http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7  

PETITIONER: COMMISSIONER OF INCOME TAX, ANDHRA PRADESH

       Vs.

RESPONDENT: M:. CHANDRA SEKHAR

DATE OF JUDGMENT04/12/1984

BENCH: PATHAK, R.S. BENCH: PATHAK, R.S. TULZAPURKAR, V.D.

CITATION:  1985 AIR  114            1985 SCR  (2) 215  1985 SCC  (1) 283        1984 SCALE  (2)973  CITATOR INFO :  R          1991 SC 966  (2)

ACT:      Income Tax Act, 1961. Section 139(1) read with proviso- In a case where Income Tax officer levies interest on income tax return  filed after  the date prescribed by sub-s.(l) of s.l39 whether  a valid presumption can be raised that Income Tax Officer  extended time for filing voluntary return under the proviso to Sub. s.(l) of s.l39.      Section  271(1)(a)-Scope   of-Whether  penalty  can  be levied  on  income  tax  return  filed  after  the      dare prescribed by  s.139(1) but  on which Income Tax officer has levied interest  under cl.(iii) of the proviso. Held No. The rime allowed  by Income  Tax officer  under proviso  to Sub- s.(l)  of   s.  139  for  filing  return  falls  within  the expression "the  time allowed"  in cl.(a)  of  Sub.s.(l)  of s.27I.      Sub-s.(l)  of   s.139  of  the  Income  Tax  Act,  1961 prescribes the  period within  which a  voluntary income tax return must  be filed. When an assessee cannot file a return within the  prescribed period,  the proviso  to Sub-s.(1) of s.l39 entitles  the assessee  to  make  an  application  for extension of  time in  the prescribed  manner and  the  form stating the  reasons on  which  the  extension  of  time  is sought. On  such an  application being  made, the Income Tax officer is  empowered to  extend the  period for  filing the income tax  return subject  to payment  of interest  on  the amount of tax payable.

HEADNOTE:      The respondent  assessee  filed  voluntary  income  tax returns for  some assessment years after the date prescribed by Sub-s.(l)of.139  of the  Income Tax Act, 1961. The Income Tax officer  treated the  assessee as  being in  default and imposed penalties under cl. (a) of Sub-s.(1) of s.271 of the Act. In  appeal before  the Appellate Assistant Commissioner of Income Tax the assessee contended that since interest had been levied  under cl.(iii)  of the Proviso to Sub-s. (1) of s.l39,  no   question  arose  of  imposing  a  penalty.  The Appellate Assistant Commissioner rejected the contention. In second appeal the Income Tax Appellate Tribunal held that as the Income  Tax officer had levied interest upto the date of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7  

