Andhra HC (Pre-Telangana)
The Income-Tax Officer, Hyderabad vs Secunderabad Tin Industries, ... on 22 July, 1977
Equivalent citations: AIR1978AP180, AIR 1978 ANDHRA PRADESH 180, 1978 TAX. L. R. 395
JUDGMENT
1. The Income -tax Officer, J.- Ward, Hyderabad has preferred this appeal against the order dated 8th April, 1975 passed by our learned brother ,Gangadhara Rao, J., allowing the Writ, Petn. No. 1464 of 1972 filed by the respondent.
2. The facts relevant for purposes of this appeal are these: The respondent was a firm originally constituted in 1961. It was registered under the Indian Income-tax Act, hereinafter referred to as the Act. On 31-3-66, one of the partners by name G. S. Naidu retired and a new partner A. S. Nandagopal was brought into the partnership. For the assessment year 1968-69, the return was filed, on 20-1-1971. The respondent firm paid a sum of Rs. 4,720/- on 11-2-1971 on self assessment basis under s. 140-A of the Income-tax Act. The assessment was completed on 20-5-1971 and the Income-tax Officer levied besides the tax a sum of Rs. 1,056/- as interest under S. 217 of the Act for failure to voluntarily file the provisional estimate. The Income-tax Officer also levied an interest of Rs. 7,750/- under S. 139 91) (iii) of the Act for belated submission of the return of the income. The petitioner having exhausted all the remedies under the Act eventually filed the writ petition. Before Gangadhara Rao, J. three contentions were advanced by the respondent which were as follows :-
1. That the firm was assessed to income-tax for the assessment year 1967-68 : as such, there was no obligation on the part of the firm to file a voluntary estimate of its income for the assessment year 1968-69 without a notice in writing calling upon the firm to file the provisional estimate. As such, the Income-tax Officer was incorrect in levying a fine of Rs. 1,056/- for not filing voluntary estimate.
2. That the Income-tax Officer erred in levying an interest of Rs. 7,750/- under S. 139 (1) (iii) of the Income-tax Act although no extension of time was prayed for and granted as envisaged in S. 139 (1) (a0 and (b) of the Act.
3. That the respondent-assessee had paid a sum of Rs. 4,720/- on 11-2-1971 as tax and, therefore, in levying the interest the amount of tax already paid ought to have been deducted from the tax which was levied by the Income-tax Officer and on that amount interest ought to have been levied.
3. These three contentions found favour with our learned brother. So far as the first contention is concerned, the learned Judge was of the opinion that the assessee firm was already assessed for the assessment year 1967-68. If during the relevant period one of the partners retired and a new partner was introduced in the firm, it did not amount to a new entity, but only a change in the constitution of the firm and, therefore, the assessee firm need not file a voluntary provisional estimate for the assessment year 1968-69 without the receipt of notice. For this proposition the learned Judge relied upon a judgment of a Full Bench of this Court in Addl. Commr. of Income-tax, Andhra Pradesh, Hyderabad v. Visakha Flour Mills, (1976) 2 Andh WR 1 : (1977 Tax LR 41 (FB) ), wherein it was held that the death of the partners in the middle of the accounting year would only amount to a change in the constitution of the firm within the meaning of S. 187 of the Income-tax Act and S. 188 has no application. Relying upon this ruling the learned Judge held that since there was only a change in the constitution of partnership, the firm was not liable to file its provisional estimate without receipt of any notice from the Income-tax authority and, therefore, in these circumstances, since admittedly no notice was issued by the Income-tax authorities calling upon the assessee firm for filing the provisional estimate, interest levied by the Income-tax Officer, was incorrect.
4. So far as the second contention is concerned, the learned Judge relying upon the ruling of a Bench decision of this Court in Kishanlal Haricharan v. Income-tax Officer, A-Ward, Nizamabad, , came to the conclusion that having regard to the provisions of S. 139 (1) (iii) only when time was extended by the Income-tax Officer on an application put forward by the assessee for the filing of the return, then only could the Income-tax Officer levy penalty under S. 139 (1) (iii).
5. So far as the third contention is concerned, the learned Judge relying upon a judgment of the Supreme Court in Commr. of Income-tax. West Bengal v. Vegetable Products Ltd., , held that the Income-tax Officer was incorrect in levying an interest of Rs. 4,720/- on the total tax assessed by him. The Income-tax Officer ought to have deducted the amount of tax already paid by the assessee and ought to have levied interest only on the balance.
6. In this appeal, Mr. Rama Rao, the learned Advocate appearing for the Revenue, contends that the induction of a partner on the retirement of the existing partner would amount to a change of the firm and coming into existence of a new firm and, therefore, he submits that the learned Judge was incorrect in holding that the induction of a partner on the retirement of the existing partner was only a change in the constitution of the firm. We regret, we cannot accede to this contention because, to our mind, the retirement of a partner during the relevant assessment year and the introduction of a new partner only amounts to a change in the constitution of the firm, and that is exactly what the Full Bench has decided in Addl. Commr. of Income-tax, Andhra Pradesh, Hyderabad v. Visakha Flour Mills, (1976) 2 Andh WR 1 : (1977 Tax LR 41 (FB)).
