Calcutta High Court
Dooars Transport vs Commissioner Of Income-Tax on 13 June, 1986
Equivalent citations: [1986]162ITR383(CAL)
JUDGMENT Dipak Kumar Sen, J.
1. This reference arises out of the assessment of M/s. Dooars Transport, the assessee, for the assessment years 1964-65, 1966-67, 1967-68, 1968-69 and 1969-70, the relevant accounting periods ending on 30th June of the calendar years 1963, 1965, 1966, 1967 and 1968. Under Section 139 of the Income-tax Act, 1961, as it stood at the relevant time, the assessee was required to file his returns for the said assessment years by 30th June of the calendar years 1964, 1966, 1967, 1968 and 1969. The assessee failed to do so. For the assessment year 1966-67, the assessee filed an application on September 30, 1966, praying for an extension of time by three months for submission of the returns, It is on record that no order was communicated to the assessee in respect of the said application. In respect of the assessment year 1968-69, time to file the return was extended till December 31, 1968, and for the assessment year 1969-70, such time was extended till June 30, 1970. The assessee could not file the returns in respect of the said three assessment years even during the extended time.
2. The assessee filed returns for the said assessment years respectively on June 30, 1965, December 27, 1967, December 27, 1967, February 3, 1970 and February 11, 1971.
3. In making the assessments, the Income-tax Officer charged interest under Sub-sections (1) and (8) of Section 139 of the Act. The Income-tax Officer also issued notices to the assessee to show cause why penalty should not be imposed on the assessee for late filing of the returns under Section 271(1)(a).
4. The assessee contended before the Income-tax Officer that it had a large number of branches exceeding 100 throughout India as also a branch in Nepal. Each of the said branches maintained separate accounts and it took a long time to finalise the accounts. The assessee contended further that at the relevant time, a number of employees of the assessee working in its accounts department were either ill or on leave. The turnover of the assessee was huge and by reason of the delay in finalisation of the accounts for one year, caused, in turn, delay in filing of the accounts for the subsequent years. The assessee also contended that the returns were filed before the assessments were completed and should be treated as returns filed within time. The Income-tax Officer did not accept the contention of the assessee and in respect of each of the said years imposed a penalty.
5. Being aggrieved, the assessee preferred appeals before the Appellate Assistant Commissioner. It was contended on behalf of the assessee in the appeals for the first time that inasmuch as the Income-tax Officer has charged interest under Section 139 of the Act, it must be presumed that he had extended the time for filing the return in each of the said years till the dates up to which interest was charged. The other contentions made before the Income-tax Officer were reiterated before the Appellate Assistant Commissioner. It was also contended that the assessee did not act in deliberate defiance of law or consciously disregarded its statutory obligations and no mens rea was established by the Income-tax Officer for which penalty could be levied.
6. The Appellate Assistant Commissioner did not accept the contentions of the assessee. He held that the assessee was conscious of its obligation to file the returns within time and in respect of several assessment years such applications had been filed. In the years where such applications were not filed, it was held that if there was any real difficulty for the assessee to file its returns in time, it would have certainly applied for extension of time and the fact that no extension of time was applied for indicates that there was no genuine difficulty for the assessee to file its returns in time. The Appellate Assistant Commissioner rejected the appeals of the assessee by two separate orders passed in respect of the assessment years 1964-65 and 1966-67 and by a common order for the assessment years 1967-68, 1968-69 and 1969-70.
7. Being aggrieved, the assessee preferred further appeals before the Income-tax Appellate Tribunal. Prior thereto, the assessee filed an application before the Commissioner of Income-tax for waiver of interest charged under Section 139 as also penalty imposed under Section 271(1)(a) of the Act. It is on record that by an order dated May 13, 1977, the interest charged under Section 139(8) of the Act was waived by the Commissioner.
8. The assessee withdrew his prayer for waiver of penalty in the application made before the Commissioner of Income-tax inasmuch as the aggregate of the penalty imposed exceeded the jurisdiction of the Commissioner.
9. Before the Tribunal, the assessee reiterated its contentions made before the authorities below and drew the attention of the Tribunal to the order passed by the Commissioner of Income-tax waiving interest. It was further urged that there was a reasonable cause for the delay in the submission of the return by the assessee in each of the years. The reasons were that the assessee had a large number of branches throughout India and also one in Nepal, that the assessee maintained separate accounts for each branch ; that it took considerable time to finalise such accounts and particularly so, when several employees of the assessee in the accounts department had fallen sick. The above caused the delay in filing of the returns. It was also contended that the Revenue had failed to establish that there was a conscious disregard of legal obligation by the assessee.