the filing  of the  returns, it  must be  presumed that  the Income Tax  officer had  extended the  time for  filing  the returns after  satisfying himself  that it  was a  case  for extension  of  time.  The  Appellate  Tribunal  allowed  the appeals and  canceled the  penalties. On  a reference  being made. the  High Court  held that  the Appellate Tribunal was justified in  relying  upon  the  presumption.  Hence  these appeals by the Revenue. The Revenue contended that there was 216 no material  to warrant  the finding that an application had made by  the assessee  A for extension of time and that upon such application  the Income  Tax officer extended the time. The Revenue  urged that  the imposition of interest does not warrant the  assumption that an application for extension of time was  made by the assessee and allowed by the Income Tax officer.      Dismissing the appeals, ^      HELD: It cannot be disputed that the Income Tax officer could extend  the date  for furnishing the return in respect of each  assessment year.  It was open to him to do so under the statute,  and he was entitled to charge interest only on the basis  that the extended period fell beyond September 30 or December  31, as  the case may be. In the ordinary course of things,  the Income  Tax officer  could have extended the date only  upon being satisfied that there a was good reason for doing so, and that would have been on grounds pleaded by the assessee.  We consider that in the circumstances of this case a presumption could validly be raised that all that was done. No  attempt was  made by  the Revenue to show that the Income Tax  officer acted  arbitrarily and  contrary to  the procedure envisaged  by the  statute. The Appellate Tribunal considered the  matter carefully  and found circumstances on the record  in favour  of raising  the presumption. The High Court approved  of the  approach adopted  by  the  Appellate Tribunal and  did not find it contrary to law. We do not see any reason  to differ from the opinion expressed by the High Court. [221E-G]      Additional  Commissioner  of  Income  Tax,  Gujarat  v. Santosh Industries,  [1974; 93  I.T.R. 563,  M. Nagappa  and others v.  Income Tax  officer, Central  Circle-l, Bangalore and others,  [1975] 99  I.T.R. 32, Poorna Biscuit Factory v. Commissioner of  Income Tax,  A.P.,  [1975]  99  I.T.R.  41, Commissioner of  Income Tax,  Orissa  v  Gangaram  Chopolia, [1976]103 I.T.R.  613, Metal  India Products v. Commissioner of  Income   Tax,  Lucknow,   [1978]  113   1.T.R.  830  and Commissioner of  Income Tax, Punjab v. Kula Valley Transport Co. P. Ltd., [1970] 77 I.T.R. 518. not applicable.      Penalty under  cl (a)  of Sub-s  (1) of  s.271  of  the Income Tax  Act is  attracted if  the Income  Tax officer is satisfied that  the assessee  as, without  reasonable cause, failed to  furnish the  returns "within  the time allowed’., The time  allowed for  furnishing a  voluntary return is the time specified  in Sub-s.(l)  of s.139.  The proviso so that sub-section empowers  the Income  Tax officer  to extend the date for  furnishing the return. When the Income Tax officer extends the  date, he  does so  in the exercise of authority conferred by  the statute, and the additional time available to the  assessee consequent  upon such extension is, for all relevant purposes, of the same character and as effective as the statutory  period specially  enacted by  Parliament. For the  purpose  of  furnishing  a  return  it  constitutes  an integral part  of the  time allowed for furnishing a return. Therefore, where  the Income  Tax officer  extends the date, then all  the time  upto that  date is  the time allowed for

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7  

furnishing the return. The additional period consequent upon such  extension   falls  within  the  expression  "the  time allowed" in cl.(a) of Sub-s.(l) of s.271. That being so, the conclusion must  follow that  the penalty provision does not come into play at all. [223C-G] 217

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal Nos. 1299 A to 1303 of 1973      From the  Judgment and  order dated  the 3rd  February, 1972 of  the Andhra  Pradesh High Court in case referred No. 61 of 1970      S. T.  Desai, M.  N. Tandon and Miss. A. Subhashini for the Appellant.      A. Subba Rao, for the respondent.      The Judgment of the Court was delivered by      PATHAK,  J.   These  appeals   by  special   leave  are directed(. against  the judgment of the High Court of Andhra Pradesh disposing  of a reference under Sub-s. (1) of s. 256 of the  Income-tax Act,  1961 on  the following questions of law:          1.    Whether on the facts and in the circumstances      of the  case, the  Appellate Tribunal  was justified in      concluding that the charging of interest indicated that      the Income-tax  officer was  satisfied that  there  was      sufficient cause  for delay  in filing  the  return  of      income ?          2.    Whether on the facts and in the circumstances      of the  case, the  Tribunal was justified in cancelling      the penalties levied under section 271 (1) (a) ?      The respondent  assessee is  a partner in the firm, M/s Manik Rao  & Brothers.  He 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 penalties under cl. (2) of Sub-s. (1) of s. 271 of the Act. In appeal before the Appellate Assistant  Commissioner of Income Tax the assessee contended that  as the returns had been furnished before the end of  four years  from the  end of the relevant assessment years, that  is to  say, the period prescribed by Sub-s. (4) of s.  139 of  the Act, he was not liable to any penalty. It was also  pointed out by the assessee that interest had been levied under clause (iii) of the proviso to Sub-s. (1) of s. 139 and, therefore, no question arose of imposing a penalty. Both contentions were rejected by the 218 Appellate Assistant  Commissioner. In  second appeal  before the A  income Tax  Appellate Tribunal  the  assessee  raised substantially the  same contentions.  The Appellate Tribunal took the view that in cases falling under Sub-s. (1), Sub-s. (2) and  Sub-s. (4)  of s.  139 the  Income Tax  officer was empowered to  grant time  for filing  a return.  and on such time being  granted the  assessee would  be  liable  to  pay interest. It pointed out that the assessee had in fact given his reasons  for the  delay in  filing the returns ’both for the purpose  of levy of interest under cl. (1) of s. 139 and also the  levy of  penalty under cl. (a) of Sub-s. (1) of s. 271". It  held that  as the  Income Tax  officer had  levied interest upto  the date of the filing of the returns it must be presumed  that the  Income Tax  officer had  extended the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7  

