Supreme Court of India
COMMISSIONER OF INCOME TAX, ANDHRA PRADESHversusM. CHANDRA SEKHAR
- Citation
- 1984 INSC 229
- Decided
- 4 December 1984
- Disposal
- Dismissed
- Bench
- V D TULZAPURKAR
Holding
The Supreme Court held that the presumption that the Income Tax Officer extended the filing time upon levying interest is valid, and consequently the penalty under s.271(1)(a) does not apply.
Summary
The assessee filed voluntary income‑tax returns after the statutory deadline prescribed under s.139(1) of the Income Tax Act, 1961. The Income Tax Officer levied interest under clause (iii) of the proviso to s.139(1) and treated the assessee as in default, imposing penalties under s.271(1)(a). The assessee argued that the levy of interest indicated that the Officer had validly extended the filing time, rendering the penalty inapplicable. The Income Tax Appellate Tribunal and the Andhra Pradesh High Court upheld this view, relying on a presumption that an officer who charges interest must have extended the time after being satisfied of sufficient cause. The Revenue appealed, contending that no application for extension was proved. The Supreme Court affirmed the lower courts, holding that the presumption was legally permissible and that the extended period falls within the "time allowed" under s.271(1)(a), so the penalty could not be levied. The appeals were dismissed.
Issues considered
- Whether the levy of interest under clause (iii) of the proviso to s.139(1) creates a presumption that the Income Tax Officer extended the time for filing the return.
- Whether a penalty under s.271(1)(a) can be imposed when the filing time has been extended and interest has been charged.
- Whether the presumption of proper exercise of discretion by the Income Tax Officer is valid in the absence of explicit proof of an application for extension.
Legislation cited
- Income Tax Act, 1961s. 139(1), s. 271(1)(a)
Subjects
Income TaxPenaltySection 271Section 139InterestExtension of timePresumptionVoluntary return
Judgment
215
A
COMMISSIONER OF INCOME TAX,ANDHRA PRADESH
v.
B
, M. CHANDRA SEKHAR
December 4, 1984
[V.D. TULZAPURKAR AND R.S. PATHAK, JJ.J
•
Income Tax Act, 1961. Section 139(1) read with proviso-In a case
where Income Tax Officer levies interest on income tax return.filed after the date
c
prescribed by sub-s.(1) of s.139-whether a valid presumption can be raised that
lucome Tax Officer extended time for filing voluntary return under the proviso to
Sub. s.(/)ofs.139.
Section 21 l(J)(a)-Scope of- Whether penalty can be levied on incom~ tax
return filed aft~r the date prescribed by s.139(1) but on which Income Tax Officer D
has levied interest under c/.(iii) of the proviso. Held-No. The time allowed by
Income Tax Officer under proviso to Sub-s.(1) of s. 139 for filing return falls
within the expression "the time allowed'' in cl.(a) of Sub-s.(l) ofs.271.
Sub·s.(I) of s.139 of the Income Ta. Act, 1961 prescribes the period
within which a volu~tary income tax return must be filed. When an assessee
cannot file a return within the prescribed period, the proviso to Sub·s.O) of E
s.139 entitles the assessee to make an application for extension of time in the
prescribed manner and the form stating the reasons on which the extension of
time is sought. On such an applk.ation being made, the Income Tax Officer is
empowered to extend the per'.od for filing the income tax return subject to
payment of interest on the amount of tax payable.
The respgndent assessee filed voluntary income tax returns for some F
assessment years after the date prescribed by Sub-s.(l) of s.139 of the Income
Tax Act, 1961. The Income Tax Officer treated the asses.sec as being in default
and imposed penalties under cl. (a) of Sub-s.(I) of s.271 of the Act. In appeal
before the Appellate Assistant Commissioner of Income Tax the assessee con..
tended that since interest had been levied under c1.(iii) of the proviso to Sub·s.
(I) of s.139, no question arose of imposing a penalty. The Appellate Assistant
Commissioner reje<:ted the contention. In second appeal the Income Tax G
Appellate Tribunal held that as the Income Tax Officer had levied interest upto
the-date of the filing of the returns, it must be presumed that the Income Tax
Officer had extended the time for filing the returns after satisfying himself that
it was a case for extension or time. The Appellate Tribunal allowed the appeals
and cancelled the penalties. On a reference being made, the High Court held
that the Appellate Tribunal was justified in relying upon the presumption.