10. The Tribunal did not accept the contentions of the assessee. It was held that the reasons for which interest has been waived by the Commissioner made no difference in the matter as the considerations for waiving of penalty were different from those for waiving interest. The Tribunal also rejected the contention of the assessee that the charging of interest under Section 139 established that the time to file the returns had been extended by the Income-tax Officer. The Tribunal held further that the facts and the grounds which were relied on by the assessee were not sufficient to show that the delay in the filing of the returns was due to circumstances beyond the control of the assessee and that the assessee had failed to establish that the delay was due to any reasonable cause. The Tribunal held that the assessee had failed to establish that it had taken reasonable steps to finalise the accounts and this would be sufficient to hold that the Revenue has established mens rea on the part of the assessee in not filing the returns in time. The appeals of the assessee were dismissed.
11. On an application of the assessee under Section 256(2) of the Income-tax Act, 1961, the Tribunal was directed to refer the following question as a question of law arising out of the order of the Tribunal for the opinion of this court! " Whether, on the facts and in the circumstances of the case, the levy of penalty under Section 271(1)(a) of the Act is justified in law ? "
12. At the hearing, the learned advocate for the assessee drew our attention to Section 139 of the Income-tax Act, 1961, as it stood at the relevant time. The material part of the section is set out as follows :
" Section 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 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 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 six per cent. per annum shall be payable from the 1st day of October or the 1st of January, as the case may be, of the assessment year to the date of the furnishing of the return--...
(4) 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 four assessment years from the end of the assessment year to which the return relates, and the provisions of Sub-clause (iii) of the proviso to Sub-section (1) shall apply in every such case......
(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. "
13. Construing the said section, the learned advocate for the assessee contended that the Income-tax Officer had power to extend the time to furnish the return up to a certain period without charging any interest. It was contended further that the section, however, provided that if time was extended beyond the said period, interest at the rate of 6% would be charged up to the date of the furnishing of the return.
14. The learned advocate submitted that in the instant case, interest having been charged up to the date of the filing of the return, the Income-tax Officer must be deemed to have extended the time for the filing of the return till the date up to which interest had been charged. The learned advocate contended further that in the instant case, on the facts found, the Tribunal was bound to hold that there was reasonable cause for delay in the filing of the returns.
15. It was contended that, on the same facts, the Commissioner of Income-tax had waived payment of interest. The Tribunal clearly erred in holding that the grounds for waiving of interest and considerations for waiving of penalty were entirely different. In support of his contentions, the learned advocate for the assessee cited the following decisions :
(a) CIT v. M. Chandra Sekhar . In this case, the assessee had filed voluntary returns for the assessment years 1959-60, 1960-61, 1961-62 and 1962-63, all on August 2, 1963. The return for the assessment year 1963-64, was filed on August 2, 1964. On account of the delay in filing the returns, the Income-tax Officer treated the assessee as being in default and imposed penalty under Section 271(1)(a). The assessee contended before the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal in successive appeals that the returns had been furnished before the end of four years after the end of the relevant years, the period prescribed by Section 139(4), and that he was not liable to pay any penalty. It was also contended that inasmuch as the interest had been levied under Section 139(1)(iii), there was no question of imposing penalty. The Appellate Assistant Commissioner rejected the contentions of the assessee. But the Tribunal held that the assessee had, in fact, given his reasons for the delay in filing the returns both for the levy of interest under Section 139 and levy of penalty under Section 271. It was held that the Income-tax Officer having levied interest up to the date of the filing of the returns, it must be presumed that the Income-tax Officer had extended the time for the filing of the returns after satisfying himself that it is a case for extension of time. On a reference, the Andhra Pradesh High Court held that the Tribunal was justified in relying upon the presumption that official acts had been regularly performed and that it must be presumed that the Income-tax Officer had extended the time upon grounds made out by the assessee as otherwise the Income-tax Officer could not have charged interest. It was held that, in the circumstances, no penalty was leviable. There was an appeal by the Revenue to the Supreme Court. It was held by the Supreme Court, affirming the order of the Tribunal and the High Court, that on the facts and circumstances, it could not be disputed that the Income-tax Officer could have extended the date for furnishing the return in respect of each assessment year. It was open to the Income-tax Officer to do so under the statute and the Income-tax Officer was entitled to charge interest only on the basis that the extended period fell beyond the prescribed or the extended time up to which interest would not be charged. In the ordinary course, the Income-tax Officer could have extended the date only upon being satisfied that there was good reason for doing so and that good grounds were pleaded by the assessee. The Supreme Court held that, in the circumstances, a presumption could be validly raised to show that the Income-tax Officer proceeded on the basis as aforesaid. The Supreme Court held that where the Income-tax Officer extended the date, then the entire period up to that date was the time allowed for furnishing the return and the penalty provision did not come into play.
(b) Liberal Engineering Works v. CIT [1986] 158 ITR 520 (Guj). In this case, the Gujarat High Court, following the decision of the Supreme Court in the case of M. Chandra Sekhar [1985] 151 ITR 433, held that where interest had been charged under Section 139, a legal presumption would be raised that the time to file the return had been extended. Therefore, when interest had been charged, there was no delay in filing the return and penalty could not be levied under Section 271(1)(a).