time for filing the returns after satisfying himself that it was a  case for  extension  of  time.  The  presumption  was founded in  the principle  that an  officer entrusted with a judicial or  quasi judicial  duty must  be presumed  to have discharged his  duties in a proper and bona fide manner. The appellate Tribunal  allowed the  appeals and  cancelled  the penalties.      At the  instance of the Commissioner of Income Tax, the Appellate Tribunal  made a  reference to  the High  Court of Andhra Pradesh.  The High  Court  held  that  the  Appellate Tribunal was  justified in relying upon the presumption that official  acts   had  been  regularly  performed,  and  that therefore it  must be  presumed that  the Income Tax officer had extended the time upon grounds made out by the assessee, because otherwise  the Income  Tax officer  could  not  have charged interest. Holding that no penalty was livable in the circumstances, the  High Court  answered  the  reference  in favour of the assessee.      To appreciate the true scope of the questions referred, it is  necessary to  understand the scheme enacted in s. 139 of the Income tax Act, 1961. Broadly, the scheme envisages a voluntary return by the assessee under Sub-s. (1) of s. 139, a return  consequent upon a notice by the Income Tax officer under Sub-s. (2) of s. 139 and a return in the circumstances mentioned in  Sub-s. (4)  of s.  139. We  are not  concerned where with  a return under Sub-s. (3) of s. 139 disclosing a loss nor are we concerned with a revised return under Sub-s. (S) of s. 139. In the case of a voluntary return, Sub-s. (1) of s.  139 prescribes  the period  within which such returns must be  filed. Where  no return  can be  filed  within  the prescribed period, 219 the assessee  is entitled to apply to the Income Tax officer for extending the date for furnishing the return. The lncome Tax  officer   is  empowered  to  extend  the  date  in  his discretion. In  a case  covered by cl. (i) of the proviso to Sub-s. (1)  of s.  139  the  period  may  be  extended  upto September 30  of the  assessment year  without charging  any interest, and  in a  case covered by cl. (ii) of the proviso the  period   may  be  extended  upto  December  31  of  the assessment year similarly without charging any interest. But where the  period is  extended beyond the dates mentioned in clauses (i)  and (ii), then under cl. (iii), the assessee is liable to  pay interest  from october 1 or January I, as the case may  be, of  the assessment  year to  the date  of  the furnishing of the return on the amount of tax payable on the total income  reduced by  the advance  tax paid  and any tax deducted at  source. Similarly,  in the  case  of  a  return furnished under  Sub-s. (2) of s. 139 the Income Tax officer has power  to extend  the date  for  furnishing  the  return subject to  payment of  interest in  the  circumstances  set forth in  relation to  voluntary returns under Sub-s. (1) of s. 139.  Where, however,  the assessee  does not  furnish  a return within  the time  allowed to  him under Sub-s. (1) or Sub-s. (2)  of s.  139 then before any assessment is made he may, under  Sub-s (4)  of s.  139, furnish  a 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 in that event the provisions of Sub-cl. (iii) of  the proviso  to Sub-s.  (1) of  s. 139 relating to payment of  interest would apply to the case. Sub- s. (8) of s. 139  was inserted  by the  Finance Act,  1963 with effect from  April  28,  1963.  It  declared  that  notwithstanding anything contained in cl. (iii) of the proviso to Sub-s. (1) of s. 139, it was open to the Income Tax officer, in certain

