ADDITIONAL COMMISSIONER OF INCOME TAX Vs. RAMPRATAP SHANKARLAL

JUDGEMENT

(1.) THIS is a reference made by the Income-tax Appellate Tribunal referring to us the question :

(2.) THE assessment year is 1963-64 for which the previous accounting year was 1962-63. Under Section 139(1) of the I.T. Act, 1961, return was to be filed by the assessee voluntarily on or before 30th June, 1963. On June 28, 1963, it appears that the assessee submitted an application for extension of time up to the 30th September, 1963. On 10th February, 1964, a notice under Section 139(2) was served on the assessee calling upon him to file a return within 30 days. Return was filed by the assessee ultimately on March 21, 1966. THE ITO, therefore, while proceeding with the assessment, gave a notice under Section 271(1)(a) of the Act as to why penalty should not be imposed under that section for having committed default in filing the return as contemplated under Section 139(1). THE ITO then imposed penalty at the rate of 2 per cent. per month and held that there was a default of 32 months and, therefore, imposed penalty of Rs. 6,250. THE AAC on appeal modified the order because in the assessment appeal the income was reduced. On further appeal before the Tribunal, the Tribunal found that the penalty imposed against the assessee was for having committed default in filing the return under Section 139(1) and no proceedings had been launched against him for any default in filing the return under Section 139(2) after service of notice. THE Tribunal, therefore, found that as soon as a notice under Section 139(2) was served on the assessee the liability to file a return under Section 139(1) came to an end and the Tribunal also found that as on June 28, 1963, the assessee submitted an application for extension of time up to September 30, 1963, and, as this application was not rejected, the Tribunal assumed that the time was extended up to September 30, 1963. Thus, according to the Tribunal, the default was committed from September 30, 1963, to February 10, 1964, when notice under Section 139(2) was served on the assessee and this is only four months' default. THErefore, the Tribunal modified the penalty to 8 per cent. of the tax on the income as finally assessed.

(3.) ON the other hand, learned counsel for the assessee contended that under the provisions contained in the I.T. Act, 1961, Section 139, it is clear that an assessee is only expected to file one return and, therefore, so long as a notice under Section 139(2) was not served on the assessee, his liability to submit a voluntary return continued, but as soon as a notice under Section 139(2) was served on the assessee, he was called upon to file a return within one month of the service of notice and, therefore, he was bound to comply with the notice and the question of filing a voluntary return thereafter did not arise. If after the service of notice any default is committed by the assessee, according to the learned counsel for the assessee, it would be a default in not complying with the notice under Section 139(2) and not a default in not filing a return under Section 139(1). And in the present case as the ITO has proceeded to impose penalty on the assessee only with regard to the default committed in respect of non-compliance with Section 139(1), the Tribunal was right in holding that the period of default under Section 139(1) came to an end as soon as notice under Section 139(2) was served on the assessee. According to learned counsel for the assessee, the question would have been different if the ITO had proceeded also to impose a penalty under Section 271(1)(a) for having committed a default in respect of Section 139(2). But that not having been done the view taken by the Tribunal is justified in law. He contended that the two cases of the Rajasthan High Court and the Delhi High Court referred to by learned counsel for the department have considered the question about automatic condonation of delay by issuance of notice under Section 139(2) but have not considered that the period of default under Section 139(1) comes to an end as and when a notice under Section 139(2) is served on the assessee. As regards the application made by the assessee on June 28, 1963, for extension of time it was contended that no grievance could be made in this reference and that is not a question referred to by the Tribunal. ON the contrary, it was a question of fact that the Tribunal held that in the absence of an order on the application made by the assessee the inference would be that the time was extended as prayed for and that having been found as a fact by the Tribunal there is no occasion for this court to go into that question.