COMMISSIONER OF INCOME TAX Vs. KERALA TRANSPORT CO

JUDGEMENT

(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 :

(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 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.