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CASE NO.: Appeal (crl.)  1260-1261 of 1997

PETITIONER: Prakash Nath Khanna & Anr.       

RESPONDENT: Commissioner of Income Tax and Anr.

DATE OF JUDGMENT: 16/02/2004

BENCH: DORAISWAMY RAJU & ARIJIT PASAYAT.

JUDGMENT: JUDGMENT

ARIJIT PASAYAT,J.

       These appeals revolve round the scope and  ambit of Section 276-CC of the Income Tax Act,  1961 (in short the ’Act’), and are directed  against a common judgment rendered by a Division  Bench of the Himachal Pradesh High Court which  rejected the three writ petitions filed by the  appellants in these two appeals. The Assistant  Commissioner of Income tax, Circle I, Shimla filed  a complaint in terms of Section 276-CC of the Act  in the Court of the CJM who had issued process of  taking cognizance of the offence.  In each of the  writ applications, challenge was made to legality  of the proceedings pending in the Court of Chief  Judicial Magistrate, Shimla (in short the ’CJM’).  

The factual position is almost undisputed and  needs to be noted in brief.          The three appellants were partners of a firm  carrying on business under the name and style of  M/s Kailash Nath and Associates. Apart from the  three appellants, two other persons were partners  and one of them Shri Kailash Nath was the Managing  partner in terms of the Partnership Deed dated  1.4.1983. For the assessment year 1988-89 return  of income was to be filed on or before 31.7.1988,  but was in fact filed on 20.3.1991. Assessment  under Section 143(3) of the Act was completed on  26.8.1991. Proceedings for late submission of  return were initiated against the appellants under  Section 271(1)(a) of the Act and penalty was  imposed.  Proceedings in terms of Section 276-CC  of the Act were also initiated and complaint was  filed before the concerned Court. As noted above,  cognizance was taken and process was issued. The  writ applications were filed challenging legality  of the proceedings. By the impugned judgment the  High Court dismissed the writ petitions. The  points which were mooted before the High Court  were re-iterated in the present appeals.  

       Mr. G.C. Sharma, learned senior counsel  appearing for the appellants urged the following  points for consideration:

1.      The expression "to furnish

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in due time" occurring in Section  276CC means to furnish within the  time permissible under the Act.  The return furnished under  Section 139(4) at any time before  the assessment is made has to be  regarded as a return furnished  under Section 139(1). This was so  held by this Court in  Commissioner of Income Tax Punjab  v. Kullu Valley Transport Co.  Pvt.Ltd. (1970 (77) ITR 518) in  the context of Sections 22(1) and  22(3) of the Indian Income Tax  Act, 1922 (in short the ’Old  Act’) which are in pari-materia  of Section 139(1) and Section  139(4) of the Act. It follows  that return was furnished in "the  due time" and consequently  Section 276CC is not attracted.   2.      The provisions of Section  276CC(i) are not intended to  apply to the cases of assessees  who have been regularly assessed  to income tax and have  voluntarily submitted their  returns of income without issue  of any notice to do so by the  Assessing Officer in that behalf,  within the time permissible to  furnish the return under the Act.  This interpretation gets support  from the marginal heading and  explanatory memo laid before  Parliament when the Section was  introduced.  

3(i) The provision only applies  where the amount of tax which  would have been evaded if the  failure had not been discovered  exceeds Rs,1,00,000/-. There has  been no discovery of the failure  in this case from the point of  view of evasion of tax. The  assessee has submitted return  voluntarily, paid advance tax and  self assessment tax.   3(ii) There has been no  concealment of income in this  case, and no penalty has been or  can be imposed. The allegation  made in the complaint that there  has been evasion of tax to the  extent of Rs.5,68,039/- is based  on no evidence and is contrary to  the materials on record.   4.      The petitioners in reply to  show cause notice issued pleaded  that the delay in submission of

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returns was unavoidable, because  their share of profit from the  firm in which they were partners  had not been communicated by the  Managing Partner of the firm who  was responsible for the accounts.  They had no guilty mind.

5.      Mere delay in filing a return  without contumacious conduct and  mens rea being established could  not make the petitioner liable  for prosecution.

6.      Petitioner having been  subjected to levy of interest  under Section 139(1) and also to  penalty proceedings under Section  271(1)(a) of the Act, could not  further be prosecuted for the  same defaults.   

