Kerala High Court
Commissioner Of Income-Tax vs Kerala Transport Co. on 15 November, 2001
Equivalent citations: [2002]253ITR231(KER)
Author: P.K. Balasubramanyan
Bench: P.K. Balasubramanyan, C.N. Ramachandran Nair
JUDGMENT P.K. Balasubramanyan, J.
1. At the instance of the Revenue and as directed by the Supreme Court the following question of law has been referred to us for our opinion :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the penalty under Section 271(1)(a) of the Income-tax Act, 1961, was leviable only for the period of default beginning from October 1, 1984, and not from November 1, 1982 ?"
2. The concerned assessment year is 1982-83. In terms of Section 139(1) of the Income-tax Act, the assessee had to file its return of income on or before July 31, 1982. On July 30, 1982, the assessee filed an application in the prescribed manner, namely, in Form No. 6, for extension of the time for furnishing the return of income. The assessee sought extension of time till October 31, 1982. As reason for extension of time, the assessee set out that the finalisation of accounts of the assessee will take a few weeks more to be completed. The Income-tax Officer allowed that application and granted extension of time till October 31, 1982. On or before October 31, 1982, the assessee did not file its return, nor did it make an application in terms of the proviso to Section 139(2) of the Act read with Form No. 6 for further extension of time. But on December 14, 1982, the assessee made yet another application in Form No. 6 seeking time for filing the return till January 30, 1983. Presumably because the application was made after the expiry of the time he had earlier granted and it had not been filed before October 31, 1982, the extended date for filing the return, the Income-tax Officer did not pass any order on that application. The assessee did not file its return even by January 30, 1983, the date up to which it had sought extension of time. The Assessing Officer thereupon called upon the assessee to appear on September 4, 1984. On that day the assessee gave a letter stating that the Assessing Officer had required it to file its return of income and to produce its accounts on September 4, 1984, but since the transactions with the sister concerns are being reconciled it would take another fortnight to prepare the return of income. The letter made a request for allowing time till September 30, 1984, to file the return. As noted, this was not an application in Form No. 6 in terms of the proviso to Section 139(2) of the Income-tax Act. On this letter also, no further extension of time was granted by the Income-tax Officer. The assessee did not file the return even by September 30, 1984, the date mentioned by it in its letter dated September 4, 1984 (produced before us as annexure D by the assessee). The assessee ultimately filed its return of income on November 29, 1984, by showing a net loss. The Assessing Officer completed the assessment on October 28, 1985.
3. The Assessing Officer also initiated penalty proceedings under Section 271(1)(a) of the Income-tax Act. The said provision, as it stood, was to the following effect :
"Where any person 'has 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 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', that person may be directed to pay, by way of penalty, the sums specified in that behalf."
4. The assessee filed a reply to the said notice. We think it appropriate to quote the reply of the assessee in his letter dated December 12, 1988 :
"Under Section 139(1) of the Income-tax Act, 1961, the return of income ought to have been filed on or before July 31, 1982. But the returns of income was filed on November 29, 1984.
Originally, we had applied for time till October 31, 1982, to file the return of income. This application is dated July 24,1982, and was filed in your office on July 30, 1982.
Subsequently, another application dated December 2, 1982, was filed on December 14, 1982, seeking time till January 30, 1983.
Again another letter dated September 4, 1984, was filed seeking rime till September 30, 1984, to file the return of income.
The time applied for was not rejected. In the light of the above facts, we request you to drop the penalty proceedings."