7. So far as the third contention is concerned, Mr. Rama Rao contends that the learned Judge was incorrect in coming to the conclusion as he did on the basis of S. 139 910 (iii) of the Act. What Mr. Rama Rao contends is that the respondent-assessee had not paid the tax along with the estimate which he had filed on 20-1-1971 and admittedly had paid the tax on the basis of his estimate much afterwards i.e., on 11-2-1971. The interest levied by the Income-tax Officer was only up to the date on which the estimate was filed and since the assessee had not paid the tax on the day when the estimate was filed by him, the Income-tax Officer was justified in levying interest on the whole amount of tax under Section 139 (1) (iii) of the Act. We are of the opinion that this contention has to be acceded to having regard to the provisions of S. 139 91) (iii) (b) of the Act. According to S. 139 9a) or (b) the assessee has to furnish a return of his income generally before 30th June of the assessment year. The proviso to that section empowers the Income-tax Officer to extend the date for furnishing the return on an application filed by the assessee. According to Proviso (iii), if the Income-tax Officer extends the date beyond the dates mentioned in provisos (i) and (ii), he is empowered to levy interest at 6% per annum from the 1st day of October or the 1st day of January as the case might be of the assessment year to the date of the furnishing of the return. According to S. 139 91) proviso (iii) (b), interest at 6% could be levied 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 might be. From a reading of S. 139 (1) (iii) (b), it becomes evident that if along with the estimate the assessee has paid the advance tax, then the Income-tax Officer could levy interest under S. 139 (1) (iii) (b) after deducting the advance tax paid by the assessee at the time of the filing of the provisional estimate.
8. In the instant case, if the respondent had paid the tax along with the estimate which he filed, then in that case the ruling relied upon both by the learned Judge and by the respondent, namely Commr. of Income-tax, West Bengal v. Vegetable Products Ltd., , would have been made applicable. But as pointed out earlier, no tax was paid by the respondent on the date when he filed the estimate, nor any time earlier, but much later on 11-2-71. What the Income-tax Officer has done is that he levied interest only up to the date of filing of the estimate, and since no tax was paid by the respondent on that date, he was fully justified in levying interest as he did. Hence, with respect, the order o the learned Judge to this extent is set aside.
9. So far as the second contention is concerned, Mr. Rama Rao contends that the learned Judge was incorrect in relying upon the judgment of a Bench of this Court in Kishenlal Haricharan v. Income-tax Officer, A-Ward Nizamabad, . What Mr. Rama Rao contends is that in the judgment of the Bench S. 139 (40 was not taken into consideration and Obul Reddi, J., as he then was, in Progressive Eng. Co. v. I.T.O., Gudivada, 1974 Tax LR 359 (Andh Pra), had taken sub-sec. (4) of S. 139 into consideration and had held that even in a case where the assessee does not file an application for the extension of time, even then, interest could be levied by the Income-tax Officer. We have examined the provisions of S. 139 (1) and (40 in detail and have gone through the judgment of the Bench as well as the judgment of Obul Reddi, J., and we are of the opinion that a point arises in this case which requires a decision by a Full Bench. We, therefore, formulate the following point for the decision of the Full Bench, which is in the following terms:-
"Is interest not leviable under S. 139 (1) (iii) where the assessee has committed delay in filing the return of his income without seeking extension of time to file the return from the concerned Income-tax Officer ?"
10. The papers may be placed before the Hon'ble the Chief Justice for the formation of the Bench. The Officer will post the Writ Appeal for further orders after the decision of the Full Bench.
JUDGMENT This appeal has been referred to a Full Bench by a Division Bench consisting of one of us (Sambasiva Rao, J.) and Muktadar, J. The point which is referred to us for our decision is "Is interest not leviable under S. 139 (1) (iii) where the assessee has committed delay in filing the return of his income without seeking extension of time to file the return from the concerned Income-tax Officer ?"
11. The question came to be referred because of a conflict of decisions between a Division Bench and a Single Judge of this Court. The first is the decision of the Division Bench consisting of Chinnappa Reddy and Madhava Reddy, JJ., in Kishanlal Haricdharan v. Income-tax Officer, A-Ward, Nizamabad, . The other is the decision of Obul Reddy, J. (As he then was), sitting single, in Progressive Eng. Co. v. Income-tax Officer Gudivada 1974 Tax LR 359 : 105 ITR 226 (Andh Pra). Several other High Courts also have taken a different view. As the Division Bench felt that the decision in Kishanlal Haricharan v. Income-tax Officer A-Ward, Nizamabad (supra) required reconsideration by a larger Bench, this point has been referred to us.
12. The facts leading to this writ appeal are as follows : The respondent in this writ appeal is a firm registered under the Indian Income-tax Act. The assessment year under consideration is 1968-69. Under law, the return for that particular assessment year should have been filed by the respondent-firm on or before Sept. 30, 1968. The respondent-firm did not apply for extension of time and ultimately filed the return on Jan. 20, 1971. The income-tax required to be paid on self-assessment basis under S. 140-A of the Income-tax Act was paid on Feb. 11, 1971. The Income-tax Officer finalised the assessment on May 20, 1971 and at the same time, he levied interest under the provisions of S. 139. The penal interest amounted to Rs. 7,750/-. This interest was charged for belated submission of the return of the income. The respondent-firm, having exhausted all the remedies under the Act filed Writ Petition No. 1464 of 1973, out of which this writ appeal arises. The writ petition was heard in the first instance by our learned brother, A. Gangadhara Rao, J., sitting single and one of the points which was urged before him was that the Income-tax Officer erred in levying interest in the sum of Rs. 7,750 under S. 139 (1) Proviso (iii) of the Income-tax Act although no extension of time was prayed for or granted. This argument about interest was accepted by Gangadhara Rao, J., in view of the decision in Kishanlal Haricharan v. Income-tax Officer A-Ward, Nizamabad, (Supra ) Against that decision of Gangadhara Rao, J., this Writ Appeal has been filed. When the matter came up before the Division Bench consisting of one of us (Sambasiva Rao, J.) and Muktadar, J., the other contentions arising in the writ appeal were dealt with by the Division Bench and the point, which we have set out hereinabove, was referred to a larger Bench.