       Per contra, learned counsel appearing for  the respondents submitted that the High Court was  justified in its conclusions in dismissing the  writ petitions. The decision in Kullu Valley’s  case (supra) has no application to the facts of  the present case and in fact it was rendered in a  different set up. Sub-sections (1) and (4) of  Section 139 deal with different situations and it  cannot be said that a return filed in terms of  Section 139(4) would mean compliance with the  requirements indicated in sub-section (1) of  Section 139. It is further submitted that Section  278-E raises a presumption which is a rebutable  one and the factual aspects raised by the  appellants can be placed for consideration in the  proceedings before the learned CJM.   

Since the fate of the appeals revolves round  the scope and ambit of Section 276-CC in the  background of sub-sections (1) and (4) of Section  139, it would be appropriate to quote the  aforesaid provisions, as they stood at the  relevant point of time:

"Section 276-CC: Failure to furnish  returns of income: If a person  wilfully fails to furnish in due time  the return of income which he is  required to furnish under sub-section  (1) of Section 139 or by notice given  under sub-section (2) of Section 139  or Section 148, he shall be  punishable,-

(i)     in a case where the amount of tax,  which would have been evaded if the  failure had not been discovered,  exceeds one hundred thousand rupees,  with rigorous imprisonment for a term  which shall not be less than six  months but which may extend to seven

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years and with fine;

(ii)    in any other case, with  imprisonment for a term which shall  not be less than three months but  which may extend to three years and  with fine:

Provided that a person shall not  be proceeded against under this  section for failure to furnish in due  time the return of income under sub- section (1) of Section 139-

(i)for any assessment year commencing  prior to the Ist day of April, 1975; or (ii)for any assessment year commencing  on or after the Ist day of April, 1975,  if-

(a)the return is furnished by him  before the expiry of the assessment  year; or

(b)the tax payable by him on the total  income determined on regular  assessment, as reduced by the advance  tax, if any, paid, and any tax  deducted at source, does not exceed  three thousand rupees".   

               Section 139: Return of income- (1)     Every person, if his total income  or the total income of any other  person 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 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, or  before the 30th day of June  of the assessment year,  whichever is later;

(b)     in the case of every other

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person, before the 30th day  of June of the assessment  year:

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 he provisions  of sub-section (8).

(IA)    Notwithstanding anything contained  in sub-section (1), no person need to  furnish under that sub-section a  return of his income or the income of  any other person in respect of whose  total income he is assessable under  this Act, if his income or, as the  case may be, the income of such other  person during the previous year  consisted only of income chargeable  under the head "Salaries" or of  income chargeable under that head and  also income of the nature referred to  in any one or more of clause (i) to  (ix) of sub-section (1) of Section 80L  and the following conditions are  fulfilled, namely:-

(a)     where he or such other person was  employed during the previous year by a  company, he or such other person was  at no time during the previous year a  director of the company or a  beneficial owner of shares in the  company (not being shares entitled to  a fixed rate of dividend whether with  or without a right to participate in  profits) carrying not less than twenty  per cent of the voting power;

(b)     his income or the income of such  other person under the head  "Salaries", exclusive of the value of  all benefits or amenities not provided  for by way of monetary payment, does  not exceed twenty four thousand  rupees;

(c)     the amount of income of the nature  referred to in clause (i) to (ix) of  sub-section (1) of Section 80L, if any  does not, in the aggregate, exceed the  maximum amount allowable as deduction  in his case under that section; and  

(d)     the tax deductible at source under  section 192 from the income chargeable

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under the head "Salaries" has been  deducted from that income.

(2)     In the case of any person who, in  the Assessing Officer’s opinion,  is assessable under this Act,  whether on his own total income or  on the total income of any other  person during the previous year,  the Assessing Officer may, before  the end of the relevant assessment  year, issue a notice to him and  serve the same upon him requiring  him to furnish, within 30 days  from the date of service of the  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  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).

(3)     If any person who has not been  served with a notice under sub- section (2), has sustained a loss  in any previous year under the  head "Profits and gains of  business or profession" or under  the head "Capital gains" and  claims that the loss or any part  thereof should be carried forward  under sub-section (1) of Section  72, or sub-section (2) of Section  73, or sub-section (1) or sub- section (3) of Section 74, or sub- section (3) of Section 74A, he may  furnish within the time allowed  under sub-section (1) or by the  thirty first day of July of the  assessment year relevant to the  previous year during which the  loss was sustained, a return of  loss in the prescribed form and  verified in the prescribed manner  and containing such other  particulars as may be prescribed,  and all the  provisions of this  Act shall apply as if it were a  return under sub-section (1).

