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Shankarlall Goenka Vs. Income-tax Officer, A-ward and ors. - Court Judgment

LegalCrystal Citation
Subject;Direct Taxation
CourtGuwahati High Court
Decided On
Case NumberCivil Rule Nos. 419, 567 and 682 of 1970
Judge
ActsIncome Tax Act, 1961 - Sections 139, 139(1), 139(2), 139(4) and 271
AppellantShankarlall Goenkamungi Debi Goenka
Respondentincome-tax Officer, A-ward and ors.income-tax Officer, B-ward and ors.
Appellant AdvocateK.C. Bezbarua and R.L. Jain, Advs.
Respondent AdvocateG.K. Taukdar and D.K. Talukdar, Advs.
Excerpt:
- - it is now well settled that the language of such a statute has to be construed in its strict sense. under section 271 of the act penalty can be levied on the assessee only if he has failed to furnish the return within the time specified under sub-section (1) of section 139 or by notice given under sub-section (2) of section 139 or 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. in a taxing act one has to look merely at what is clearly said. ' to put it in other words, the subject is not to be taxed unless the charging provision clearly imposes the obligation. this is a well accepted view of law. but it has long been recognised that our courts cannot so apply taxing acts'.21. hence, the best that can be said..... sadanandaswamy, c.j.1. common questions of law are involved in these three writ petitions under art. 226 of the constitution. the facts are also similar. in c.r. no. 419/70, the petitioner derived income in the assessment year 1962-63 from two firms, m/s. ganeshdas sreeram and m/s. a. v. morello & co. the major income was from m/s. ganeshdas sreeram which is a registered firm. respondent no. 1, the ito, a-ward, shillong, assessed the petitioner on the return filed by the petitioner under section 141 of the i.t. act, 1961, and found a total income of rs. 72,102 and demanded an amount of rs. 36,961.39 as tax including a sum of rs. 3,881.39 as interest under section 139. thereafter, respondent no. 1 made the final assessment under section 143(3)/154 of the said act and found the total.....
Judgment:

Sadanandaswamy, C.J.

1. Common questions of law are involved in these three writ petitions under art. 226 of the Constitution. The facts are also similar. In C.R. No. 419/70, the petitioner derived income in the assessment year 1962-63 from two firms, M/s. Ganeshdas Sreeram and M/s. A. V. Morello & Co. The major income was from M/s. Ganeshdas Sreeram which is a registered firm. Respondent No. 1, the ITO, A-Ward, Shillong, assessed the petitioner on the return filed by the petitioner under Section 141 of the I.T. Act, 1961, and found a total income of Rs. 72,102 and demanded an amount of Rs. 36,961.39 as tax including a sum of Rs. 3,881.39 as interest under Section 139. Thereafter, respondent No. 1 made the final assessment under Section 143(3)/154 of the said Act and found the total income of the petitioner to be Rs. 91,174. In pursuance of the said assessment order, respondent No. 1 issued a demand notice dated March 27, 1967, for payment of a sum of Rs. 57,735 as tax for the assessment year. Out of this amount, Rs. 36,961 was paid. A demand notice for Rs. 20,774 was issued. This included an amount of Rs. 7,351 as interest under Section 139 of the I.T. Act, 1961. Against the imposition of interest on the petitioner for filing the return beyond the specified time allowed under Section 139, the petitioner filed a petition for waiver of the interest as provided under Rule 117A of the I.T. (Second Amend.) Rules, 1964. That petition was rejected on May 30, 1969. The firm, M/s. Ganeshdas Sreeram, of which the petitioner is one of the partners, filed an appeal against the assessment order and the demand notice issued to the firm before the AAC of Income-tax who fixed the income of the petitioner at Rs. 74,704 for the assessment year 1962-63. Respondent No. 1 issued a fresh notice of demand. According to this assessment, the petitioner had to pay Rs. 38,766, out of which Rs. 36,961 had already been paid. The demand notice was, therefore, issued for Rs. 1,805. The tax of Rs. 38,766 demanded from the petitioner included interest, under Section 139, of Rs. 4,071.

2. It is the first contention of the petitioner that he had not filed any application for extension of time for filing the return and that, therefore, no interest can be charged under Section 139(4).

3. The registered firm, M/s. Ganeshdas Sreeram, was treated as an unregistered firm for purposes of charging interest under Sub-clause (a) of Clause (iii) of the proviso to Sub-section (1) of Section 139 and the firm was charged interest on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm. Under the provisions of the I.T. Act, the

partners of an unregistered firm are not liable to pay any tax on the income derived from the unregistered firm. The said income is included in the partner's total income only for the purpose of filing the rate. It is the second contention of the petitioner that since the registered firm of which he is a partner has been treated by respondent No. 1 as an unregistered firm, the petitioner is not liable to be charged with interest. The demand notices dated February 18, 1970, and March 26, 1967, by which interest has been charged and demanded have been challenged by the petitioner in this writ petition. The facts in the other two writ petitions are similar.