13. In order to appreciate the controversy which has arisen on this point, it is necessary to refer to the provisions of S. 139 as they stood at the relevant time i.e. in connection with the assessment year 1968-69. Sub-sec. (1) of S. 139 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."
14. Cls. (a) and (b) of sub-sec. (1) of S. 139 lay down the allowable periods for filing the return and under cl. (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 the 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; and under cl. (b) in the case of every other person, the return has to be filed before the 30th day of June of the assessment year. Proviso to S. 139 (1), so far as is material for the purpose of this judgment, reads :
"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 case 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 Dec. of the year immediately preceding the assessment year, and in the case of any person referred to in cl. (B) up to a period not extending beyond the 30th day of Sept. 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 Dec. of the assessment year without charging any interest; and
(iii) upto any period falling beyond the dates mentioned in cls. (I) and (ii), in which case, interest at nine per cent, per annum shall be payable from the 1st day of October or 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 cl. (B) of S. 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."
15. Under sub-sec, (2) a provision is made for service of individual notice by the Income-tax Officer and that sub-section reads :
"..................the Income-tax Officer may, before the end of the relevant assessment year, serve a notice upon him ( the assessee) requiring him to furnish, within thirty days from the date of service of 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 Sept. or, as the case may be, the 31st day of Dec. of the assessment year, the provisions of sub-cl. (Iii) of the proviso to sub-sec. (1) shall apply."
16. Under cl. (A0 of sub-sec. (4) of S. 139, any person who has not furnished a return within the time allowed to him under sub-sec. (1) or sub-sec. (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 cl. (B), and the provisions of cl. (Iii) of the proviso to sub-sec. (1) shall apply in every such case. Under cl. (B), the period referred to in cl. (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; and (iii) where the return relates to a previous year relevant to any other assessment year, two years from the end of such assessment year.
17. Thus, the scheme of S. 139 makes it clear that the return has to be filed without waiting for any individual notice before the 30th day of June or the 30th day of Sept., as the case may be, under the provisions of cl. (A) or (b) of sub-sec. (1) of S. 139. However, a provision is made under clause (i) of the proviso to sub-sec, (1) of S. 139 that, on an application made by the assessee in the prescribed manner, the Income-tax Officer, may, in his discretion, extend the date for furnishing the return up to 30th Sept. or 31st Dec. as the case may be. If such date is extended on an application made by the assessee, no interest is to be charged up to the date of 30th Sept. or 31st Dec. as the case may be. The Income-tax Officer, on an application made in the prescribed manner, may also extend the date for furnishing the return beyond 30th Sept. or 31st Dec.; but if the date, which is thus extended falls beyond 30th Sept. or 31st Dec. as the case may be, from 1st Oct, or 1st Jan. Interest at 9% per annum has to be paid. Cls. (I) and (ii) of the proviso deal with cases where no interest is chargeable. The only benefit which an assessee gets is that, by virtue of the application made by him, he avoids the payment of penalty and gets the convenience of extension of time without payment of interest, but if the date, which is thus extended falls beyond 30th Sept. or 31st Dec. as the case may be, interest has to be paid at 9% per annum from 1st Oct. or 1st Jan. of the assessment year in question up to the date of the furnishing of the return. Sub-sec. (2) of S. 139 contemplates a situation wherein an individual notice is served by the Income-tax Officer on the assessee calling upon him to furnish the return within 30 days from the date of service of the notice. If, after service of the notice, the assessee asks for extension of time for furnishing the return, the Income-tax Officer may, in his discretion, extend the date for furnishing the return. The proviso to sub-sec. (2) makes it clear that, when the date for furnishing the return, whether fixed originally or on extension, falls beyond the 30th day of Sept. or the 31st day of Dec. of the assessment year, as the case may be, the provisions of sub-cl. (Iii) of the proviso the sub-sec. (1) shall apply i.e. interest at 9% per annum has to be paid from 1st Oct. or 1st Jan. as the case may be, up to the date of the filing of the return. Under sub-sec. (4) (a) of S. 139, any person who has not furnished a return within the time allowed to him under sub-sec, (1) or sub-sec. (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 cl. (B) and in such a case, the provisions of cl. (Iii) of the proviso to sub-sec, (1) shall apply to that case i.e. it is open the the assessee to file the return within a period of four years, three years or two years, as the case may be, as provided in sub-sec. (4) (b) of S. 139. But, in every such case, from the 1st day of October or the 1st day of January of the assessment year under consideration, he has to pay interest of 9% per annum up to the date of the filing return. Sub-sec. (4), as it now stands, was substituted with effect from April 1, 1968 by the Finance Act, 1968. In the instant case, we are concerned with the above provisions of S. 139 as they stood at the commencement of the assessment year 1968-69. It is clear from a perusal of S. 139 (4) (a) that the "time allowed" is to be distinguished from the "time extended". Time allowed is up to the date of 30th Sept, or 31st Dec. as the case may be, when the case falls under sub-sec. (1) and thirty days from the date of service of notice when the case falls under sub-sec. (2); but when the return is not furnished within the time allowed under sub-sec. (1) or sub-sec. (2) it is open to the assessee to furnish the return within two years or three years or four years as the case may be, as provided in sub-sec. (4) (b), but he has to pay interest as provided in cl. (Iii) of the proviso to sub-sec. (1) from the 1st day of Oct. or the 31st day of Dec. of the assessement year under consideration up to the date of the filing of the return. Thus, it is clear that, by the use of the words "any person who has not furnished a return within the time allowed" occurring in cl. (A) of sub-sec. (4), all persons, who did not file the returns within the time allowed i.e. before 30th Sept. or 31st Dec, as the case may be, of the assessment year under consideration, have to pay interest in accordance with the scheme laid down in cl. (iii) of the proviso to sub-sec. (1) irrespective of whether the return comes to be filed in the ordinary course under sub-sec. (1) or in pursuance of a notice under sub-sec. (2). The question of extension of time either on application or no extension of time, because extension of time is not sought by the assessee, is totally out of consideration in the light of the provisions of S. 139 (4) (a).