(4)(a)  Any person who has not

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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 Ist 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  Ist 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.    (4A)    Every person in receipt of income  derived from property held under trust  or other legal obligation wholly for  charitable or religious purposes or in  part only for such purposes, or of  income being voluntary contributions  referred to in sub-clause (iia) of  clause (24) of section 2 shall, if the  total income in respect of which he is  assessable as a representative  assessee(the total income for this  purpose being computed under this Act  without  giving effect to the  provisions of sections 11 and 12)  exceeds the maximum amount which is  not chargeable of income tax furnish a  return of such income of the previous  year in the prescribed form and  verified in the prescribed manner and  setting forth such other particulars  as may be prescribed and all the  provisions of this Act shall, so far  as may be, apply as if it were a  return required to be furnished under  sub-section (1).

(4B)   The Chief Executive Officer  (whether such Chief Executive Officer)  is known as Secretary or by any other   designation) of every political party  shall, if the total income in respect  of which the political party is  assessable  (the total income for this  purpose being computed without  giving

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effect to the provisions of section  13A) exceeds the maximum amount which  is not chargeable of income tax  furnish a return of such income of the  previous year in the prescribed form  and verified in the prescribed manner  and setting forth such other  particulars as may be prescribed and  all the provisions of this Act shall,  so far as may be, apply as if it were  a return required to be furnished  under sub-section (1).

(5)If any person having furnished a  return under sub-section (1) or sub- section (2), discovers any omission or  any wrong statement therein, he may  furnish a revised return at any time  before the assessment is made.

       Kullu Valley’s case (supra ) was rendered in  the background of Section 22 of the Old Act.  Great emphasis is laid on the observation by this  Court that sub-section (3) of Section 22 of the  Old Act was in the nature of a proviso to sub- section (1) thereof. It is to be noted that the  decision was rendered in a totally different  context. The question related to the treatment of  a return of loss filed beyond the time provided  under sub-section (1) of Section 22. The  observation on which reliance is placed cannot be  read out of context.  

       In Kullu valley’s case (supra) the majority  view was that Section 22(3) of the Old Act  (corresponding to Section 139(4) of the Act) is  merely a proviso to Section 22(1)   (Section 139(1)) respectively, and if Section  22(3) is complied with, Section 22(1) must be  held to have been complied with and that if  compliance has been made with Section 22(3), the  requirement of Section 22(2A) (corresponding to  Section 139(3) of the Act) would stand satisfied.  It was thus, held that the ascertained losses  could be carried forward to the subsequent years  and set off, even though  suo motu return is not  filed within time prescribed under Section 22(1)  of the Old Act.

       The decision was rendered in a conceptually  different situation, and has no relevance so far  as the present dispute is concerned.  

       The basic issue in Kullu Valley’s case  (supra) was determination of loss on the basis of  return filed under Section 22(1) or 22(3) of the  Old Act. In the Act, Section 80 deals  specifically with the situation.  

       The original Section 80 in the Act reads as  under:

"Notwithstanding anything contained in  this Chapter, no loss which has not  been determined in pursuance of a

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return filed under Section 139, shall  be carried forward and set off under  sub-section (1) of Section 72 or sub- section (2) of Section 73 or sub- section (1) of Section 74".

By the Taxation Laws (Amendment) Act, 1984 with  effect from Ist April, 1985, the words "under  Section 139" (underlined for emphasis) were  substituted by the words "within the time  allowed under sub-section (1) of Section 139 or  within such further time as may be allowed by the  Income Tax Officer". (underlined for emphasis)  

       As a result of the amendment of Section  139(3) by the Taxation Laws (Amendment and  Miscellaneous Provisions) Act, 1986 the power of  the Income tax Officer to extend time  for  furnishing return was taken away w.e.f. Ist  April, 1987.

       Yet again, by the Direct Tax Laws (Amendment  Act), 1987 w.e.f. Ist April, 1989 the words  "within the time allowed under sub-section (1)  of Section 139 or within such further time as may  be allowed by the Income tax Officer" were  substituted by the words "in accordance with the  provisions of sub-section (3) of Section 139".

