KRISHNA CHETTIAR V Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee in this case is a firm carrying on business of purchasing paddy, converting the same into rice and selling the resultant rice. It filed its return of income disclosing a sum of Rs. 18,306 as income for the assessment year 1965-66, the same being estimated at 10% of the turnover of Rs. 1,83,060 as per its books. THEre was a raid in the assessee's premises by the officers of the Income-tax Department on February 1, 1965, and during that raid certain incriminating documents were seized. THE ITO, after scrutiny thereof, noticed that certain purchases made on certain dates had not been recorded in its books of account. He further noticed that payment of wages to its employees as per register did not tally with the corresponding entries made in the accounts. Holding that the account books maintained by the assessee were not reliable, and on considering the facts that the Sales Tax Appellate Tribunal had determined the turnover of the assessee for the relevant year as Rs. 23,46,371, the ITO estimated the gross profit of the assessee's firm for the assessment year under consideration at 4% thereof and after deducting the expenditure amount of Rs. 60,677, determined the total income from business as Rs. 33,178 and the tax payable thereon as Rs. 9,049. He also charged a sum of Rs. 2,923 by way of interest under Section 139 of the I.T. Act. Aggrieved by the said assessment, the assessee preferred an appeal to the AAC, but the said appeal came to be dismissed substantially. THEreupon, the assessee preferred an appeal to the Income-tax Appellate Tribunal contending, inter alia, that the charging of interest of Rs. 2,923 under Section 139 of the Act was not proper and that the interest could be charged only if it had applied for extension of time in submitting its returns to the ITO. Since the assessee had not applied for extension of time, the charging of interest was not proper. THE Tribunal, however, rejected the appeal, upholding the assessment and charging of interest under Section 139(4) of the Act. At the instance of the assessee, the following question has been referred for the opinion of this court :

(2.) THE learned counsel for the assessee submits that the interest could be charged only if the assessee had applied for extension of time in submitting its return to the ITO. Since the assessee had not applied for extension of time, the interest could not be charged under Section 139(4) of the Act. For the purpose of appreciating the assessee's contention, it is necessary to refer to Section 139(1) and Section 139(4) of the I.T. Act.

(3.) THE learned counsel for the Revenue, however, states that having regard to the object of Section 139(4), proviso 3 to Section 139(1) should be applied mutatis mutandis to cases covered by Sub-section (4), that is, with such modification as necessary, to suit the conditions in cases coming under Section 139(4) and that there is no question of blind application of proviso 3 to Section 139(1), in cases covered under Section 139(4). It is also submitted by the Revenue that the interpretation suggested by the assessee will lead to a ridiculous result, in that, in cases where the assessee did not file its return in time, he will be in a better position than the persons who, realising their obligations to file the return, approached the authorities and asked for extension of time and that such unreasonable construction has to be avoided. In support of the said view, the learned counsel for the Revenue relied on the following decisions :