4. The relevant part of Section 139 of the I.T. Act, 1961, hereinafter referred to as ' the Act', reads as follows :

'139. (1) Every person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall furnish a return of his income or the income of such other person during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed--

(a) in the case of every person whose total income, or the total income of any other person in respect of which he is assessable under this Act, includes any income from business or profession, before the expiry of six months from the end of the previous year or where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year, or before the 30th day of June of the assessment year, whichever is later ;

(b) in the case of every other person, before the 30th day of June of the assessment year :

5. Provided that, on an application made in the prescribed manner, the Income-tax Officer may, in his discretion, extend the date for furnishing the return--

(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 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 year without charging any interest;

(ii) in the case of any person whose total income includes 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, up to the 31st day of December of the assessment year without charging any interest; and

(iii) up to any period falling beyond the dates mentioned in Clauses (i) and (ii), in which case, interest at six per cent. per annum shall be payable from the 1st day of October or the 1st day of January, as the case may be, of the assessment year to the date of the furnishing of the return--

(a) in the case of a registered firm or an unregistered firm which has been assessed under Clause (b) of Section 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............

(2) In the case of any person who, in the Income-tax Officer's opinion is assessable under this Act, whether on his own total income or on the total income of any other person during the previous year, the Income-tax Officer may, before the end of the relevant assessment year, serve a notice upon him requiring him to furnish, within thirty days from the date of service of the notice, a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed :

Provided that on an application made in the prescribed manner the Income-tax Officer may, in his discretion, extend the date for the furnishing of the return, and when the date for furnishing the return, whether fixed originally or on extension, falls beyond the 30th day of September or, as the case may be, the 31st day of December of the assessment year, the provisions of Sub-clause (iii) of the proviso to Sub-section (1) shall apply

(4) Any person who has not furnished a return within the time allowed to him under Sub-section (1) or Sub-section (2) may, before the assessment is made, furnish the 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 the provisions of Sub-clause (iii) of the proviso to Sub-section (1) shall apply in every such case........'

6. The proviso to Sub-section (1) of Section 139 enables the ITO to extend the date for furnishing the return if an application is made in the prescribed manner. Clauses (i) and (ii) of the proviso provide the period up to which extension can be granted by the ITO without charging any interest. Clause (iii) provides that if the period is extended beyond the dates mentioned in Clauses (i) and (ii) interest at the rate of 6% per annum shall be pay-

able from the dates specified therein. Hence, reading Sub-section (1) alone along with its proviso, interest is chargeable only in cases where an application has been made by the assessee and the ITO extends the date for furnishing the return beyond the dates specified in Clauses (a) and (b) of Sub-section (1). Sub-section (4) enables the assessee to file the return at any time before the four assessment years from the end of the assessment year to which the return relates, in case he has not furnished the return within the time allowed to him under Sub-sections (1) and (2). In such a case, the provisions of Sub-clause (iii) of the proviso to Sub-section (1) have been made applicable. The question, therefore, is whether interest is chargeable if the return is filed under Sub-section (4) even though no application for extension of time has been filed by the assessees. According to the petitioner, interest is chargeable in such a case only if an application for extension of time has been filed. Since the petitioner filed no such application, his contention is that no interest is chargeable. On the other hand, the contention of the respondent is that interest is chargeable in such cases even if no application for extension of time has been filed by the assessee.

7. The Division Bench before which these petitions came up for hearing observed that the main point raised in these cases was covered by the decision of this court reported in (Ganesh Das Sreeram v. ITO), but that this decision may require to be reconsidered and they were referred to a larger Bench. That is how they have come up for hearing before us.

8. In Ganesh Das Sreeram v. ITO , a Division Bench of this court held that where an assessee furnishes the return under Section 139(4), an application by the assessee and a consequent order extending the time for furnishing the return are not conditions precedent for authorising the ITO to charge interest under Clause (iii) of the proviso to Section 139(1). The decisions in : [1974]95ITR372(Orissa) (Biswanath Ghosh v. ITO) : [1976]105ITR230(Guj) (Chhotalal & Co. v. ITO) : [1972]86ITR566(KAR) (Indian Telephone Industries Co-op. Socy. Ltd. v. ITO) and (K. C. Trunk & Bucket Factory v. CIT) also take the same view. This may be called the first view.

9. As against this, it has been held that an application for extension of time is a condition precedent to enable the ITO to charge interest where the return is filed under Sub-section (4) of Section 139 in : [1971]82ITR660(AP) (Kishanlal Haricharan v. ITO) : [1976]102ITR443(Patna) (CIT v. Bahri Bros. (P.) Ltd.) : [1974]97ITR639(Delhi) (Garg & Co. v. CIT) and (Mulakh Raj Bimal Kumar v. ITO). This may be called the second view.