18. Before we proceed further, we may point out that the sechme of S. 139 (1) and the proviso has been recast by the Legislature. The proviso to sub-sec. (1) of S. 139 which was substituted with effect from 1st April, 1971 by Taxation laws (Amendment) Act, 1970, merely provides that , on an application made in the prescribed manner the Income-tax Officer may, in his discretion, extend the date for furnishing the return, and, notwithstanding that the date is so extended, interest shall be chargeable in accordance with the provisions of sub-sec. (8). The proviso to sub-sec. (2) has also been recast so as to refer to sub-sec. (8) and similarly CL. (A) of sub-sec. (4) has also been recast so as to refer to sub-sec. (8) instead of cl. (Iii) of the proviso to sub-sec. (1). Cls. (I) to (iii) of the proviso to sub-sec. (1) were deleted with effect from April, 1, 1971 and sub-section 8, which was substituted by Taxation Laws (Amendment) Act, 1970 with effect from April, 1, 1971, and subsequently amended by Finance Act, 1972, with effect from April 1, 1972, reads :
"Where the return under sub-sec. (1) or sub-sec. (2) or sub-sec. (4) for an assessment year is furnished after the specified date, or is not furnished, then whether or not the Income-tax Officer has extended the date for furnishing the return under sub-sec. (1) or sub-sec. (2), the assessee shall be liable to pay simple interest at twelve per cent per annum; reckoned from the day immediately following the specified date to the date of the furnishing of the return or, where no return has been furnished, the date of completion of the assessment under S. 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid and any tax deducted at source:
Provided that the Income-tax Officer may, in such cases and under such circumstances as may be prescribed reduce or waive the interest payable by any assessee under this sub-section."
19. Explanation to sub-sec. (8) (a) defines "specified date" as was being defined originally, to be 30th June of the assessment year or the date of 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, as the case may be.
20. Thus it is clear that, after the amendment which came into effect from April, 1971, there is no scope for any controversy now of the type which has arisen between the different High Courts for assessment years prior to 1971-72. Not much light is thrown regarding the intention of the Legislature in inserting new sub-sec. (8) in S. 139 and the note on clauses which was circulated along with the Bill, which ultimately was enacted as the Amendment Act, does not throw much light on the reasons why the Legislature enacted this provisions of sub-section (8).
21. In Kishanlal Haricharan v. Income-tax Officer A-Ward, Nizamabad, (supra), the assessee failed to submit a return of his income in spite of notices issued to him under Sections 139 (2) and 142 (1) of the Income-tax Act, 1961. The Income-tax Officer made a best judgment assessment under S. 144 levying, in addition to the tax, penal interest under S. 139 (1) (b) proviso Cl. (Iii). On appeal, the Appellate assistant Commissioner granted some slight relief to the assessee regarding the quantum of tax, but otherwise dismissed the appeal. Thereafter the assessee preferred an application to the High Court for issue of a writ challenging the levy of penal interest. On those facts, after referring to the proviso to S. 139 (1), Chinnappa Reddy, J., speaking for the Division Bench consisting of himself and Madhava Reddy, J., observed :
"A perusal of the proviso makes it clear that it is only when an assessee requests for time, under the third clause, he can be directed to pay penal interest as provided in the clause. Where the assessee does not request for time for submitting a return, the third clause has no application. Other consequences may follow. For example, the petitioner may subject himself to the penalty provided in S. 271 of the Act. The petitioner may also subject himself to a best judgment assessment by the Income-tax Officer. Those consequences may follow then the assessee fails to submit a return, but the consequence of paying penal interest does not follow. An assessee is liable to pay penal interest under the third clause of proviso to S. 139 (1) (b) only if he asks for extension of time under that clause."
22. With great respect to the learned Judges, who constituted the Division Bench, we are unable to agree with their reasoning. As we have pointed out above, the provisions of S. 139 (4) (a) have also to be borne in mind when considering the late filing of the return and in view of those provisions as we have noticed above, it is not possible to agree with the Division Bench that penal interest under Cl. (Iii) of the proviso to sub-s. (1) of S. 139 can be levied only if the assessee asks for extension of time from the Income-tax Officer.
