Vildirect: IncomeTax-caselaws-2006-VIL-12-SC-DT

2006-VIL-12-SC-DT

Equivalent Citation: [2006] 285 ITR 546 (SC)

Supreme Court of India

Date: 05.09.2006

AMIN CHAND PAYARELAL

INSPECTING ASSISTANT COMMISSIONER OF INCOME-TAX AND OTHERS

BENCH

Judge(s) : ASHOK BHAN. and MARKANDEY KATJU.

JUDGMENT

Tarun Chatterjee J.- This appeal has been preferred against the judgment and/or order passed by a learned judge of this court in C.R. No. 6258(W) of 1997 whereby a writ petition filed at the instance of the writ petitioner/respondent M/s. Amin Chand Payarelal, a partnership firm was allowed. By moving the writ application the respondent prayed, inter alia, for an appropriate writ, commanding the appellants to cancel and/or withdraw the order dated September 26, 1974, passed by the Commissioner of Income-tax, Central and the order of assessment and penalty proceedings under section 271(1)(a) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") and the demand notice issued under section 156 of the Act and also the penalty orders passed on, October 7, 1974. The learned trial judge allowed the writ application as noted herein earlier and held that the penalty imposed by the income-tax authorities was not in accordance with law and direction was made on the appellants to withdraw and/or cancel the demand notice for realisation of the penalty first for the assessment years 1959-60 to 1965-66. From a perusal of the judgment under appeal, it appears to us that the writ petition was allowed and imposition of penalty under section 271(1)(a) of the Act was quashed only on the ground that the imposition of penalty was without jurisdiction in view of the fact that the interest was paid for late filing of the return for the aforesaid years. It was further held that the penalty under section 271(1)(a) of the Act could not be imposed against the writ petitioner/respondent as the Inspecting Assistant Commissioner, Income-tax, had no jurisdiction to impose such penalty on the writ petitioner/respondent. However, before us the learned advocate for the writ petitioner/respondent did not question the jurisdiction of the Inspecting Assistant Commissioner of Income-tax to impose penalty on the writ petitioner for not filing the return within the extended time, that was granted by the concerned authority. In this case, there is no dispute that the assessment years in question for which penalty proceeding started was for 1959-60 to 1965-66. Let us now give the details of the date of filing of the return and the date upto which the time was extended and the date on which the return was filed by the writ petitioner/respondent.

Year	Date on which the return ought to have been filed	The time was extended to file the return	Date on which return actually filed
1959-60	18-06-1959	14-11-1959	04-02-1961
1960-61	20-06-1960	01-10-1962	30-08-1962
1961-62	30-06-1961	31-08-1962	05-10-1962
1962-63	04-08-1962	31-08-1962	05-10-1962
1963-64	Nil	No application	07-12-1964
1964-65	07-06-1964	30-09-1964	18-01-1965
1965-66	21-07-1965	No application	21-01-1966

This is the position which was not disputed by learned counsel for the parties. From the aforesaid chart, it is evident that even on the extended time for filing the return, the assessee did not file the returns, that is to say, there was admittedly delay in filing the returns after the extended time had expired and no second application was filed by the writ petitioner/respondent to extend the time to file the return even for the second time. Keeping this admitted fact in mind, let us now consider whether the learned trial judge was justified in holding that the imposition of penalty for filing late returns under the Act was illegal. According to Dr. Pal, in view of the admitted fact that the assessee paid the entire dues with interest, the trial court was justified in holding that under the relevant provisions of the Act, penalty proceedings would not be initiated. In support of this contention, Mr. Pal relied on certain decisions of different High Courts of this country. The decisions cited by Dr. Pal are reported in Dooars Transport v. CIT [1986] 162 ITR 383 (Cal); Liberal Engineering Works v. CIT [1986] 158 ITR 520 (Guj) Bralco Metal Industries P. Ltd. v. CIT [1990] 181 ITR 436 (Bom) and CIT v. Jindal Brothers [1997] 223 ITR 289 (Patna). On the other hand, Mr. Agarwal appearing on behalf of the Revenue in support of this contention submitted that in view of the admitted fact that there was no application for extension of time for the second time, the decisions cited by Dr. Pal could not apply. In our view, the ratio of these decisions could not be applied as the interest was not charged by the Assessing Officer in his assessment orders for the aforesaid periods. From a perusal of the aforesaid decisions of different High Courts of India, it appears to us that in these decisions facts were completely different. In these decisions, admittedly, interest was charged and paid by the assessee along with the amount due as taxes in the present case on a perusal of the assessment order. We do not find that the interest was at all charged in not filing the return nor in the assessment year there was any question of payment of interest by the asses-see on the amount due from the assessment order. In that view of the matter, the principles on which the aforesaid decisions were rendered could not be applied in the admitted facts of this case. That being the position, we are unable to agree with the learned trial judge that the imposition of penalty after the income-tax dues have been paid with interest for not filing the return in time cannot arise at all. Therefore, we are of the view that the learned judge was in error in quashing the penalty proceeding. Accordingly, in the facts and circumstances of the case, we are of the view that the trial court was not justified in allowing the writ petition and quashing the imposition of penalty and the demand notice for payment of such penalty.