Hence these appeals by the R•venue. The Revenue contended that there was
u
216 SUPREME COURT REPORTS (1985J 2 S.C.R.
no material to warrant the finding that an application had made by the assessee
A' for extension of time and that upon such application the Income Tax Officer
extended the time. The Revenue urged that the imposition of interest does not
warrant the assumption that an application for extension of time was made by
the assessee and allowed by the Income Tax Officer.
Dismissing the appeals,
B HELD : It cannot be disputed that the Income Tax Officer could extend •
the date for furnishing the return in respect of each assessment year. It was
open to him to do so under the statute, and he was entitled to charge interest
only on the basis that the extended period feH beyond September 30 or
'
December 31, as the case may be. In the ordinary_ course of things, the Income
Tax Officer could have extended the date only upon being satisfied ~that there
was good reason for doing so, and that would have been on grounds pleaded by
G the assessee. We consider that in the circumstances of this case a presumption
could validly be raised that all that was done. No attempt was made by the
Revenue to show that the Income Tax Officer acted arbitrarily and contrary
to the procedure envisaged by the statute. The Appella:e Tribunal considered
the matter carefully and found circumstances on the record in favour of raising
the presumption. The High Court approved of the approach adopted by the
D Appellate Tribunal and did not find it contrary to law. We do not see any
reason to differ from the opinion expressed by the High Court. [221E·G]
Additio"nal Commis~ioner of Income Tax, Gujarat v. Santosh Industries,
(1974] 93 l.T.R. 563, M. Nagappa and Others v. Income Tax Officer, Central
Circle·!, Bangalore and Others, [1975] 99 I.T.R. 32, Poorna Biscuit Factory v.
Commissioner of lnconie Tax, A.P., l1975] 99 I.T.R. 41, Commissioner of lncon1e
E Tax, Orissav Gangaram Chapn/ia, [1976] 103 l.T.R. 613, Metal India Products
v. Commissioner of Income Tax, Lucknow, [1978] 113 I.T.R. 830 and Comntis-..
sioner of Income Tax, Punjab v. Kula Valley Transport Co. P. Ltd., [1970] 77
I.T.R. 518. not applicable.
Penalty under cl.(a) of Sub-s. (I) of s.271 of the Income Tax Act is
attracted if the Income Tax Officer is satisfied that the assessee as, without
F reasonable cause, failed to furnish the returns "within the time allowed'".
The time alJowed for furnishing a voluntary return is the time specified in
Sub-s.(1) of s:139. The proviso so that sub.section empowers the Income Tax
Officer to extend the date for furnishing the return. When the Income Tax
Officer extends the date, he does so in the exercise of authority conferred by
the statute, and the additional time available to the assessee consequent upon
such extension is, for all relevant purposes, of the same character and as
G effective as the statutory period specifically enacted by Parliament. For the
purpose of furnishing a return it constitutes an integral part of the time allowed
for furnishing a return. Therefore, where the Income TaK Officer extends the
date, then all the time upto that date is the time allowed for furnishing the
return. The additional period consequent upon such extension falls within the
expression uthe time allowed" in cl.(a) of Sub-s.(I) of s.271. That being so,
the conclusion must follow that the penalty provision does not come into play
ll at all. [223C-G]
c.1.t. v. M.C. SBKHAR (Pathak, J.) 217
CIVIL APPELLATE JURISDIC1ION : Civil Appeal Nos. 1299
A
to 1303 of 1973
From the Judgment and Order dated the 3rd February, 1972
of the Andhra Pradesh High Court in c~se referred No. 61 of 1970
S. T. Desai, M. N. Tandon and Miss. A. Subhashini for the
B
Appellant.
A. Subba Rao, for the respondent.
The Judgment of the Court was delivered by
PATHAK, J. These appeals by special leave are directec against c
the judgment of the High Court of Andhra Pradesh disposing of a
reference under Sub-s. (I) of s. 256 of the Income-tax Act, 1961 on
t '
the following questions of law :
!. Whether on the facts and in the circumstances of the case, D
the Appellate Tribunal was justified in concluding that the
charging of interest indicated that the Income-tax Officer
was satisfied that there was sufficient cause for delay in
filing the return of income?
2. Whether on the facts and in the circumstances of the case, E
the Tribunal was justified in cancelling the penalties levied
under section 271 (I) (a) ?