5. The Assessing Officer took the view that the assessee had been given extension of time only till October 31, 1982, that he had not applied for any further extension of time before the expiry of October 31, 1982, and hence the assessee was in default for a period of 24 months after October 31, 1982. The Assessing Officer also found that even in the first application for extension of time it was stated that only a few weeks more were needed for finalisation of accounts and in that situation, the assessee had not given any reasonable explanation or acceptable explanation or reasons for the default in filing the return and hence the Assessing Officer was satisfied that penalty under Section 271(1)(a) of the Act was liable to be imposed. Since the default extended to 24 months, the Assessing Officer quantified the rate of penalty at the rate of 2 per cent. of the tax for every month of default. The assessee appealed against the order before the Commissioner of Income-tax (Appeals). By order dated June 24, 1988, the Commissioner of Income-tax (Appeals) reconsidered the relevant aspects and came to the conclusion that the Assessing Officer was justified in holding that there was a delay in filing the return of income from November 1, 1982, to November 29, 1984, and that that delay was without reasonable cause. Hence, the imposition of penalty under Section 271(1)(a) of the Act was fully justified. The assessee appealed to the Income-tax Appellate Tribunal. The Appellate Tribunal stated that the fate of the assessee's application for extension of time was not informed by the Income-tax Officer to the assessee and hence the assessee was entitled to presume and could entertain a bona fide belief that its request for extension of time was granted by the Income-tax Officer. But the assessee had not offered any satisfactory explanation to the effect that it was prevented by sufficient cause from filing the return of income beyond the extended period. Hence, this was a case where penalty was leviable for the period of default beginning from October 1, 1984, till the date of the filing of the return. The appeal was thus allowed and the Income-tax Officer was directed to recompute the penalty. The Revenue having sought a reference as indicated earlier, the question has now been referred to us as set out above.
6. Before we discuss the question, we must say that the order of the Income-tax Appellate Tribunal is of a very unsatisfactory nature. While interfering with the orders of the Income-tax Officer and the Commissioner of Income-tax (Appeals), the Appellate Tribunal has not even discussed the relevant aspects with reference to the relevant provisions of law and have not entered proper findings in justification of its interference. But ultimately what is seen done by the Appellate Tribunal is to hold that the assessee could not be held to be in default until September 30, 1994, the time up to which he had sought extension in a letter addressed by him on September 4, 1984. The Appellate Tribunal had not even cared to consider whether that letter could be considered sufficient in terms of the clear words of the second proviso to Section 139 of the Act and whether the request in that letter given long after January 30, 1983, the date up to which extension of time was earlier sought by the assessee, had expired. These observations are prompted by our experience in this jurisdiction where we find the Tribunal interfering with the orders of the Commissioner of Income-tax (Appeals) without properly discussing the relevant question and without giving reasons, whether it be adequate or not, in support of its conclusions.
7. We must notice that the assessee was bound to file its return by July 31, 1982. Under the proviso to Section 139(2) of the Act as it stood, there was discretion in the Assessing Officer to grant extension of time for filing the return under Section 139(1) of the Act. The said proviso, as it stood at the relevant time, read as follows :
"Provided that, on an application made in the prescribed manner, the Assessing 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-Section (8)."
8. There is no dispute that the application made in the prescribed manner is an application in terms of Rule 13 of the Income-tax Rules, 1962, and Form No.6. The assesses had made an application in Form No. 6 on July 30, 1982, seeking extension of time till October 31, 1982. That application had been allowed by the Assessing Officer. Again, though not before October 31, 1982, on December 14, 1982, the assessee had made yet another application in Form No. 6 seeking extension of time till January 30, 1983. Since the application was not filed before October 31, 1982, the Assessing Officer did not allow that application. Of course, he did not convey the information to the assessee that the application stood dismissed. But whatever it be, even by January 30, 1983, the assessee had not filed a return. For more than one year and six months even thereafter, the assessee did not file its return. Nor did it make an application in Form No. 6 for extension of time after January 30, 1983. Only on September 4, 1984, the assessee apparently gave a letter to the Income-tax Officer seeking time till September 30, 1984. That letter was admittedly not in Form No. 6. It cannot, therefore, be considered to be an application for extension of time in terms of the proviso to Section 139(2) of the Income-tax Act read with Rule 13 of the Income-tax Rules. Therefore, in this case, there was no attempt by the assessee to seek extension of time after January 30, 1983. It admittedly filed the return only on November 29, 1984. It is in this context that the question referred to us has to be answered.