For the aforesaid reasons, this appeal is allowed. The judgment and/or order of the learned trial judge who allowed the writ petition is set aside. The authorities can proceed with the penalty proceeding to recover penalty in accordance with law.

S.N. Bhattacharjee J.- I agree."

Anil Roychowdhury, Senior Advocate (Raja Chatterjee, Ms. Sutapa Roychowdhury, Sachin Das and G.S. Chatterjee, Advocates, with him) for the appellant.

Harish Chandra, Senior Advocate (Preetesh Kapur, Arijit Prasad and B.V. Balram Das, Advocates, with him) for the respondents.

JUDGMENT

The judgment of the court was delivered by

Ashok Bhan J.- This appeal is directed against the order dated September 28, 2000, passed by a Division Bench of the High Court of Calcutta in FMA No. 1160 of 1990 whereby the Division Bench has set aside the order passed by the single judge of the same High Court and dismissed the writ petition filed by the writ petitioner-appellant.

The brief facts giving rise to file the present appeal by special leave are as follows:

The appellant filed a writ petition in the High Court, inter alia, seeking an appropriate writ, order or directions and/or to withdraw the order dated September 26, 1974, passed by the Commissioner of Income-tax, Central and the orders of assessment and penalty proceeding under section 271(1)(a) of the Income-tax Act, 1961 (for short "the Act") and the demand notice issued under section 156 of the Act and also the order dated October 7, 1974 imposing penalty.

The learned single judge before whom the writ petition came up for hearing allowed the writ petition and held that the penalty imposed by the authorities was not in accordance with law and consequently the order imposing penalty and demand notice for realization of penalty for the assessment years 1959-60 to 1965-66 was quashed.

The learned single judge allowed the writ petition on the grounds-(a) that the imposition of penalty was without jurisdiction in view of the fact that interest had been paid for late filing of the returns for the aforesaid years; and (b) that the penalty under section 271(1)(a) of the Act could not be imposed by the Inspecting Assistant Commissioner of Income-tax as he had no jurisdiction to do so and, only the Income-tax Officer was competent to impose penalty as per the provisions of section 271(1)(a) of the Act. During the course of arguments, counsel appearing for the respondent-assessee before the Division Bench of the High Court, the appellant herein, did not dispute the jurisdiction of the Inspecting Assistant Commissioner of Income-tax to impose the penalty for not filing the returns within the extended period. The Division Bench recorded the following findings

"However, before us the learned advocate for the writ petitioner/respondent did not question the jurisdiction of the Inspecting Assistant Commissioner of Income-tax to impose penalty on the writ petitioner for not filing the return within the extended time, that was granted by the concerned authority."

On the aforementioned first point, the Division Bench came to the conclusion that mere deposit of interest would not absolve the assessee from its liability to pay the penalty under section 271(1)(a) of the Act. To appreciate the contention it is necessary to understand the scheme enacted in section 139 of the Act, as it stood at the relevant time. Broadly, the scheme envisages a voluntary return by the assessee under sub-section (1) of section 139, a return consequent upon a notice by the Income-tax Officer under sub-section (2) of section 139 and a return in the circumstances mentioned under sub-section (4) of section 139. We are not concerned with the return filed under sub-section (1) or (3) of section 139. We are concerned with the situation where the return has been filed under section 139(4) of the Act which at the relevant time read as under:

"(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."

Section 271 provides for levy of penalty under sub-clauses (a), (b) and (c) of sub-section (1) of section 271. In the present case, the penalty has been levied under section 271(1)(a), as it stood at the relevant time and the same reads as under:

"271.(1) If the Income-tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act, is satisfied that any person-

(a) has without reasonable cause failed to furnish the 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"

Under this provision, in essence, three situations are contemplated in which penalty can be imposed, i.e., (i) where the assessee has without reasonable cause failed to furnish the return of total income which he was required to furnish under sub-section (1) of section 139; (ii) or where the assessee has without reasonable cause failed to furnish the return of total income which he was required to furnish by notice given under sub-section (2) of section 139 or section 148; and (iii) or where the assessee has without reasonable cause failed to furnish it within the time allowed and in the manner required by sub-section (1) of section 139.