16. The learned advocate for the Revenue contended to the contrary. He submitted that where the return was filed out of time, the Revenue authorities were entitled to charge both interest and also to levy penalty. In support of his contentions, he relied on a decision of a learned judge of this court in Narandas Paramanand Das v. 1TO [1975] 98 ITR 453, where it was held that where the return was not filed within the statutory time or within the time as extended by the Income-tax Officer and where the other conditions for imposition of penalty under Section 271 were satisfied, then penalty could be levied even where interest was charged and the return was filed before the assessment.
17. Learned advocate for the Revenue also relied on a decision of a Full Bench of the Allahabad High Court in Metal India Products v. CIT [1978] 113 ITR 830, where it was held that where the assessee did not file his return within the time prescribed, then, even if the return had been filed under Section 139(4), that is, within four years from the end of the assessment year and before the assessment order was made, the assessee would be liable to pay penalty under Section 271(1)(a) of the Act for not having filed the return either within the time prescribed under Section 139(1) or the period prescribed under Section 139(2).
18. The learned advocate for the Revenue also submitted that in the instant case, the interest having been waived by the Commissioner of Income-tax subsequently, the decision of the Supreme Court in M. Chandra Sekhar [1985] 151 ITR 433, was not applicable to the facts of the instant case. It was also contended that, in any event, in three of the assessment years involved, the Income-tax Officer had extended the time for the filing of the returns by the assessee and returns not having been filed by the assessee within such extended time, penalty was leviable for the said three assessment years.
19. In reply, the learned advocate for the assessee cited a decision of this court in CIT v. Bhotica Textiles [1986] 159 ITR 355, where it was held by a Division Bench of this court that an order imposing penalty was the result of a quasi-criminal proceeding. The validity of the order of penalty must be determined with reference to information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed. Further, discovery of facts subsequent to the imposition of penalty could not validate an order of penalty which when passed could not be sustained. The learned advocate also contended that at least in one assessment year, the Income-tax Officer had imposed penalty without communicating an order on the application made by the assessee for extension of time to file its return. This he submitted was not permissible in law. In support of his contentions, the learned advocate cited another decision of this court in Sunderdas Thackersay & Bros. v. CIT [1982] 137 ITR 646, where it was held by a Division Bench of this court that where an assessee filed an application in the prescribed form expressing the reasons for not furnishing the return in time after the expiry of the lime for furnishing the return, such application must be considered by the Income-tax Officer after giving reasonable opportunity to the parties concerned and then pass a speaking order as to whether reasonable cause was shown or not. An order of penalty could not be passed without considering the explanation of the assessee.
20. The learned advocate for the assessee also submitted that the power conferred on the Income-tax Officer to extend the time for the filing of the return could be exercised more than once under Section 14 of the General Clauses Act and in the instant case, the fact that in three of the assessment years involved the Income-tax Officer had extended the time for the filing of the return by the assessee would not make any difference and as interest had been charged under Section 139 in the said assessment years up to date of the filing of the returns, a presumption could still be raised that the Income-tax Officer had further extended the time for the filing of the returns.
21. In the facts of this case, it appears to us that interest having been charged by the Income-tax Officer up to the date of the filing of the return, the principles laid down by the Supreme Court in M. Chandra Sekhar [1985] 151 ITR 433 are clearly attracted. The fact that such interest was waived subsequently by the Commissioner of Income-tax would make no difference in principle inasmuch as it is the primary act of the Income-tax Officer in accepting the return filed and charging interest up to the date of the filing which raises the presumption of extension of time. What was waived by the Commissioner was interest which was already charged by the Income-tax Officer. As held by the Gujarat High Court in Liberal Engineering Works' case [1986] 158 ITR 520, the Income-tax Officer having levied interest up to the date of the filing of the return was not justified in further invoking the penalty proceedings. We accept the contention of the assessee that even in the said three assessment years where time was in fact extended by the Income-tax Officer, the charging of interest up to the dates of the filing of the returns after the extended period gives rise to a presumption of further extension of time for filing of the returns.
22. We also find that the contention of the assessee, that the fact that interest was waived by the Commissioner of Income-tax in the instant case, established a prima facie case for the assessee that there were reasonable grounds for not filing the return within time is not without substance. The conclusion of the Tribunal that the grounds for waiving interest are different from the grounds for imposing penalty in our view is not correct. The Tribunal ought to have given open consideration to the order passed by the Commissioner of Income-tax in waiving interest and should not have ignored and brushed it aside.
23. As we are disposing of the reference on the ground that penalty cannot be imposed where interest has been charged up to the date of the filing of the return raising the presumption that the time to file the return had been extended, we need not express our final views on this aspect.
24. For the reasons as above, we answer the question referred in the negative and in favour of the assessee.
25. In the facts and circumstances, there will be no order as to costs.
Monjula Bose, J.
26. I agree.