The respondent assessee is a partner in the firm, M/s Manik
Rao & Brothers. He filed voluntary returns for the assessment
years 1959-6(1, 1960-61, 1961-62 and 1962-63, all on August 2, 1963. F
The return for the assessment year 1963-64 was filed on August
2, 1964. On account of the delay in filing the returns the Income
Tax Officer treated the assessee as being in default and imposed
penalties under cl. (2) of Sub-s. (I) of s. 271 of the Act. In appeal
before the Appellate Assistant Commissioner of Income Tax the
assessee contended that as the returns had been furnished before G
the end of four years from the end of the relevant assessment years,
that is to say, the period prescribed by Suh-s. (4) of s. 139 of the
Act, he was not liable to any penalty. It was also pointed out by
the assessee that interest had been levied under clause (iii) of the
proviso to Sub-s. (I) of s. 139 and, therefore, no question arose of
imposing a penalty. Both contentions were rejected by the H
SUPRBME COURT REPORTS (1985J 2 S.C.R.
Appellate Assistant Commissioner. In second appeal before the 'h I
A
Income Tax Appellate Tribunal the assessee raised substantially the
same contentions. The Appellate Tribunal took the view that in
cases falling under Sub-s. (!), Sub-s. (2) and Sub-s. (4) of s. 139
the Income Tax Officer was empowered to grant time for filing a
return. and on such time being granted the assessee would be liable
B to pay interest. It pointed out that the assessee had in fact given
his reasons for the delay in filing the returns '"both for the purpose 1
of levy of interest under cl. (!)of s. 139 and also the levy of penalty
under cl. (a) of Sub-s. (!) of s. 271 ". It held that as the Income
Tax Officer had levied interest upto the date of the filing of the
returns it must be presumed that the Income Tax Officer had
c extended the time for filing the returns after satisfying himself that
it was a case for extension of time. The presumption was foUllded
in the principkthat an Officer entrusted with a judicial or quasi·
judicial duty must be presumed to have discharged his duties in a t
proper and bona fide manner. The Appellate Tribunal allowed the
appeals and cancelled the penalties.
D
At the instance of the Commissioner of Income Tax, the
Appellate Tribunal made a reference to the High Court of Andhra
Pradesh. The High Court held that the Appellate Tribunal was
justified in relying upon the presumption that official acts had been
E regularly performed, and that therefore it must be presumed that
the Income Tax Officer had extended the time upon grounds made
out by the assessee, because otherwise the Income Tax Officer could
not have charged interest. Holding that no penalty was leviable
in the circumstances, the High Court answered the reference in
favour of the assessee.
F
To appreciate the true scope of the questions referred, it is
necessary to understand the scheme enacted in s. 139 of the Income·
tax Act, 1961. Broadly, the scheme envisages a voluntary return
by the assessee under Sub-s. (1) of s. 139, a return consequent upon
G a notice by the Jncome Tax Officer under Sub-:-s. (2) of s. 139 and
a return in the circumstances mentioned in Sub-s. (4) of s. 139.
We are not concerned here with a return under Sub-s. (3) of s. 139
disclosing a loss nor are we concerned with a revised return under
Sub-s. (5) of s. 139. In the case of a voluntary return, Sub-s. (l)
of s. 139 prescribes the period within which such returns must be
filed. Where no return can be filed within the prescribed period,
B
. d.I.T. v. M.C. SEKl!AR (Pathak, i.) 21!)
) ~·
the assessee is entitled to apply to the Income Tax Officer fur extend-
ing the date for furnishing the return. The Income Tax Officer is
empowered to extend the date in his discretion. In a case covered
by cl. (i) of the proviso to Subs. (1) of s. 139 the period may be
extended upto September 30 of the assessment year without charging
any interest, and in a case covered by cl. (ii) of the proviso the
period may be extended upto December 31 of the assessment year B
• similarly without charging any interest. But where the period is
extended beyond the dates mentioned in clauses (i) and (ii), then
under cl. (iii), the assessee is liable to pay interest from October 1
or January l, as the case may be, of the assessment year to the date
of the furnishing of the return on the amount of tax payable on the
total income reduced by the advance tax paid and any tax deducted
at source. Similarly, in the case of a return furnished under Sub-s. c
(2) of s. 139 the Income Tax Officer has power to extend the date
for furnishing the return subject to payment of interest· in the
circumstances set forth in relation to voluntary returns under
Sub-s. (I) of s. 139. Where, however, the assessee does tiot furnish
a return within the time allowed to him under Sub-s. (1) or D
Sub-s. (2) of s. 139 then before any assessment is made he may,
under Sub-s (4) of s. 139, furnish a return for any previous year
at any time before the end of four assessment years from the end of
the assessment year to which the return relates, and in that event
the provisions of Sub-cl. (iii) of the proviso to Sub-s. (1) of s.