       It is well settled principle in law that the  Court cannot read anything into a statutory  provision which is plain and unambiguous. A  statute is an edict of the legislature. The  language employed in a statute is the  determinative factor of legislative intent. The  first and primary rule of construction is that  the intention of the legislation must be found in  the words used by the legislature itself. The  question is not what may be supposed and has been  intended but what has been said. "Statutes  should be construed, not as theorems of Euclid",  Judge Learned Hand said, "but words must be  construed with some imagination of the purposes  which lie behind them". (See Lenigh Valley Coal  Co. v. Yensavage (218 FR 547). The view was re- iterated in Union of India v. Filip Tiago De Gama  of Vedem Vasco De Gama (AIR 1990 SC 981), and  Padma Sundara Rao (dead) and Ors. V. State of  Tamil Nadu and Ors. (2002 (3) SCC 533).

       In D.R. Venkatchalam v Dy. Transport  Commissioner (1977 (2) SCC 273) it was observed  that courts must avoid the danger of a priori  determination of the meaning of a provision based  on their own preconceived notions of ideological  structure or scheme into which the provision to  be interpreted is somewhat fitted. They are not  entitled to usurp legislative function under the  disguise of interpretation.

       While interpreting a provision the court  only interprets the law and cannot legislate it.  If a provision of law is misused and subjected to  the abuse of process of law, it is for the

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legislature to amend, modify or repeal it, if  deemed necessary. (See Rishabh Agro Industries  Ltd. V. P.N.B. Capital Services Ltd. (2000 (5)  SCC 515). The legislative casus omissus cannot be  supplied by judicial interpretative process.

       Two principles of construction- one relating  to casus omissus and the other in regard to  reading the statute as a whole -appear to be well  settled. Under the first principle a casus  omissus cannot be supplied by the court except in  the case of clear necessity and when reason for  it is found in the four corners of the statute  itself but at the same time a casus omissus  should not be readily inferred and for that  purpose all the parts of a statute or section  must be construed together and every clause of a  section should be construed with reference to the  context and other clauses thereof so that the  construction to be put on a particular provision  makes a consistent enactment of the whole  statute. This would be more so if literal  construction of a particular clause leads to  manifestly absurd or anomalous results which  could not have been intended by the legislature.  "An intention to produce an unreasonable  result", said Danckwerts, L.J., in Artemiou v.  Procopiou (1966 (1) QB 878), "is not to be  imputed to a statute if there is some other  construction available". Where to apply words  literally would "defeat the obvious intention of  the legislation and produce a wholly unreasonable  result", we must "do some violence to the  words" and so achieve that obvious intention and  produce a rational construction. (Per Lord Reid  in Luke v. IRC {1963 AC 557} where at AC p.577 he  also observed: "This is not a new problem,  though our standard of drafting is such that it  rarely emerges".}

       The heading of the Section or the marginal  note may be relied upon to clear any doubt or  ambiguity in the interpretation of the provision  and to discern the legislative intent. In C.I.T.  v. Ahmedbhai Umarbhai and Co. (AIR 1950 SC 134)  after referring to the view expressed by Lord  Machnaghten in Balraj Kunwar v. Jagatpal Singh  (ILR 26 All. 393 (PC), it was held that marginal  notes in an Indian Statute, as in an Act of  Parliament cannot be referred to for the purpose  of construing the statute. Similar view was  expressed in Board of Muslim Wakfs, Rajasthan v.  Radha Kishan and Ors. (1979(2) SCC 468), and  Kalawatibai v. Soiryabai and Ors. (AIR 1991 SC  1581). Marginal note certainly cannot control the  meaning of the body of the Section if the  language employed there is clear. (See Smt.  Nandini Satpathy v. P.L. Dani and Anr. (AIR 1978  SC 1025) In the present case as noted above, the  provisions of Section 276-CC are in clear terms.  There is no scope for trying to clear any doubt  or ambiguity as urged by learned counsel for the  appellants. Interpretation sought to be put on  Section 276-CC to the effect that if a return is  filed under sub-section (4) of section 139 it

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means that the requirements of sub-section (1) of  Section 139 cannot be accepted for more reasons  than one.  