The following chart would indicate the dates on which the returns were required to be filed, the extended time/date within which they were to be filed and the dates on which they were actually filed.

Year	Date on which the return ought to have been filed	The time was extended to file the return	Date on which return actually filed
1959-60	18-06-1959	14-11-1959	04-02-1961
1960-61	20-06-1960	01-10-1962	30-08-1962
1961-62	30-06-1961	31-08-1962	05-10-1962
1962-63	04-08-1962	31-08-1962	05-10-1962
1963-64	Nil	No application	07-12-1964
1964-65	07-06-1964	30-09-1964	18-01-1965
1965-66	21-07-1965	No application	21-01-1966

Admittedly, the appellant did not file the return either within the time specified in the statute for doing so or within the extended period of time. The returns were filed beyond the extended period for filing the return. Interest on the amount due and penalty are two different and distinct concepts. Interest is the accretion on the capital whereas the penalty is a punishment imposed on a wrong-doer.

Counsel appearing for the assessee in support of the contention placed reliance on a judgment of this court in CIT v. M. Chandra Sekhar [1985] 151 ITR 433. In the said case, their Lordships were dealing with a return filed under section 139(1) of the Act whereas in the present case the returns had been filed under section 139(4). The assessee was absolved of his liability to pay the penalty under provisos to section 139(1). It was observed:

"In the instant case, the extension was a matter falling within subsection (1) of section 139, and the returns furnished by the assessee must be attributed to that provision. They were not returns furnished within the contemplation of sub-section (4) of section 139. Therefore, the decision, of the Gujarat High Court in Addl. CIT v. Santosh Industries [1974] 93 ITR 563, of the Karnataka High Court in M. Nagappa v. ITO [1975] 99 ITR 32, of the Andhra Pradesh High Court in Poorna Biscuit Factory v. CIT [1975] 99 ITR 41, of the Orissa High Court in CIT v. Gangaram Chapolia [1976] 103 ITR 613 [FB] and of the Allahabad High Court in Metal India Products v. CIT [1978] 113 ITR 830 [FB] cannot be invoked in the instant case. They are cases dealing with a return filed in the circumstances mentioned in subsection (4) of section 139."

Meaning thereby that cases falling under sections 139(1) and 139(4) have to be dealt with differently. Sub-section (4) of section 139 of the Act provides for a situation where the returns are not filed by an assessee within the time allowed or within the extended period for filing such returns. In the present case, the returns in question had not been filed either within the time allowed under the Act or within the extended period. The reliance placed on the aforesaid judgment lends no assistance to the appellant as the principle on which the aforesaid decision has been rendered is distinguishable and cannot be applied to the admitted facts in the present case.

In the present case, as mentioned above, the return was filed under sub-section (4) of section 139 of the Act. The question whether penalty under section 271(1)(a) could be levied on a return filed under section 139(4) fell for consideration before this court in Pradip Lamps Works v. CIT [2001] 249 ITR 797. The question posed in that case was as under:

Question No. 2:

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that notwithstanding that the return of income had been filed on February 6,1961, i.e., within the period permissible under section 139(4) of the Income-tax Act, 1961, the imposition of a penalty was justified as there was a delay for the purpose of section 271(1) (a) of the Income-tax Act, 1961?"

It was answered in the following terms:

"So far as the second question is concerned, the only submission is that since the assessee was entitled to and did file his return before making the assessment, no penalty should be levied under section 271(1)(a), even though the return was filed beyond the prescribed date. We do not think that this contention is sustainable in law. Merely because, sub-section (4) of section 139 enables the assessee to file his return at any time before the assessment is made, it does not mean that his liability to pay penalty under section 271(1)(a) is erased. We affirm the opinion of the High Court on this question as well."

We respectfully follow the law laid down in Pradip Lamps Works's case [2001] 249 ITR 797 (SC). There are a number of High Courts who have taken the same view.

We hold that the penalty could be levied in the present case under section 271(1)(a) of the Act.

For the reasons stated hereinabove, we do not find any merit in this appeal and dismiss the same. The impugned judgment of the Division Bench is affirmed. Parties to bear their own costs.

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