139 relating to payment of interest would apply to the case. Sub- £
s. (8) of s. 139 was inserted by the Finance Act, 1963 with effect
from April 28, 1963. It declared that notwithstanding anything con-
tained in cl. (iii) of the proviso to Sub-s. (I} of s. 139, it was open
to the Income Tax Officer, in certain prescribed cases and circum-
stances, to reduce or waive the interest payable by any person under
any provision of s. 139. It may be noted that the language of F
Sub-s. (8) of s. 139 suffered material change with effect from April
' 1, 1971.
Now, it will be apparent that delay in filing a return of income
results in the postponement of payment of tax by the assessee G
resulting in the State being deprived of a corresponding amount of
revenue for the period of the delay. It seems that in order to com-
pensate for the Joss so occasioned Parliament enacted the provision
for payment of interest. It is apparent also from the language of cl.
(iii) of the proviso that interest becomes payable only upon the H
220 SUPREME COURT REPORTS t19ssj :i s.c.il.
Income Tax Officer acting on an application made by the assessee
A for the purpose and extending the date for furnishing the return.
At the relevant time the proviso to Sub -s. (!)of s. 139 read : --
"Provided that on an application made in the prescrib-
ed manner, the Income Tax Officer may, in his discretion,
extend the date for furnishing the return-
B
(i) in the case of any person whose total income includes
any income from business or profession the previous '
year in respect of which expired on or before the 31st
day of December of the year immediately preceding
c the assessment year, and in the case of any person
referred to in clause (b), up· to a period not extending
beyond the 30th day of September of the assessment t
year without charging any interest ; t
(ii) in the case of any person whose total income includes
D any income from business or profession the previous
year in respect of which expired after the 31st day of
December of the year immediately preceding the
assessment year, upto the 31st day of December of
the assessment year without charging any interest; and
E (iii) up to any period falling beyond the dates mentioned
in clauses (i) and (ii), in which case, interest at nine
per cent per annum shall be payable from the 1st day
of October or the !st day of January, as the case may
be, of the assessment year to the date of the furnishing of
the return--
F
(a) in the case of a registered firm or an unregistered
firm which has been assessed under cl. (b) of s. 183,
on the amount of tax which/would have been payable
if the firm had been assessed as an unregistered firm,
and
(b) in any other case, on the amount of tax payable on
the total income, reduced by the advance tax, if any
paid or by any tax deducted at source, as the case
may be,"
ff It is only where the Income Tax Officer extends the time for
c.1.r. v. M.C. SBKHA'R. (Pathak, J.) 221
r furnishing the return beyond September 30 or December 31, as the A
case may be, that interest becomes payable.
Now the contention on behalf of the Revenue is that there is
no material to warrant the finding that an application had been
made by the assessee for extension of time and that upon such
• application the Income Tax Officer extended the time. It is urged
that the imposition of interest does not warrant the assumption B
that an application for extension of time was made by the assessee
and allowed by the Income Tax Officer. The proviso to Sub·s.