22-A. We may point out that, inasmuch as, in that particular case, the assessee had not filed any return whatsoever and the assessment was made under Section 144 on the basis of best judgment assessment, no penal interest could be charged, because under the scheme of Section 139 (2) and (4), as it stood prior to April 1, 1971, interest could only be calculated form the date of 1st October or 1st January of the assessment year, as the case may be, up to the date of the filing of the return and since no return at all was filed, as the law then stood, it was impossible to calculate interest because the date up to which interest could be charged was not mentioned in the Act at all. It is to fill up this lacuna that special provision has been made in S. 139 (8) as it now stands with effect from April 1, 1972. Though the final conclusion of the learned Judges, who decided Kishanlal Haricharan's case (supra), can be justified, the reasoning which appealed to them cannot be sustained. In our opinion, therefore, the reasoning in Kishanlal Haricharan's case (Supra), must be held to be contrary to the scheme of the provisions of S. 139 as it stood prior to April, 1, 1971.
23. In Indian Telephone Industries Co-op. Society Ltd. v. Income-tax Officer, 86 ITR 566 : (1972 Tax LR 547), a Division Bench of the Karnataka (Mysore) High Court consisting of Govenda Bhat J., (as he then was) and Jagannatha Shetty, J., was dealing with the following facts : The assessee failed to submit returns for the assessment years 1963-64 to 1969-70 and notice under S. 139 (2) was served on the assessee for the assessment year 1969-70 and notice under S. 139 (2) was served on the assessee for the assessment year 1969-70 and a notice under S. 148 was served with regard to the other assessment years. The assessee filed the returns within the dates specified in the notices under Ss. 139 (2) and 148. The Income-tax Officer levied interest under Ss. 139 and 217 and issued notices for penalty for late submission of returns and non-filing of estimates of advance tax. On these facts, the assessee filed writ petitions challenging the levy of interest and it was held, dismissing the writ petitions, that the levy of interest was legal. The learned counsel for the assessee before the Karnartaka high Court relied on the decision of this High Court in Kishanlal Haricharan v. Income-tax Officer, A-Ward, Nizamabad, (Supra) and contended that the liability to pay interest arose only if extension of time was sought for from the Income-tax Officer. Dealing with Kishanlal Haricharan's case (supra), Govinda Bhat, J. (As he then was) speaking for the Division Bench, observed at p. 569 of the report 986 ITR) : (at pp. 548-549 of 1972 Tax LR) :
"In the said case, the assessee did not at any time furnish a return of his income. Section 139 as it stood before its amendment by Taxation Laws (Amendment) Act, 1970, did not empower the levy of interest where the assessment is completed without the assessee furnishing a return of his income. Such an assessee may be subject to other liabilities under the Act but was not chargeable to interest. Therefore, the decision of the Andhra Pradesh High Court holding that no interest could be levied on the petitioner was right on the merits of the case. But, the observation made therein that sub-cl. (iii) of the proviso to sub-sec. (1) of S. 139 has no application where the assessee does not request for time for submitting his return is too wide a statement from which we respectfully dissent. If the provisions of the proviso to sub-s. (2) and the provisions of sub-sec. (40 (a0 of S. 139 are perused, it is clear that sub-cl. (iii) of the proviso to sub-sec. (1) of S. 139 applies not only where the assessee requests for extension of time for furnishing his return of income but also where the date fixed originally under S. 139 (20 falls beyond the date specified in the proviso to sub-s. (2) of S. 139."
24. Thus, the Karnataka High Court, in terms, differed from the reasoning of the Division Bench in Kishanlal Haricharan's case (supra).
25. This point was dealt with by the Gauhati High Court in Ganesh Das Sreeram v. Income-tax Officer, 'A' Ward, shillong, 93 ITR 19 : (1973 Tax LR 768) (Gauhati). In that case, the petitioner, who had filed the writ petition before the High Court, was a registered firm and for the assessment year 1965-66, the return of income was furnished on 11th April, 1966. The petitioner had not applied for extension of time. The learned counsel for the petitioner before the Gauhati High Court relied on the decision of this Court in Kishanla Haricharan's case (Supra) and urged the Division Bench of the Gauhati High Court consisting of Goswami C. J., and B. N. Sarma, J., to take the same view as expressed in Kishanlal Haricharan's case. At p. 24 of the report (93 ITR ) : (at p. 771 of 1973 Tax LR), Goswami, C. J., dealing with this contention, observed :
"With respect, we are unable to agree with the above decision which has taken no note of S. 139 (4) of the Act. For the reasons given by us and in view of the provisions of sub-s. (4) of S. 139, there is no escape from the conclusion that Cl. (Iii) of the proviso is attracted to the case of the present assessee and the Income-tax Officer is fully justified in charging interest in the case."
26. Thus, like Karnataka High Court, Gauhati High Court also did not accept the reasoning of the Division Bench in Kishanlal Haricharan's case (supra).