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7  

prescribed cases  and circumstances,  to reduce or waive the interest payable  by any  person under  any provision  of s. 139. It  may be  noted that the language of Sub-s. (8) of s. 139 suffered material change with effect from April 1, 1971.      Now, it  will be apparent that delay in filing a return of income  results in  the postponement of payment of tax by the assessee  resulting in  the State  being deprived  of  a corresponding amount of revenue for the period of the delay. It seems  that in  order  to  compensate  for  the  loss  so occasioned Parliament  enacted the  provision for payment of interest. It is apparent also from the language of cl. (iii) of the proviso that interest becomes payable only upon the 220 Income Tax  officer acting  on an  application made  by  the assessee  for   the  purpose  and  extending  the  date  for furnishing the  return. At  the relevant time the proviso to Sub-s. (1) of s. 139 read:-           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, upto  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  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," It is only where the Income Tax officer extends the time for 221 furnishing the return beyond September 30 or December 31, as the  case may be, that interest becomes payable.      Now the  contention on  behalf of  the Revenue  is that there  is  no  material  to  warrant  the  finding  that  an application had  been made  by the assessee for extension of time and  that upon  such application the Income Tax officer extended the  time. It  is  urged  that  the  imposition  of interest does not warrant the assumption that an application for extension  of time  was made by the assessee and allowed by the  Income Tax  officer. The proviso to Sub-s. (1) of s. 139  requires  the  assessee  to  make  an  application  for extension  of   time  in  the  prescribed  manner,  and  the prescribed form  of the  application set forth is Form No. 6 pursuant to  rule 13 of the Income Tax Rules, which requires

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7  

the assessee  to state the reasons on which the extension of time  is   sought.  All   this,  learned  counsel  contends, contemplates that  the Income  Tax officer  should apply his mind to relevant material before him before deciding, in his discretion, whether  the time  should be  extended.  Learned counsel, however,  has not  been able  to satisfy us why the presumption raised  by the  Appellate Tribunal, and endorsed by the High Court, should not prevail. It cannot be disputed that the  Income Tax  officer  could  extend  the  date  for furnishing the return in respect of each assessment year. It was open  to him  to do  so under  the statute,  and he  was entitled to  charge interest  only on  the  basis  that  the extended period  fell beyond September 30 or December 31, as the case  may be.  In the  ordinary course  of  things,  the Income Tax  officer could  have extended  the date only upon being satisfied that there was good reason for doing so, and that would  have been on grounds pleaded by the assessee. We consider  that   in  the   circumstances  of   this  case  a presumption could  validly be raised that all that was done. No attempt  was made  by the Revenue to show that the Income Tax officer  acted arbitrarily and contrary to the procedure envisaged by  the statute. The Appellate Tribunal considered the matter  carefully and  found circumstances on the record in  favour  of  raising  the  presumption.  The  High  Court approved of  the approach adopted by the Appellate Tribunal] and did  not find  it contrary  to law.  We do  not see  any reason to  differ from  the opinion  expressed by  the  High Court.      In the instant case, the extension was a matter falling within Sub-s.  (1) of  s. 139,  and the returns furnished by the assessee must be attributed to that provision. They were not returns furnished 222 within the contemplation of Sub-s. (4) of s. 139. Therefore, the  decision  of  the  Gujarat  High  Court  in  Additional Commissioner   of    Income   Tax,    Gujarat   v.   Santosh Industries,(l) of the Karnataka High court in M. Nagappa and others v.  Income Tax  officer, Central  Circle-l, Bangalore and others,(a)  of the  Andhra Pradesh  High Court in Poorna Biscuit Factory  v. Commissioner  of Income Tax, A.P.,(3) of the Orissa  High Court in Commissioner of Income Tax, Orissa V. Gangaram  Chapolia,(4) and of the Allahabad High Court in Metal  India   Products  v.   Commissioner  of  Income  Tax, Lucknow(’) cannot  be invoked  in the instant case. They are cases dealing  with a  return  filed  in  the  circumstances mentioned in Sub-s. (4) of s. 139.      our attention  has also  been drawn  to the decision of this Court  in Commissioner  of Income  Tax, Punjab  v. Kulu Valley Transport  Co. P.  Ltd.(") That  was a case where the returns were  filed under  Sub-s. 3  of s.  22 of the Indian Income Tax Act, 1922. They were not returns furnished within the time  allowed by or under Sub-s. (1) or Sub-s. (2) of s. 22 of  that Act.  Accordingly, that  case also  need not  be considered.      In the  result, we  uphold the  answer returned  by the High Court to the first question raised in the reference.      The  second  question  raises  the  point  whether  the Appellate Tribunal was justified in cancelling the penalties levied under cl. (a) of Sub-s. (1) of s. 271. That provision reads:- "271 (1)  If  the   Income  Tax  officer  or  the  Appellate      Assistant Commissioner in the course of any proceedings      under this Act, is satisfied that any person-      (a)  has without reasonable cause failed to furnish the           return of  total income  which he  was required to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7  