(1) of s. 139 requires the assessee to make an application for ex-
tension of tirne in the prescribed manner, and the prescribed form
\. of the application set forth is Form No. 6 pursuant to rule 13 of
\
i
the Income Tax Rules, which requires the assessee to state the c
reasons on which the extension of time is sought. All this, learned
counsel contends, contemplates that the Income Tax Officer should
apply his mind to relevant material before him before deciding, in
his discretion, whether the time should be extended. Learned
counsel, however, has not been able to satisfy us why the presump-
tion raised by the Appellate Tribunal, and endorsed by the High D
Court, should not prevail. It cannot be disputed that the Income
Tax Officer could extend the date for furnishing the return in respect
of each assessment year. It was open to him to do so under the
statute, and he was entitled to charge interest only on the basis that
the extended period fell beyond September 30 or December 31, as
E
the case may be. In the ordinary course of things, the Income
Tax Officer could have extended the date only upon being satisfied
that there was good reason for doing so, and that would have been
on grounds pleaded by the assessee. We consider that in the
circumstances of this case a presumption could validly be raised
that all that was done. No attempt was made by the Revenue
F
to show that the Income Tax Officer acted arbitrarily and contrary
to the procedure envisaged by the statute. The Appellate Tribunal
considered the matter carefully and found circumstances on the
record in favour of raising the presumption. The High Court ·
approved of the approach adopted by the Appellate Tribunal and
did not find it contrary to law. We do not see any reasoa to diffe
from the opinion expressed by the High Court. r G
In the instant case, the extension was a matter falling within
Sub-s. (!) of s. 139, and the returns furnished by the assessee must
be attributed to that provision. They were not returns furnished
ff
222 SUPREME COURT REPORTS (1985] 2 S.C.R.
within the contemplation of Sub-s. (4) of s. 139. Therefore, the
A
decision of the Gujarat High Court in A'dditional Commissioner of
Income Tax, Gujarat v. Santosh Industries,('> of the Karnataka High
court in M. Nagappa and Others v. Income Tax Officer, Central
Circle-I, Bangalore and Others,<'> of the Andhra Pradesh High
Court in Poorna Biscuit Factory v. Commissioner of Income Tax,
B A.P.,(') of the Orissa High Court in Commissioner of Income Tax,
Orissa V. Gangaram Chapo/ia,<'> and of the Allahabad High Court
in Metal India Products v. Commissioner of Income Tax, Lucknow<">
'
cannot be invoked in the instant case. They are cases dealing with
a return filed in the circumstances mentioned in Sub-s. (4) of s. 139.
c Our attention has also been drawn to the decision of this
Court in Commissioner of Income Tax, Punjab v. Kulu Valley Trans-
port Co. P. Ltd.(f) That was a case where the returns were filed
under Sub-s. 3 of s. 22 of the Indian Income Tax Act, 1922. They
were not returns furnished within the time allowed by or under
D
Sub-s. (1) or Sub-s. (2) of s. 22 of that Act. Accordingly, that
case also need not be considered.
In the result, we uphold the answer returned by the High
Court to the first question raised in the reference.
The second question raises the point whether the Appellate
E
Tribunal was justified in cancelling the penalties levied under cl.
(a) ofSub-s. (I) ofs. 271. That provision reads:-
"271 (1) If the Income Tax Officer or the Appellate Assistant
Commissioner in the course of any proceedings under
F 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-s. (1) of s. 139 or by notice given
under Sub-s. (2) of s. 139 or s. 148 or has without
reasonable cause failed to furnish it within the time
G
(l) [1974193 I.T.R. 563.
(2) [1975] 99 I.T.R. 32.
(3) [1975] 99 I.T.R. 41.
(4) [1976) 103 I.T.R. 613.
(5) [1978] 113 I.T.R. 830.
(6) (1970] 77 I.'f.R. 518
C.J.T, v M.C. SEKHAR (Pathak J.) 223
allowed and ni the manner reqnired by Suh-s. (!)
of s. 139 or by such notice, as the case may be, or A
(b) ............................................................... -
(c) ................................................................. .
he may direct that such person shall pay by way of penalty,- B
(i) .................................................. .
(ii} .................................................. .
(111) ......... - ...... - ... - ............ - ...... -
It is clear that penalty is attracted if the Income Tax Officer is
satisfied that assessee has, without reasonable cause, failed to furnish
•
the returns "within the time allowed". The time allowed for
furnishing a voluntary return is the time specified in Sub-s. (I) of
s. 139. We have seen that the proviso to that sub-section empowers
the Income Tax Officer to extend the date for' furnishing the return. D
It was open to Parliament to specify by express enactment the date
by which a return must be filed, and also confer power on the In-
come Tax Officer to extend the date for doing so. When the In-
come Tax Officer extends the date, he does so in the exercise of
authority conferred by the statute, and the additional time available
to the assessee consequent upon such extension is, for all relevant E
purposes, of the same character and as effective as the statutory
period specifically enacted by Parliament. For the purpose of
furnishing a return it constitutes an integral part of the time allowed
for furnishing a return. Therefore, where the Income Tax Officer
extends the date, then all the time upto that date is the time allowed F
for furnishing the return. The additional period consequent upon
such extension falls within the expression "the time allowed" in
cl. (a) of Sub-s. of s. 271. That being so, the conclusion must
follow that the penalty provision does not come into play at all.
In our opinion, the High Court was right in answering the
second question also in favour of the assessee.
We express our agreement with the opinion of the High Court G
on both the questions referred to it. Accordingly, these appeals
fail and are dismissed with costs.
H.S.K. Appeal dismissed,
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