V L DUTT Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS reference arises out of the penalty proceedings for the belated submission of the return of income for the assessment years 1964-65 and 1965-66 by the assessee, who is a director of M/s. V. Ramakrishna & Sons Private Ltd., and whose main source of income was remuneration derived from the company. For the assessment year 1964-65 the return was due under a notice under section 139(2) of the Income-tax Act, 1961, on 11th July, 1964. The return was filed only on 27th December, 1965, i.e., nearly 18 months after the date when it was due. The assessment itself came to be made subsequent to the said return. For the assessment year 1965-66, similarly, the return was due on 14th September, 1965, in accordance with the notice under section 139(2) of the Act. The return was actually filed on 13th June, 1966, i.e., about 9 1/2 months after the notice was issued For both these years the Income-tax Officer required the assessee to show cause why penalty should not be levied for the above default. The explanation of the assessee in respect of the assessment year 1964-65 was that the return of income could not be filed in time because the finalisation of the statutory audit relating to M/s V. Ramakrishna & Sons Private Ltd., Madras, which was the only source for gathering the materials required for the preparation of the return, was not completed and that there were labour troubles in the workshop of K.C.P. Ltd., a sister concern. It was also contended that the Income-tax Officer, was fully satisfied with the existence of the reasonable cause, as he had not completed the assessment under section 144 of the Act and that in any event the Income-tax Officer having levied interest under the provisions of section 139 of the Act could not also levy penalty. For the assessment year 1965-66 the objections and the contentions were identical.

(2.) THE Income-tax Officer rejected all of them and held that penalty was leviable under section 271(1)(a). He came to the conclusion that for the assessment year 1964-65 it could be taken that time had been allowed for filing the return of income up to 15th March, 1965. He, therefore, calculated the penalty only for the period of delay subsequent to 15th March, 1965, for that year. For the assessment year 1965-66 the period of delay was computed at 91 months from the time when the return was due in response to the notice under section 139(2) of the Act to the date on which it was actually filed. THE penalty levied came to Rs. 4, 500 and Rs. 1, 344 for the two years respectivelyTHE Appellate Assistant Commissioner confirmed the levy of penalty, but gave reduction for these two years consequent on the reduction in the assessment as a result of the appellate proceedings. THE result was that for the assessment year 1964-65 the penalty stood reduced to Rs. 4, 150 and that for 1965-66 to Rs. 1, 114. On further appeal to the Tribunal, the contentions of the assessee were, (1) that he was pre-occupied with certain business matters, (2) that though the Income-tax Officer was authorised by section 144 to make an assessment thereunder if a person failed to make a return required by any notice given under section 139(2), he had not chosen to exercise that authority and make an assessment thereunder, so that he could be presumed to have considered the assessee as not being in default, and (3) that the Income-tax Officer had already charged interest of Rs. 1, 783 for the assessment year 1964-65 and Rs. 279 for the assessment year 1965-66 in accordance with the proviso to section 139(2) which permitted charging of interest where the extension of the date granted by the Income-tax Officer for the furnishing of the return fell beyond the 30th day of June of the assessment year, so that the Income-tax Officer could be taken to have extended the time for furnishing the return resulting in the absence of any default.

(3.) THE court can also consider whether on the case stated by the Tribunal the proper question is raised or not." *As in this case, the prayer of the assessee is only to reframe the questions so as to bring out the real controversy, no petition as such is necessary. This is not a case where we have to refer the matter back to the Tribunal under section 258 (corresponding to section 66(4) of the 1922 Act) as the question is not on any different point and as all the facts are already on record. This is not also a case where any new question which was not raised before the Tribunal is sought to be raised. We, therefore, reframe the questions as follows"Whether, on the facts and in the circumstances of the case, the levy of penalty under section 271(1)(a) was justified for the delay in submission of the returns for the assessment years 1964-65 and 1965-66 ?" *In the present case the question reframed by us as above is substantially the same as that was asked for by the assessee. We would, therefore, proceed to consider the reference on the question as reframed aboveSection 271(1)(a) in so far as it is material runs as follows"271. (1) If the Income-tax Officer......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 furnish under sub-section (1) of section 139 or by notice given under sub-section (2) of section 139......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, orhe may direct that such person shall pay by way of penalty, --(i) in the cases referred to in clause (a), in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent. of the assessed tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent. of the assessed tax...................." *At the relevant time there was also another provision in section 276, which to the extent material ran as follows"276. If a person fails without reasonable cause or excuse--(b) to furnish in due time any of the returns or statements mentioned in sub-section (2) of section 139he shall be punishable with fine which may extend to ten rupees for every day during which the default continues." *With effect from 1st of April, 1971, section 276(b) was amended so as to exclude reference to the return under section 139(2) and section 276C was enacted.