30th day of September or, as the case may be, the 31st day of December of the assessment year, the provisions of sub-clause (iii) of the proviso to sub-section (1) shall apply.

(3) If any person who has not been served with a notice under sub-section (2), has sustained a loss in any previous year under the head a 'Profits and gains of business or profession' or under the head 'Capital gains' and claims that the loss or any part thereof should be carried forward under sub-section (1) of section 72 or sub-section (2) of section 73, or sub-section(1) of section 74, he may furnish, within the time allowed under sub-section (1), a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under sub-section (1).

(4) (a) Any person who has not furnished a return within the time allowed to him under sub-section (1) or sub-section (2) may, before the assessment is made, furnish the return for any previous year at any time before the end of the period specified in clause. (b), and the provisions of clause (iii) of the proviso to sub-section (1) shall apply in every such case.

(b) The period referred to in clause (a) shall be--

(i) where the return relates to a previous year relevant to any assessment year commencing on or before the 1st day of April, 1967, four years from the end of such assessment year ;

(ii) where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1968, three years from the end of the assessment year ;

(iii) where the return relates to a previous year relevant to any other assessment year, two years from the end of such assessment year.

(5) If any person having furnished a return under sub-section (1) or sub-section (2), discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the assessment is made.

(6) The prescribed form of the returns referred to in sub-sections (1), (2) and (3) shall, in the case of an assessee engaged in business or profession, require him to furnish particulars of the location and style of the principal place where he carries on the business or profession and all the branches thereof, the names and addresses of his partners, if any, in such business or profession and it he is a member of an association or body of individuals, the names of the other members of the association or the body and the extent of the share of the assessee and the shares of all such partners or the members, as the case may be, in the profits of the business or profession and any branches thereof.

(7) No return under sub-section (1) need be furnished by any person for any previous year, if he has already furnished a return of income for such year in accordance with the provisions of sub-section (2).

(8) Notwithstanding anything contained in clause (iii) of the proviso to sub-section (1), the Income-tax Officer may, in such cases and under such circumstances as may be prescribed, reduce or waive the interest payable by any person under any provision of this section."

Section 148 of the Act reads :

"148. Issue of notice where income has escaped assessment--(1) Before making the assessment, reassessment or recomputation under section 147, the Income-tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 139 ; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section.

(2) The Income-tax Officer shall, before issuing any notice under this section, record his reasons for doing so."

The contention of the petitioner's counsel was that the levy of interest under the impugned orders under the provisions of section 139(1) and (3) was unsustainable in law. The argument was put thus : Sections 139(1) and 139(3) have application only to cases where the assessee has filed his return within the assessment year ; and section 139(4) where such return is filed beyond the assessment year. In these cases, it was argued that sections 139(1) and (2) cannot have application at all as the returns had not been filed within the period of the assessment year, and, therefore, section 148(1) which rendered them applicable only "so far as may be" would be of no avail. Counsel for the revenue pointed out that by reason of section 148(1), if a notice is issued with the requirements of one under sub-section (2) of section 139, the provisions of the 1961 Act shall "so far as may be" be applied to the reassessment proceedings. This provision, according to him, would attract the entirety of section 139 and all the other relevant sections of the Act enabling the officer to complete the reassessment proceedings. In particular, he contended that this would attract section 139(2) and, therefore, the proceedings would be proper and valid. Counsel for the assessee rejoined that the scope of the fiction embodied in section 148 must be limited to the purpose of the enactment, and so limited, it would not enable the officer to take action if the period of time within which the requisite notices are contemplated under the various sub-clauses of section 139 had run out. In particular, it was contended that on a proper analysis of section 139(2) the notice had to be served before the end of the relevent assessment year calling upon the assessee to furnish within thirty days from the date of service of the notice a return of income. According to the petitioner's counsel, the outermost limit for action under this sub-clause would be 30th April, at the end of which the officer would not be in a position to resort to the sub-section. It was, therefore, contended that section 148 should not be read and understood so as to render possible an action which could altogether be impossible if assessment proceedings were to be contemplated and proceeded with under section 139 of the Act. We are unable to accept this argument, It should be remembered that reassessment proceedings under sections 147 and 148 of the Act are started because the income has escaped assessment for reasons which may range --as was put in a decision of this court --from "the stupidity of the officer to the cupidity of the assessee". These may well befall long after the period of time contemplated by section 139 and the various sub-clauses and provisos thereto. To read section 148 as rendering action under section 139 impossible in such circumstances, would be destructive of the very object and purpose of the reassessment proceedings sanctioned by the section. What section 148 enacts is to treat the reassessment proceedings as assessment proceedings and proceed accordingly under section 139 and other provisions of the Act. So understood, we are unable to accept the argument of the counsel for the petitioner. We, therefore, hold that the levy of interest under the impugned assessment orders under the provisions of section 139 was justified and proper.