27. In Biswanath Ghosh v. Income-tax Officer Ward 'B', 95 ITR 372 : (1974 Tax LR 326) (Ori), a Division Bench of the Orissa High Court consisting of Misra and Panda, JJ., held that, where the return had not been filed within the time specified under sub-s. (1) of S. 139 of the Income-tax Act, 1961 but was filed late and no extension of time had been obtained, the provisions of sub-s. (4) (a) of S. 139 would be attracted and interest would become eligible. At p. 373 of the report (95 ITR) : (at p. 327), Misra, J., delivering the judgment of the Division Bench, has pointed out that the levy of interest was challenged on the ground that the assessee having not applied for extension of time as provided under sub-s. (1) of S. 139 of the Act, no interest was leviable. In support of this contention, reliance was placed on the decision of this Court in Kishanlal Haricharan's case (supra). Dealing with this point at p. 373 (of 95 ITR) : (at p. 327 of 1974 Tax LR) Misra J., observed:
"It is conceded that the assessee had never asked for extension of time for filing return in respect of any of these years. Sub-section (4) (a0 of S. 139 of the Income-tax Act makes provision in respect of cases where returns are filed beyond time even though extension has not been obtained. In respect of such returns the provisions of Cl. (iii) of the proviso to sub-s. (1) of that section has been made applicable. Under the third clause of the proviso interest is payable from the date of default till the date of furnishing of the return. On the admitted position that return had not been filed within the time specified under sub-section (1) of S. 139, provisions of sub-section (4) (a) of S. 139 would be attracted and interest becomes eligible. The Andhra Pradesh case referred to by the learned counsel for the petitioner has no application. That was not a case to which sub-s. (4) (a) of S. 139 of the Act applied. In fact no return had been filed at all and, therefore, the levy of interest was only under sub-s. (1) of S. 139."
28. Thus like the Karnataka High Court and Gauhati High Court, Orissa High Court also differed from the view taken by the Division Bench of this Court in Kishanlal Haricharan's case (Supra).
29. In Garg & Co. v. Commr. of Income-tax, 97 ITR 639 : (1975 Tax LR 374) (Delhi), a Division Bench of the Delhi High Court consisting of M. R. A. Ansari and P. N. Khanna, JJ., dealt with the following facts : For the assessment year 1962-63, the assessee filed its return of income voluntarily under S. 139 (4) of the Income-tax Act (prior to its amendment in 1969) in Feb., 1966, after a delay of 38 months. No application for extension of time was filed and no extension had been granted by the Income-tax Officer. On these facts, the Division Bench, following the view taken in Kishanlal Haricharan's case held that interest under Cl. (iii) of the proviso to Section 139 (1) could not be legally charged. It was held that the proviso to S. 139 (1) required an application to be made in the prescribed manner, which required the use of the prescribed form for getting the extension. At p. 644 of the report (97 ITR) : (at 377 of 1975 Tax LR), it has been pointed out that the Division Bench of the Delhi High Court was in agreement with the view of the Division Bench of this Court in Kishanlal Haricharan's case (Supra). It appears that the attention of the learned Judges of the Division Bench of the Delhi High Court was not drawn to the decision of the Karnataka High Court; but their attention was drawn to the decision of the Gauhati High Court in Ganesh DasSreeram v. Income-tax Officer, A-Ward, Shillong (1973 Tax LR 768) (Gauhati) (supra) and dealing with the decision of the Gauhati High Court, Khanna, J. Observed :
"We must say with profound respect that we are unable to persuade ourselves to agree with this view"
30. Thus, the Delhi High Court has accepted the view taken by the learned Judges of this High Court in Kishanlal Haricharan's case (Supra).
31. In Progressive Engineering Co. v. Income-tax Officer, Gudivada (Supra), Obul Reddy, J. (As he then was) distinguished the decision of the Division Bench of this Court in Kishanlal Haricharan's case . In that case, the facts were that the petitioner, who had filed the writ petitions, was a partnership firm. The firm did not file the returns for the assessment years 1968-69 and 1969-70 within the time allowed under S. 139 (1) of the Act. The Income-tax Officer issued a notice under S. 148 stating that the income chargeable to tax has escaped assessment within the meaning of S. 147 of the Act. The petitioner-firm was asked to submit returns for the said two years within 30 days from the date of receipt of the notice. Thereupon, the petitioner-firm filed returns for both the assessment years on Jan. 16, 1971. Penal interest for the two assessment years 1968-69 and 1969-70 was charged and it was in connection with these orders levying penal interest under S. 139 (1) proviso Cl. (Ii) that the writ petitions were filed. The decision in Kishanlal Haricharan's case (supra) was, in terms, relied upon and it was urged that, since the assessee had not applied for extension of time for filing the returns under S. 139 (1), no penal interest could be levied. Obul Reddi, J., (as he then was) referred to the provisions of Section 139 (4) and observed at p. 228 of the report :
"The case on hand is one where returns have been filed beyond the dates mentioned in Cls. (I) and (ii) of the proviso to S. 139 (1) and, therefore, sub-s. (4) of S. 139 is automatically attracted. The mere fact that the petitioner filed the returns pursuant to the notice issued to him under S. 148 thereatening to assess him under S. 147 does not make any difference, for what has to be seen is whether he has filed the returns beyond the dates mentioned in Cls. (I) and (ii) and not whether he applied for extension of time under Cls. (i) and (ii) and failed to furnish the returns within the time allowed either under Cl. (I) or Cl. (Ii) of the proviso. The Division Bench in the case cited above was not dealing with a case which falls under sub-s. (4) of Section 139. That was a case where no returns were at all filed even though the Income-tax Officer issued a notice to the petitioner therein under S. 139 (2) calling upon him to submit a return before a particular date. Therefore, the case where no returns were filed stands on a different footing from a case where returns were filed, pursuant to a notice issued by the Income-tax Officer under s. 148. There is nothing in the language of Cl. (Iii) of the proviso to S. 139 (1) or sub-s. (4) of S. 139 to indicate that where returns are filed beyond the time specified in Cls. (I) and (ii) of the proviso pursuant to a notice issued by the Income-tax Officer, Cl. (Iii) of the proviso is not applicable".