       One of the significant terms used in Section  276-CC is ’in due time’. The time within which  the return is to be furnished is indicated only  in sub-section (1) of Section 139 and not in sub- section (4) of Section 139. That being so, even  if a return is filed in terms of sub-section (4)  of Section 139 that would not dilute the  infraction in not furnishing the return in due  time as prescribed under sub-section (1) of  Section 139. Otherwise, the use of the expression  "in due time" would loose its relevance and it  cannot be said that the said expression was used  without any purpose. Before substitution of the  expression "clause (i) of sub-section (1) of  section 142" by Direct Tax Laws (Amendment) Act,  1987 w.e.f. 1.4.1989 the expression used was  "sub-section (2) of section 139". At the  relevant point of time the assessing officer was  empowered to issue a notice requiring furnishing  of a return within the time indicated therein.  That means the infractions which are covered by  Section 276-CC relate to non-furnishing of return  within the time in terms of sub-section (1) or  indicated in the notice given under sub-section  (2) of Section 139. There is no condonation of  the said infraction, even if a return is filed in  terms of sub-section (4). Accepting such a plea  would mean that a person who has not filed a  return within the due time as prescribed under  sub-sections (1) or (2) of Section 139 would get  benefit by filing the return under Section 139(4)  much later. This cannot certainly be the  legislative intent.  

       Another plea which was urged with some  amount of vehemence was that the provisions of  Section 276-CC are applicable only when there is  discovery of the failure regarding evasion of  tax. It was submitted that since the return under  sub-section (4) of Section 139 was filed before  the discovery of any evasion, the provision has  no application. The case at hand cannot be  covered by the expression "in any other case".  This argument though attractive has no substance.  

       The provision consists of two parts. First  relates to the infractions warranting penal  consequences and the second, measure of  punishment. The second part in turn envisages two  situations. The first situation is where there is  discovery of the failure involving the evasion of  tax of a particular amount. For the said  infraction stringent penal consequences have been  provided. Second situation covers all cases  except the first situation elaborated above.  

       The term of imprisonment is higher when the  amount of tax which would have been evaded but  for the discovery of the failure to furnish the  return exceeds one hundred thousand rupees. If  the plea of the appellants is accepted it would

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mean that in a given case where there is  infraction and where a return has not been  furnished in terms of sub-section (1) of Section  139 or even in response to a notice issued in  terms of sub-section (2), the consequences  flowing from non-furnishing of return would get  obliterated. At the relevant point of time  Section 139(4)(a) permitted filing of return  where return has not been filed within sub- section (1) and sub-section (2). The time limit  was provided in clause (b). Section 276-CC refers  to "due time" in relation to sub-sections (1)  and (2) of Section 139 and not to sub-section  (4). Had the Legislature intended to cover sub- section (4) also, use of expression "Section  139" alone would have sufficed. It cannot be  said that Legislature without any purpose or  intent specified only the sub-sections (1) and  (2) and the conspicuous omission of sub-section  (4) has no meaning or purpose behind it. Sub- section (4) of Section 139 cannot by any stretch  of imagination control operation of sub-section  (1) wherein a fixed period for furnishing the  return is stipulated. The mere fact that for  purposes of assessment and carrying forward and  to set off losses it is treated as one filed  within sub-sections (1) or (2) cannot be pressed  into service to claim it to be actually one such,  though it is factually and really not by  extending it beyond its legitimate purpose.  

       Whether there was wilful failure to furnish  the return is a matter which is to be adjudicated  factually by the Court which deals with the  prosecution case. Section 278-E is relevant for  this purpose and the same reads as follows:

       "278-E: Presumption as to  culpable mental state-

(1)     In any prosecution for any offence  under this Act which requires a  culpable mental state on the part of  the accused, the court shall presume  the existence of such mental state but  it shall be a defence for the accused  to prove the fact that he had no such  mental state with respect to the act  charged as an offence in that  prosecution.  

Explanation: In this sub-section,  "culpable mental state" includes  intention, motive or knowledge of a  fact or belief in, or reason to  believe, a fact

(2)     For the purposes of this section,  a fact is said to be proved only when  the court believes it to exist beyond  reasonable doubt and not merely when  its existence is established by a  preponderance of probability".                           

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       There is a statutory presumption prescribed  in  Section 278-E. The Court has to presume the  existence of culpable mental state, and absence  of such mental state can be pleaded by an accused  as a defence in respect to the act charged as an  offence in the prosecution. Therefore, the  factual aspects highlighted by the appellants  were rightly not dealt with by the High Court.  This is a matter for trial. It is certainly open  to the appellants to plead absence of culpable  mental state when the matter is taken up for  trial.  

       Looked at from any angle the appeals are  without merit and are dismissed.