Patna High Court
Nauranglal Chiranjilal vs Commissioner Of Income-Tax on 9 August, 1984
Equivalent citations: [1985]155ITR464(PATNA)
JUDGMENT Nazir Ahmad, J.
1. A statement of the case has been submitted, by the Income-tax Appellate Tribunal, "B" Bench, Patna, under Section 256(1) of the I.T. Act, 1961 (hereinafter to be called is "the Act"), referring the following question for the opinion of this court:
"Whether, on an appeal against an order of penalty imposed by the Income-tax Officer under Section 271(1)(a) for default under Section 139(2) of the Act, the Tribunal on facts was right in sustaining the penalty for the period of default falling under Section 139(1) ?"
2. The relevant facts of the case can be culled out from the statement of the case. The assessee is a firm and the assessment year involved is 1966-67.
3. The ITO imposed a penalty of Rs. 6,110 under Section 271(1)(a) of the Act due to the default of delayed submission of return, rejecting the explanation of the assessee that a return was sent by post on June 23, 1966, since he found that the said return was not available in his record. The order of the ITO has been annexed and marked as annexure 'A' forming part of the statement of the case.
4. The assessee went in appeal before the AAC and it was submitted that no notice under Section 274 of the Act was served on the assessee and that the penalty proceeding was not started in the course of the assessment proceedings. It was also submitted that the assessee could not be treated as a defaulter as he had filed return under Section 139(4) of the Act. The AAC after verification of the record found that notice under Section 274 was issued on March 5, 1968, whereas the assessment was completed on April 3, 1969. He further found that the alleged certificate of posting could not prove sending of return. He, therefore, held that the assessee was a defaulter and was liable to penalty, and so he confirmed the order of the ITO. A copy of the order of the AAC has been annexed and marked as annexure 'B' to the statement of the case.
5. Being aggrieved by the order of the AAC, the assessee appealed before the Tribunal and reiterated the same argument as was submitted before the AAC. A postal receipt was, however, produced before the Tribunal to show that the return was sent on June 23, 1966, by post. It was also submitted on behalf of the assessee that since the ITO issued notice under Section 139(2) of the Act, the period of default should be calculated from the date of service of notice under Section 139(2). The Tribunal found that the penalty proceeding was initiated by the ITO in the course of the assessment proceedings. It further found that the postal receipt produced by the assessee's counsel did not mention any particulars of the document or letters said to have been sent by the assessee on June 23, 1966. The Tribunal also considered the fact that the assessee had not even informed the ITO about sending of any return on June 23, 1966, on receipt of notice under Section 139(2) of the Act. The Tribunal, therefore, came to the conclusion that the assessee was a defaulter for delayed submission of the return without any cause and was liable to penalty. As regards the period of default, the Tribunal held that the assessee may be saddled with penalty for his default in terms of Section 139(1) of the Act, although he had furnished the return within the time and manner as required by notice under Section 139(2). In coming to the said conclusion, the Tribunal relied on the case of CIT v. Indra and Co. [1971] 79 ITR 702 (Raj). The Tribunal, therefore, upheld the order of the AAC. A copy of the order of the Tribunal has been annexed and marked as annexure 'C ' forming part of the statement of the case.
6. Mr. K.N. Jain for the assessee has submitted that for the assessment year 1966-67, notice under Section 139(2) of the Act was served on the assessee on November 14, 1966, and the assessee's return was filed on March 21, 1968, and so the ITO held that it was a clear case of default under Section 139(2) of the Act and so penalty was imposed for default under Section 139(2) and, therefore, no penalty could be imposed for the default under Section 139(1) of the Act.
7. Mr. B.P. Rajgarhia, senior standing counsel for the Revenue, has submitted that the ITO actually meant to say that for non-compliance of the notice under Section 139(2) of the Act, the assessee was liable to imposition of penalty under Section 271(1)(a) and so the ITO imposed penalty for delayed submission of the return under Section 139(1) and the AAC and the Appellate Tribunal upheld this imposition of penalty under Section 139(1) of the Act.
8. It was conceded by both the parties that the ITO has imposed penalty under Section 139(1) of the Act when he imposed penalty of Rs. 6,110. The AAC in paragraph 5 of his decision has pointed out that as there was a clear default in compliance of notice under Section 139(2), the ITO was justified in levying the penalty. Before the Appellate Tribunal, it was argued on behalf of the Department, that the assessee was rightly treated as defaulter for non-compliance of Section 139(1) of the Act and the penalties were correctly imposed and the Tribunal came to a finding that the assessee may be inflicted with penalty for his default in not furnishing the return within the time prescribed under Section 139(1) of the Act, although he had furnished the same within the time and in the manner required by the notice under Section 139(2) of the Act.
9. The order of the ITO shows that it is a clear case of default of the notice under Section 139(2) of the Act and so for non-compliance of the notice, he held that it was a fit case for imposition of penalty under Section 271(1)(a) of the Act. It is evident that for non-compliance of the notice under Section 139(2), the ITO imposed penalty under Section 139(1) of the Act. Thus, the intention of the ITO appears from his conduct that he imposed penalty for default under Section 139(1). When he used the words "it is a clear case of default of the notice under Section 139(2) and it is a fit case for imposition of penalty under Section 271(1)(a)", he actually meant that for non-compliance of the notice under Section 139(2), the assessee was liable to penalty under Section 139(1) of the Act. This will be the only reasonable explanation in view of the fact that the ITO imposed penalty under Section 139(1) for non-compliance of the notice under Section 139(2). The AAC and the Appellate Tribunal considered the fact that the ITO had imposed penalty for delayed submission of return under Section 139(1) and so both the appellate courts upheld the order of the ITO.
10. As regards the decision in the case of Addl. CIT v. Bihar Textiles [1975] 100 ITR 253 of the Patna High Court to the effect that once a notice under Sub-section (2) of Section 139 of the Act has been issued to an assessee during the relevant assessment year, there cannot be any penalty under Section 271(1)(a) for failure to furnish the return as required by Sub-section (1) of Section 139 and that where the return is filed beyond the time given in the notice under Section 139(2) of the Act, penalty will have to be calculated only from the expiry of the time fixed for filing the return in the notice under Section 139(2) of the Act has been held to be not a correct decision for the detailed reasons mentioned in paragraphs 44 to 57 of the Full Bench decision in Taxation Cases Nos. 37 and 38 of 1975 at pages 277 to 284 in the case of Jamunadas Mannalal v. CIT--since reported in [1985] 152 ITR 261 (Pat).
11. In view of my findings above, the question is answered in the affirmative and in favour of the Revenue and against the assessee and it is held that on an appeal against the order of penalty imposed by the ITO under Section 271(1)(a) for non-compliance of the notice under Section 139(2) of the Act, the Tribunal on the facts was right in sustaining the penalty for the period of default under Section 139(1) of the Act. However, in view of the peculiar circumstances of the case, the parties will bear their own costs, S.K. Jha, J.
12. I agree.