32. The learned Judge held that the fact that no application was made by the petitioner for extension of time was not relevant at all in view of sub-s. (4) of S. 139 of the Act and that is how the learned Judge distinguished the case before him from Kishanlal Haricharan's case (supra).
33. In Commr. of Income-tax v. Bahri Bros. (P.) Ltd., 102 ITR 443 : (1976 Tax LR 84) (Pat) a Division Bench of the Patna High Court consisting of S. N. P. Singh, C. J., and S. K Jha, J., dealt with this point. In that case, the assessee was a limited company and for the assessment year 1964-65, the assessee was required to file the return under S. 139 (1) of the Act by Sept. 30, 1964; but no such return was filed. Subsequently, a notice under S. 139 92) was served on the assessee on Aug. 22, 1964 asking it to file the return within 35 days from the date of the service of the notice. The assessee failed to file the return within the period of 35 days. It filed the return on March 11, 1966 and the question arose whether penal interest under S. 139 (1), proviso Cl. (Iii) could be charged for the late filing of the return. On those facts, following the decision of the Division Bench of this Court in Kishanlal Haricharan's case (supra), it was held that where the return was not filed within the time specified in the notice under S. 139 (2) of the I.-T. Act, 1961, as it stood before April 1, 1972, but was filed later and no extension of time had been applied for, the assessee was not liable to pay interest under Cl. (Iii) of the proviso to S. 139 (1). The decision of the Gauhati High Court in Ganesh Das Sreeram v. I. T. O., 1973 Tax LR 768 (Gauhati) (supra) was distinguished and the decision of the Orissa High Court in Biswanath Ghosh v. Income-tax Officer, 1974 Tax LR 326 (Ori) (supra) was referred to. At page 446 of the report (102 ITR) : (at p. 86 of 1976 Tax LR), the learned Judges of the Patna High Court referred to the enactment of sub-s. (8) of S. 139 and the clue to the interpretation to be found in the Finance Act of 1972 and the corresponding changes made in sub-ss. (1) and (2) of S. 139. With great respect,for the reasons stated above, we are unable to agree with the conclusion of the learned Judges of the Patna High Court. The subsequent legislative changes cannot help the Court in determining the meaning of the law as it stood prior to the amendment
35. In Chhotalal & Co. v. Income-tax Officer, , a Division Bench of the Gujarat High Court of which one of us (Divan, C. J.) was a member, considered all the case law available upto that point. The Division Bench dissented from the view taken in Kishanlal Haricharan's case (Supra), and accepted the principle laid down by the Karnataka High Court in Indian Telephone Industries Co-operative Society Ltd. v. Income-tax Officer (1972 Tax LR 768) (Gauhati) (Supra). The Division Bench, after referring to the decision in Kishanlal Haricharan's case (Supra) observed at p. 236 of the report :
"With respect, it may be pointed out that there was no provision in S. 144 similar to the provisions of S. 139 (4) making the provisions of the third clause of the proviso to S. 139 (1) applicable when an order of best judgment assessment is made under S. 144. The best judgment assessment can be made, inter alia, if any person fails to make the return required by any notice given to him under sub-s. (2) of S. 139 and has not made a return or a revised return under sub-s. (4) or sub-s. (5) of S. 139. But there was no provision in S. 144 as is to be found in S. 139 (4) stating that the provisions of Cl, (iii) of the proviso to sub-s. (10 of S. 139 is to apply to every such case falling within S. 144 9a0 of the Act. Under these circumstances the final decision of the Andhra Pradesh High Court can be supported on the ground that there was no provision in law making Cl. (Iii) of the proviso to sub-s. (1) of S. 139 applicable when best judgment assessment was made under s. 144. With respect, we are unable to agree with the conclusions of the learned Judges of the Andhra Pradesh High Court that "an assessee" is liable to pay interest under the third clause of the proviso to S. 139 (1) (b) only if he asks for extension of time under that clause. On a plain reading of the third clause of the proviso, when it is to be read in the context of S. 139 (4) it does not necessarily follow that first an application for extension of time must have been made by the assessee before the penal interest can be charged."
At page 238 of the report the Division Bench further observed:
"In our opinion the only way of construing S. 139 (40 is to hold that those provisions of Cl. (Iii) of the proviso to sub-s. 91) of S. 139 which provide that 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 apply whenever the return is not filed within the time allowed to the assessee under sub-s. 91) or sub-s. (2) but is filed before the assessment is made within the period of four years from the end of the assessment year under consideration."
36. It may be pointed out incidentally that, in the course of the arguments before us, Mr. Swamy for the respondent urged the same argument as was sought to be urged by Mr. Patel, the learned Advocate for the assessee, before the Gujarat High Court in Chhotalal & Co. v. Income-tax Officer, (Supra). The argument was that the proviso to sub-s. 91) of S. 139 cannot be dissected into three separate categories and it was in the light of this argument that the judgment of the Division Bench of this Court in Kishanlal Haricharan's case (Supra) was sought to be supported by Mr. Swamy. It may be pointed out that the opening words of the proviso to S. 139 (1) "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," do not apply when considering the provisions of S. 139 (4) (a), because it is obvious that it is only the provisions of Cl. (Iii) of the proviso to sub-s. (1) of S. 139 which are made applicable in cases arising under S. 139 (4) (a). Since Cl. (Iii) of the proviso to sub-s. (1) of S. 139 stands by itself viz., where the extension of time is granted up to any period falling beyond the dates mentioned in Cls. (I) and (ii) of the proviso, interest at 9% per annum is to be paid from the 1st day of October or the 1st day of January, as the case may be, of the assessment year to the date of the furnishing of the return. It is obvious that the words "any person who has not furnished a return within the time allowed to him under sub-s. 91) or sub-s. (2)" occurring in S. 139 (4) (a) contemplate all cases of late filing of the returns irrespective of whether any extension of time has been applied for and granted or not . The words "any person" at the commencement of S. 139 (4) (a) are not capable of any modification whatsoever and the argument of dissection of Cl. (Iii) of the proviso to S. 139 (1) cannot be sustained.