         furnish under  Sub-s. (1)  of s.  139 or by notice           given under  Sub-s. (2) of s. 139 or 9. 148 or has           without reasonable  cause  failed  to  furnish  it           within the time (1) [l974] 93 I.T.R. 563. (2) [1975] 99 I.T.R. 32. (3) [1975] 99 I.T.R. 41. (4) [1976] 103 I.T.R. 613. (5) [1978] 113 I.T.R. 830. (6) [1970] 77 I.T.R. 518 223      allowed and  ni the manner required by Sub-s. (1) of s.      139 or by such notice, as the case may be, or A b) ....      -      (c)                                                 ...      ...................................................._ he may direct that such person shall pay by way of penalty,-      (i)      ..................................................._      (ii)      ...................................................      (iii)......... -......  -....... -...... -.......-.....      - It is  clear that  penalty is  attracted if  the Income  Tax officer is  satisfied that  assessee has, without reasonable cause, failed  to  furnish  the  returns  "within  the  time allowed". The time allowed for furnishing a voluntary return is the  time specified in Sub-s. (1) of s. 139. We have seen that the proviso to that sub-section empowers the Income Tax officer to extend the date for furnishing the return. It was open to  Parliament to specify by express enactment the date by which  a return  must be  filed, and also confer power on the Income Tax officer to extend the date for doing so. When the Income  Tax officer  extends the date, he does so in the exercise of  authority conferred  by the  statute,  and  the additional time  available to  the assessee  consequent upon such extension  is, for  all relevant  purposes, of the same character  and   as  effective   as  the   statutory  period specifically enacted  by  Parliament.  For  the  purpose  of furnishing a  return it  constitutes an integral part of the time allowed  for furnishing  a return. Therefore, where the Income Tax  Officer extends the date, then all the time upto that date is the time allowed for furnishing the return. The additional  period  consequent  upon  such  extension  falls within the  expression "the time allowed" in cl. (a) of Sub- s. Of s. 271. That being so, the conclusion must follow that the penalty provision does not come into play at all.              In  our opinion,  the High  Court was  right in answering  the   second  question  also  in  favour  of  the assessee.             We express our agreement with the opinion of the High  Court   a  on  both  the  questions  referred  to  it. Accordingly, these  appeals  fail  and  are  dismissed  with costs. H.S K.                                     Appeal dismissed. 224