9. We may straightaway dispose of an argument raised on behalf of the assessee regarding the letter dated September 4, 1984 (marked annexure D before us at the instance of the assessee). According to learned counsel for the assessee, that letter could be treated as an application for extension of time to file the return in terms of the proviso to Section 139(2) of the Income-tax Act. According to counsel, after all, what is needed is only a request for time and a letter was sufficient in the circumstances. We are not in a position to agree with this submission. The proviso to Section 139(2) of the Income-tax Act, 1961. which contemplated the extension of time for filing a return, very clearly stated that on an application made in the prescribed manner, the Assessing Officer may in his discretion extend the date for furnishing the return. The Assessing Officer can therefore, exercise his discretion or his discretionary jurisdiction to grant extension of time for furnishing the return only on an application made in the prescribed manner. Rule 13 of the Income-tax Rules, 1962. which refers to application for extension of time for filing return of income clearly provides that the application to the Income-tax Officer under the proviso to Sub-Section (1) or the proviso to Sub-Section (2) of Section 139 for seeking an extension of the date for furnishing the return of income, shall be in Form No. 6. Thus, the power to extend the time for filing a return could be exercised by the Assessing Officer at his discretion only on an application made in Form No. 6. When a statute provides that a thing shall be done in a particular manner, it has to be done in that manner or not at all. This is a proposition well accepted. Therefore, if the assessee wanted to make an application for extension of time to file the return he had to comply with the concerned rule and the concerned form prescribed in that behalf and if the Income-tax Officer wanted to exercise his discretion to extend the time for filing the return by the assessee, he had to exercise that discretion only on an application made in the prescribed manner. Further, the letter dated September 4, 1984, is only a reply to the posting of the assessment made by the officer on that day and in fact it could not be treated as an application for extension of time for filing the return especially because the same was filed nearly two years after the last application for extension dated December 14, 1982, under which extension was sought only up to January 30, 1983. In this situation, we have no hesitation in overruling the contention of learned counsel for the assessee that the letter dated September 4, 1984, could have been treated as an application for extension of time in terms of the proviso and the Tribunal was justified in apparently proceeding on that basis.
10. On the facts, therefore, the position is that the assessee was actually given extension of time till October 31, 1982, on an application made by it in the prescribed form and on its subsequent application filed on December 14, 1982, no extension of time was granted, though in that application apparently made in Form No. 6 the assessee had sought extension of time to file the return till January 30, 1983. In our answer to the next aspect we have considered that even an application filed beyond the time could be treated as a valid application in terms of the proviso to Section 139(2) of the Act, it could be considered that the assessee had also made an application for extension of time till January 30, 1983, for filing the return.
11. In that context, yet another question would arise and that would be whether the failure of the Assessing Officer to pass an order on the application made by the assessee dated December 14, 1982, or communicate an order of rejection to the assessee, would enable the assessee to contend that he was entitled to proceed on the basis that his application for time made on December 14, 1982, had been entertained and allowed by the Assessing Officer.
12. We find that it is unnecessary for us to discuss this aspect argued before us in detail since we find that the position is covered by the decision of the Supreme Court in CIT v. Ajanta Electricals [1995] 215 ITR 114. In that decision the Supreme Court has held that no fetters were placed upon the discretion of the Income-tax Officer as regards the number of times he could extend the date or the period for which he could extend it. Repeated applications could be made within the time allowed, in view of the clear indication to that effect in Form No. 6, by the use of the words "it has not been possible". If it was intended that an application for extension of time under Section 139(2) was to be made within the time allowed originally or within the extended time then the words "it has not been possible" were not at all necessary and the words "it is not possible" would have been sufficient. Though the rule cannot affect, control or derogate from the Section of the Act, so long as it does not have that effect, it has to be regarded as having the same force as the Section of the Act. If Section 139(2) is read along with Rule 13 and Form No. 6, it becomes clear that an application for extension could be made even after the period allowed originally or as a result of extension of time granted having expired. It is, therefore, clear that even though the assessee made the second application for extension of time only on December 14, 1982, after expiry of the time granted till October 31, 1982, the said application could be treated as an application which could be considered for exercise of discretion in terms of the proviso to Section 139(2) of the Act. It has, therefore, to be held that on December 14, 1982, the assessee had made a valid application for extension of time to file his return till January 30, 1983.