37. A Division Bench of the Jammu and Kashmir High Court in Mulakh Raj Bimal Kumar v. Income-tax Officer, 107 ITR 382 : (1977 Tax LR 97) (J & K) has taken the same view as the Delhi High Court in Garg & Co. v. Commr. of Income-tax, 1975 Tax LR 374 (Delhi) (supra), and this Court in Kishanlal Haricharan's case (supra). It held that, under S. 139 of the Income-tax Act, 1961, as it stood in the assessment year 1967-68, unless an application seeking extension of time for making a return was made and the date was extended by an order of the Income-tax Officer, no interest under S. 139 could be charged. From the report, it does not appear that the attention of the learned Judges of the Jammu and Kashmir High Court was drawn to S. 139 (4); but sub-s. (8) of S. 139, as amended by the Finance Act, 1972 was considered by the Division Bench and it was observed (at p. 386 of the report) (107 ITR) : (at p. 99 of 1977 Tax LR) :
"All this lends support to the view that the position obtaining in the relevant assessment year was that unless an application seeking extension in the date was made and the date was extended by an order of the Income-tax Officer no interest under S. 139 could be charged."
38. In National Hotel & Dilkusha Cabin v. Income-tax Officer, , Sabyasachi Mukharji. J. of the Calcutta High Court, sitting single, has held that, prior to amendment of S. 139 of the Income-tax Act, 1961, by the Finance Act, 1972, with effect from April 1, 1972, interest under sub-s. (8) (a) thereof could not be charged in the case of an assessee who had not filed the return prior to the assessment and to whom an extension of time has not been granted by the Income-tax Officer on an application made. The facts of the case before the learned Judge of the Calcutta High Court were that no return whatsoever had been filed and the question of best judgment assessment arose before the Income-tax Authorities. As we have observed above, prior to the insertion of sub-s. (8) in S. 139, the position as regards the non-filing of the return was that there was no date up to which the interest could be calculated and in the absence of any provision in s. 144 similar to S. 139 (4) (a), it was not open to the Income-tax Officer to levy interest under cl. (Iii) of the proviso to sub-s. (1) of S. 139. In this decision of the Calcutta High Court, the attention of the learned single Judge does not appear to have been drawn to the decision of the Gujarat High Court in Chhotalal & Co v. Income-tax Officer (supra) and the decision of the Karnataka High Court in Indian Telephone Industries Co-op. Society Ltd. v. Income-tax Officer 1972 Tax LR 547 (Mys) (supra). However, on the provisions of law, as it stood for the relevant assessment year, it was not open to the Income-tax Officer to levy interest on the facts of the case before the Calcutta High Court.
39. These are all the decisions which have been brought to our notice and with respect, we are unable to accept the reasoning of the learned Judges of the Division Bench of this Court in Kishanlal Haricharan's case (supra) and of the learned Judges of the Delhi, Patna and Jammu and Kashmir High Courts under the different decisions referred to above. We are in agreement with the view expressed by the learned Judges of the Karnataka, Gauhati, Orissa and Gujarat High Courts under the different decisions referred to above.
40. If the conclusion, which we have reached, is not adopted, an anomalous situation is likely to arise, in as much as a person, who co-operates with the department by applying for extension of time, is put on a worse footing than a person who does not apply for extension of time and who files the return at his own sweet will. That is an additional factor, apart from the analysis of S. 139 (1) together with proviso thereto and the provisions of Section 139 (4) which we have set out hereinabove. With great respect to the learned Judges of the different High Courts who held to the contrary the process of legislative interpretation viz., in the light of what the Legislature subsequently enacts by way of amendment, cannot help the Court in deciding the effect of the clear provisions of law as they stood before the amendment.
41. In the light of the above discussion, we hold that interest is leviable under Cl. (Iii) of the proviso to sub-s. 91) of S. 139 where the assessee has committed delay in filing the return of his income without seeking extension of time to file the return from the concerned Income-tax Officer.
42. The matter will now go back before the Division Bench for disposing of the writ appeal in the light of our answer to the point referred to us.
JUDGMENT
43. By our order dated 20th Oct., 1976 we have formulated the following point for consideration of Full Bench "Is interest not leviable under Section 139 (1) (iii) where the assessee had committed delay in filing the return of his income without seeking extension of time to file the return from the concerned Income-tax Officer ?" The Full Bench by its judgment dated 20th July, 1977 has held that interest is leviable under Cl. (iii) of the proviso to sub-s. (1) o S. 139 where the assessee has committed delay in filing the return of his income without seeking extension of time to file the return from the concerned Income-tax Officer. In the light of this judgment of the Full Bench, we partly allow the appeal. Having regard to the circumstances of the case, there will be no order as to costs.
44. Appeal partly allowed.