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CASE NO.: Appeal (civil)  4114 of 2001

PETITIONER: Amin Chand Payarelal

RESPONDENT: Inspecting Asstt. Commissioner,Income Tax & Ors.

DATE OF JUDGMENT: 05/09/2006

BENCH: ASHOK BHAN & Markandey Katju

JUDGMENT: J U D G M E N T

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

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

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

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

       The learned Single Judge allowed the writ petition on the  grounds \026 (a) that the imposition of penalty was without  jurisdiction in view of the fact that interest had been paid for  late filing of the returns for the aforesaid years; and (b) that  the penalty under Section 271 (1)(a) of the act could not be  imposed by the Inspecting Assistant Commissioner of Income  Tax as he had no jurisdiction to do so and, only the Income  tax Officer was competent to impose penalty as per provisions  of Section 271 (1)(a) of the Act.

       During the course of arguments, counsel appearing for  the respondent-assessee before the Division Bench of the High  Court, the appellant herein, did not dispute the jurisdiction of  the Inspecting Assistant Commissioner of the Income Tax to  impose the penalty for not filing the returns within the  extended period.  The Division Bench recorded the following  findings:

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"\005.However, before us the learned  advocate for the writ  petitioner/respondent did not question of  jurisdiction of the Inspecting Assistant  Commissioner of the Income Tax to  impose penalty on the writ petitioner for  not filing the return within the extended  time, that was granted by the concerned  authority\005."

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

"(4) (a) Any person who has not furnished a  return within the time allowed to him under  sub-section (1) or sub-section (2) may, before  the assessment is made, furnish the return for  any previous year at any time before the end of  the period specified in clause (b), and the  provisions of sub-section (8) shall apply in  every such case.

(b) The period referred to in clause (a) shall be-   

(i)     where the return relates to a previous  year relevant to any assessment year  commencing on or before the 1st day of  April, 1967, four years from the end of  such assessment year;  

(ii)    where the return relates to a previous  year relevant to the assessment year  commencing on the 1st day of April, 1968,  three years from the end of the  assessment year;

(iii)   where the return relates to a previous  year relevant to any other assessment  year, two years from the end of such  assessment year,"   

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

"271. (1) If the Income-tax Officer or the   Appellate Assistant Commissioner in the

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course  of any proceedings under this Act, is  satisfied that any person \026  

(a)     has without reasonable cause failed to  furnish the return of total income which he  was required to furnish under sub-section (1)  of Section 139 or by notice given under sub- section (2) of Section 139 or Section 148 or has  without reasonable cause failed to furnish it  within the time allowed and in the manner  required by sub-section (1) of Section 139 or  by such notice, as the case may be, or"

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

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

Year Date on which the  return ought to have  been filed The time was  extended to file  the return Date on which  return actually  filed 1959 -60 18.06.1959 14.11.1959 04.02.1961 1960-61 20.06.1960 01.10.1962 30.08.1962 1961-62 30.06.1961 31.08.1962 05.10.1962 1962-63 04.08.1963 31.08.1962 05.10.1962 1963-64 Nil No. appln. 07.12.1964 1964-65 07.06.1964

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30.09.1964 18.01.1965 1965-66 21.07.1965 No. appln. 21.01.1966

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

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

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

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

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

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Question No. 2:

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

It was answered in the following terms:

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

We respectfully follow the law laid down in Pradip Lamps  Works’s case (supra).  There are number of High Courts who  have taken the same view.

       We hold that the penalty could be levied in the present  case under Section 271(1)(a) of the Act.              For the reasons stated hereinabove, we do not find any  merit in this appeal and dismiss the same.  The impugned  judgment of the Division Bench is affirmed.   Parties to bear  their own costs. 28009