13. We have already held that the letter dated September 4, 1984, is not an application for extension of time since it is not an application made in Form No. 6 as prescribed by the proviso to Section 139(2) of the Act and Rule 13 of the Rules. Hence, it has to be taken that subsequent to January 30, 1983, no application for extension of time for filing the return had been made by the assessee. Nor had the assessee filed his return on or before January 30, 1983.
14. Then the question is, what is the effect of the Income-tax Officer not passing an order on the application made by the assessee on December 14, 1982. Since it is a question of exercise of discretion by the Assessing Officer, normally the Assessing Officer is expected to give a hearing to the assessee and to pass an order on the application for extension of time by a proper exercise of his discretion. But since no decision was communicated by the Assessing Officer to the assessee informing the assessee that the application for time was not being granted, the assessee proceeded on the footing that the Assessing Officer had given him time to file his return till the date asked for. In that context, we may notice that the Supreme Court in CIT v. Ajanta Electricals [1995] 215 ITR 114, had referred with approval to a decision of the Calcutta High Court in Sunderdas Thackersay and Brothers v. CIT [1982] 137 ITR 646. In that decision the Calcutta High Court has stated that the Income-tax Officer must consider the application giving a reasonable opportunity to all parties concerned and then pass a speaking order as to whether reasonable cause was shown or not since it visits the assessee with serious consequences. When a formal application is made for extension of time to file the return, which is a statutory obligation of the assessee, not communicating to the assessee a decision that he was not inclined to grant time, must be taken to have the effect of the assessee having an extension of time until the date asked for by him. The position that if a valid application is filed and no reply is given the assessee can proceed as if his prayer is accepted is seen well accepted by the High Courts of Bombay, Gujarat, Punjab and Haryana, Calcutta, Madras and Patna in the various decisions brought to our notice. As far as this court is concerned, in Velimalai Rubber Co. Ltd. v. IAC of I. T. and S. T. [1991] 190 ITR 385, a learned judge of this court, after referring to the decisions of the other courts, held that in cases where no orders were passed on the application for extension of time for filing the return, the assessee was justified in construing the silence as sancation of his request. In the light of this position, it has to be held on the facts of this case that the assessee's request for time had been allowed by the Assessing Officer till January 30, 1983, and hence the assessee had time to file the return till January 30, 1983.
15. We have already held that the letter dated September 4, 1984, could not be considered to be an application for extension of time to file the return. The return was admittedly filed only on November 29, 1984. The assessee is hence liable to pay penalty for the period from January 31, 1983, till November 29, 1984, the date on which the return was filed. The Appellate Tribunal has clearly erred in holding that penalty was leviable only for the period of default beginning from October 1, 1984, on the basis of the request contained in the letter dated September 4, 1984. In view of the discussion and our conclusion as above, it must be held that the period of default commences from January 31, 1983, and it continued till the date of filing of the return.
16. Then the question is whether the imposition of penalty for belated filing of the return in terms of Section 271(1)(a) of the Act is justified. Learned counsel for the assessee submitted that this was only the failure to fulfil a statutory obligation and the mere failure to fulfil a statutory obligation would not entail imposition of penalty. There was no contumacious conduct on the part of the assessee.
