COMMISSIONER OF INCOME TAX Vs. DESHPANDE R S

JUDGEMENT

(1.) A return of income to be filed by the assessee for the asst. yr. 1960-61 was due on 5th August, 1960. However, prior to that date, the ITO issued a notice under s. 22(2) of the Indian IT Act, 1922 (hereinafter referred to as "the 1922 Act"), on 28th June, 1960. In response to this notice, the assessee filed his return on 29th March, 1962. He then filed a revised return on 31st March, 1964, and another revised return on 8th February, 1965. Penalty proceedings under s. 271(1)(a) of the IT Act, 1961 (hereinafter referred to as "the 1961 Act"), were initiated by the ITO. The explanation given by the assessee for the delay in filing the return was his old age and want of figures in respect of the share income from firms. This explanation was, however, rejected by the ITO who found that the assessee had committed default by filing return late without any reasonable cause. The ITO rejected the objection of the assessee that penalty proceedings under the 1961 Act cannot be taken against him. A penalty of Rs. 1,818 was, therefore, levied against the assessee. The order of the ITO was upheld by the AAC.

(2.) HOWEVER, in the appeal filed by the assessee, the Tribunal set aside the order of penalty. The Tribunal seems to have taken the view that s. 22(3) of the 1922 Act contemplates that if any assessee does not furnish the return within the time, allowed by sub-s. (1) or sub-s. (2), law permitted him to file a return or revised return at any time before the assessment was completed and that, in the instant case, the original return as well as the revised return must be considered as having been filed within the time prescribed by law since the returns were filed before the assessment was made. The Tribunal expressed the view that since s. 22(3) of the 1922 Act has been complied with, it logically followed that s. 22(2) must be held to have been complied with and, if such compliance has been made, the provisions of s. 271(1)(a) of the 1961 Act were not attracted. The Tribunal has relied on the decision of the Supreme Court in CIT vs. Kulu Valley Transport Co. P. Ltd. (1970) 77 ITR 518 (SC), in which the Supreme Court has observed that s. 22 (3) of the 1922 Act must be read as a proviso to s. 22(1) of the Act. The Tribunal thus set aside the orders of penalty and directed the penalty to be refunded. Arising out of this order of the Tribunal, the following two questions have been referred to this Court under s. 256(1) of the 1961 Act :

(3.) A bare reading of this provision will show that in so far as the present case is concerned, the omission to furnish a return of total income by the person who has been given a notice under sub- s. (2) of s. 22 or the failure to furnish a return without reasonable cause within the time allowed by a notice under sub-s. (2) of s. 22 has been made penal. A liability to penalty is, therefore, immediately attracted in case a person either fails to file a return as required by the notice under s. 22(2) or, though he files a return, he does not file it within the time prescribed by the notice under s. 22(2). It is no doubt true that he may be relieved of this penalty if he shows a reasonable cause explaining the omission. Now, unless there is any other provision in the Act which relieves the assessee of the liability which results from the omission specified in s. 28(1)(a), the provisions of s. 28 must prevail. It has to be pointed out that in so far as the omission to comply with the notice under s. 22(2) is concerned, there may be an omission to comply with it where the assessee does not file a return at all even though the notice is served or the omission can be when he fails to file, the return " within the time allowed...by such notice". Therefore, when a question arises as to whether an assessee becomes liable to penalty under s. 28 in a case where a notice under s. 22(2) has been served on him and he has filed the return, the question to be considered is whether he has filed the return within the time allowed by the notice. If it is found that the return has been filed beyond the time allowed by the notice, it is difficult for us to see why the provisions of s.28(1) (a) will not be attracted. When we go back to s. 22(2) of the 1922 Act, it refers to the time within which an assessee can be called upon to file his return. The material portion of s. 22(2) reads as follows :