The levy of penal interest under section 217 of the Act was attacked. In order to understand the argument, we may quote section 217 and also section 212, as those sections stood at the relevant time :

217. Interest Payable by assessee when no estimate made.--(1) Where, on making the regular assessment, the Income-tax Officer finds that any such person as is referred to in sub-section (3) of section 212 has not sent the estimate referred to therein, simple interest at the rate of nine per cent. per annum from the 1st day of April next following the financial year in which the advance tax was payable in accordance with the said provisions up to the date of the regular assessment shall be payable by the assessee upon the amount equal to the seventy-five per cent. referred to in sub-section (1) of section 215.

(2) The provisions of sub-sections (2), (3) and (4) of section 215 shall apply to interest payable under this section as they apply to interest pay- able under that section."

Section 212 reads :

"212. Estimate by assessee.--(1) If any assessee, who is required to pay advance tax by an order under section 210, estimates at any time before the last instalment is due that his income subject to advance tax for the period which would be the previous year for the immediately following assessment year, is less than the income on which he is required to pay such tax, and accordingly wishes to pay an amount less than the amount which he is so required to pay, he may send to the Income-tax Officer--

(i) an estimate of the total income exclusive of capital gains for that period ;

(ii) an estimate of the advance tax payable by him calculated in the manner laid down in section 209 ;

and shall pay such amount as accords with his estimate in equal instalments on such of the dates specified in section 211 as have not expired, or in one sum if only the last of such dates has not expired.

(2) The assessee may send a revised estimate of the advance tax payable by him before any one of the dates specified in section 211 and adjust any excess or deficiency in respect of any instalment already paid in a subsequent instalment or in subsequent instalments.

(3) Any person who has not previously been assessed by way of regular assessment under this Act or under the Indian Income-tax Act, 1922 (XI of 1922), shall, before the 1st day of March in each financial year, if his total income exclusive of capital gains of the period which would be the previous year for the immediately following assessment year is likely to exceed the maximum amount not chargeable to income-tax in his case by two thousand five hundred rupees, send to the Income-tax Officer--

(i) an estimate of the total income exclusive of the said previous year ;

(ii) an estimate of the advance tax payable by him calculated in the manner laid down in section 209 ; and shall pay such amount as accords with his estimate, on such of the dates specified in section 211 as have not expired, by instalments which may be revised according to sub-section (2).

(4) Every estimate under this section shall be sent in the prescribed form and verified in the prescribed manner."

The argument was that proceedings under section 217 can be taken only against the person referred to in sub-section (3) of section 212, and that under the latter provision only a person "who has not been previously assessed by way of regular assessment under this Act or the earlier Act of 1922" is liable to be dealt with. It was, therefore, contended that, as in this case, the petitioner had been previously assessed by way of regular assessment on October 31, 1967 (as exhibit P-3 would show), the levy of penal interest by the impugned orders, all of which were subsequent to that date, was illegal and unjustified. Counsel for the revenue contended that there was a fallacy in the argument. Reading sub-clause (3) of section 212 in the light of the purpose that it was meant to serve, it was pointed out that the obligation was to send an estimate only before the 1st day of March in each financial year. Therefore, it was argued that the point of time with respect to which the officer had to judge whether the assessee had been previously assessed by way of regular assessment, was this date, viz., the 1st day of March. So viewed, it was pointed out that on the 1st day of March, 1967, the petitioner had not been previously assessed, as the earliest assessment on which the petitioner could rely, was only on October 31, 1967. For the years with which we are concerned, viz., the assessment years 1961-62 to 1966-67, the latest point of time before which the estimate under section 212(3) had to be filed, was March 1, 1966. With respect to that date, it cannot be said that the petitioner had been previously assessed. Counsel for the revenue placed reliance on K. Y. Pilliah v. Commissioner of Income-tax, which construed the meaning of the expression "not hitherto been assessed" occurring in section 18A(3) of the Indian Income-tax Act, 1922. Those words were construed as requiring that there should be an actual assessment and not merely that the person concerned is assessable or liable to be assessed. We think that counsel for the revenue is correct in his submission that the point of time with respect to which it has to be seen whether the person has been previously assessed or not, is the limit indicated in section 212(3) for filing the estimate concerned. In that view, exhibits P-1 to P-6 orders were right in imposing penal interest on the petitioner under the provisions of section 139(1) and (3).

The writ petition is dismissed with no order as to costs.

Writ Petition dismissed.

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