17. In the decision in C/T v. Gujarat Travancore Agency [1976] 103 ITR 149, a Full Bench of this court held that the penalty provisions under Section 271 of the Act are not provisions of a criminal nature, which warrant the requirement of mens rea in the sense in which the same is required for an offence by the criminal law. Their Lordships noticed the difference between Section 271 of the Act and Section 276C of the Act in that regard. In that decision it was also held that the burden was on the assessee to prove reasonable cause. This view of this High Court was affirmed by the Supreme Court in appeal in the decision in Gujarat Travancore Agency v. CIT [1989] 177 ITR 455. Their Lordships clearly held that in the case of a proceeding under Section 271(1)(a) of the Act, the intention of the Legislature is to emphasis the fact of loss of revenue and to provide a remedy for such loss, although no doubt an element of coercion is present in the penalty. In this connection, the terms in which the penalty falls to be measured are significant. Unless there is something in the language of the statute indicating the need to establish the element of mens rea, it is generally sufficient to prove that a default in complying with the statute has occurred. There is nothing in Section 271(1)(a) which requires that mens rea must be proved before penalty can be levied under that provision. Thus, it is clear that the failure to file a return itself invites penalty under Section 271(1)(a) of the Act and no mens rea and contumacious conduct on the part of the assessee in not filing the return is needed. It is also clear that the burden is on the assessee to prove a reasonable cause for non-imposition of penalty for failure to file the return in time. In this context, the explanation offered by the assessee to the notice issued under Section 271(1)(a) of the Act becomes relevant. We have already set out that reply in full. Paragraph 1 of that reply only referred to the fact that the last date for filing the return was July 31, 1982, and the return was filed only on November 29, 1984. Paragraph 2 only referred to the applying for and obtaining extension of time for filing the return till October 31, 1982. Paragraph 3 only referred to the application filed on December 14, 1982, seeking extension of time till January 30, 1983. Paragraph 4 only referred to the letter dated September 4, 1984, given by the assessee seeking time till September 30, 1984, for the filing of the return. Paragraph 5 only stated that the time applied for was not rejected. In the light of the facts as indicated above, the assessee requested the Assessing Officer to drop the penalty proceedings. Both the Assessing Officer and the Commissioner of Income-tax (Appeals) on these materials properly held that there was no reasonable cause made out for relieving the assessee from the penalty proposed to be imposed under Section 271(1)(a) of the Act. Both the assessing authority and the first appellate authority also referred to the reason given by the assessee in its application dated July 24, 1982, and filed on July 30, 1982, to find that there was absolutely no reasonable cause for not filing the return till November 29, 1984. For, in the application filed on July 30, 1982, what was stated was that the finalisation of the accounts will take a few weeks more. Even, if the few weeks more had not expired by October 31, 1982, the date till which time was asked for, it certainly has to be taken to have expired by January 30, 1983, which was the time up to which extension was sought for by a proper application. The assessee had no explanation for not filing a return for the period commencing from January 31, 1983, till the return was actually filed. It is in this context that the Income-tax Officer and the first appellate authority clearly held that no reasonable cause has been shown and penalty has to be imposed. The Appellate Tribunal itself found that there was no satisfactory explanation forthcoming to hold that the assessee was prevented by sufficient cause from filing the return of income beyond the extended period. Of course, the Tribunal proceeded on the basis that the period stood extended till October 1, 1984. But in our view that the extended period expired by January 30,1983, the position is that the assessee had no reasonable explanation or satisfactory explanation for the delay in filing the return from January 30, 1983, till the date on which it was filed. Penalty is, therefore, leviable in this case for the period of default beginning from January 31, 1983, till the date of the filing of the return by the assessee. The order of the Appellate Tribunal is to be modified in that manner and the Income-tax Officer is to be directed to recompute the penalty on the basis that the default commenced on January 31, 1983, and continued till the date of the filing of the return.
18. Learned counsel for the assessee argued before us that if we took the view that the letter dated September 4, 1984, given by the assessee did not constitute a valid application for extension of time, the matter required to be remitted to the Income-tax Officer for a fresh decision so as to enable him to exercise his discretion once more. We find that such a course is unnecessary and unwarranted. Both the Income-tax Officer and the Commissioner of Income-tax (Appeals) have clearly referred to the relevant facts and have properly exercised the discretion vested in them by law. Even, the Appellate Tribunal was not able to differ from the finding or to discard the finding of the Assessing Officer and the Commissioner of Income-tax (Appeals) that the assessee had shown no reasonable cause for not filing the return beyond the extended time. We have already set out the explanation offered by the assessee and in our view on the basis of that explanation there is no necessity for directing the Income-tax Officer to reconsider the question of imposition of penalty. We think that the proper course to adopt is to answer the question referred to us in the light of our conclusions.
19. We, therefore, answer the question referred to us in the negative and in favour of the Revenue in part by holding that the penalty under Section 271(1)(a) of the Income-tax Act was leviable for the period of default beginning from January 31, 1983, till the filing of the return by the assessee. The Tribunal will issue consequential orders.