10. The leading case in support of the first view is the decision in Chhotalal & Co. v. ITO : [1976]105ITR230(Guj) . A Division Bench of the

Gujarat High Court observed as follows while dealing with this question (P.238):

' In our opinion the only way of construing Section 139(4) is to hold that those provisions of Clause (iii) of the proviso to Sub-section (1) of Section 139 which provide that interest at nine per cent. per annum shall be payable from the 1st day of October or from the 1st day of January, as the case may be, of the assessment year to the date of the furnishing of the return apply whenever the return is not filed within the time allowed to the assessee under Sub-section (1) or Sub-section (2) but is filed before the assessment is made within the period of four years from, the end of the assessment year under consideration. It also follows that in the case of a registered firm, interest will be charged on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm.

It was contended that in order to appreciate the correct impact of Clause (iii) of the proviso to Sub-section (1) of Section 139, we must take note of the fact that the provisions of Clauses (i) and (ii) of the proviso to Section 139(1) have to be looked at in order to find out the significance of the dates, 1st day of October and 1st day of January, occurring in Clause (iii). In our opinion, the Legislature has incorporated by reference the provisions of Clause (iii) of the proviso to Sub-section (1) in Section 139(4) and once those provisions are read as having been so incorporated, so much of these provisions of Clause (iii) of the proviso have to be read in Section 139(4) as may be applicable and as may be consistent with the language of the two provisions. Under these circumstances, on a mere construction of the provisions of Section 139(4) read with the third clause of the proviso to Sub-section (1) of Section 139, it must be held that an assessee who does not furnish his return within the time mentioned in Sub-section (1) of Section 139 or within the time given to him under the notice under Section 139(2) may tile his return before the assessment is made so long as it is filed within the period of four years from the end of the assessment year under consideration. But such belated filing would attract the provisions of Clause (iii) of the proviso to Sub-section (1) and would compel the Income-tax Officer to levy penal interest as mentioned in Clause (iii) of the proviso to Sub-section (1).'

11. The leading case in support of the second view is the decision in [1974] 97 ITR 639 (Delhi) (Garg & Co. v. CIT). A Division Bench of the Delhi High Court, while considering this question, observed as follows (p. 642):

' Mr. Kirpal then contended that Sub-section (4) does not apply the whole of the proviso to Sub-section (1) to the case. It is the interest part of the proviso, which alone is relevant in the context of the language of Sub-section (4) which, according to him, would apply. This contention again is without merit. Sub-clause (iii) torn from its context, in itself, would

hardly make much sense. It would remain an incomplete sentence. Sub-clause (iii) has to be read along with the opening part of the proviso, which says that the Income-tax Officer may in his discretion extend the date for furnishing the return, ' up to any period falling beyond the date mentioned in clauses (i) and (ii), in which case interest at 9% per annum shall be payable'. The part of Sub-clause (iii) which requires the assessee to pay interest comes into operation only in case the extension of the date for furnishing the return beyond the prescribed dates is given by the Income-tax Officer in his discretion. This power is exercisable only when an application is made in the prescribed manner. Various parts of the proviso including Sub-clause (iii) are so inter-dependent that no one part can stand by itself. We. therefore, hold that interest could be demanded from the assessee only in case an application in the prescribed manner had been made by him and the Income-tax Officer in his discretion had extended the date for furnishing the return.

Mr. Kirpal contended that in order to make the section work, it is necessary to read the language of the proviso in the manner suggested by him. He submitted that a literal reading of the proviso would render Sub-section (4) completely unworkable. This contention of the learned counsel has no substance. We are not privileged to read the language of a section in a manner different from the one in which the language is incorporated in the section. We cannot incorporate words in the statute which the Legislature in its wisdom has not incorporated, nor can we ignore the words which the Legislature has incorporated. This is more so when the statute to be interpreted is a fiscal statute. It is now well settled that the language of such a statute has to be construed in its strict sense. The assessee is always entitled to the benefit of doubt, if any, left in the language of the statute.

Sub-section (4) applies the provisions of Clause (iii) of the proviso to the cases falling under it. The phrase ' in which case', occurring in Clause (iii) makes the subsequent portion of the clause dealing with interest dependent on the earlier portion of the clause, which read with the opening part of the proviso makes the making of an application in the prescribed manner and the actual grant of extension by the Income-tax Officer, conditions precedent for the payment of interest. There may be a lacuna in the language, which we are afraid, we cannot fill up. We are fortified in this view by the subsequent amendment effected by the Finance Act, 1972, by which the lacuna has been filled up by substituting the old Sub-section (8), by a new Sub-section (8), which reads as follows :

'(8) (a) Where the return under Sub-section (1) or Sub-section (2) or Sub-section (4) for an assessment year is furnished after the specified date, or is not furnished, then whether or not the Income-tax Officer, has extended

the date for furnishing the return under Sub-section (1) or Sub-section (2) the assessee shall be liable to pay simple interest at twelve per cent. per annum, reckoned from the day immediately following the specified date to the date of the furnishing of the return or, where no return has been furnished, the date of completion of the assessment under Section 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source:

Provided that the Income-tax Officer may, in such cases and under such circumstances as may be prescribed, reduce or waive the interest payable by any assessee under this sub-section...'

The very fact that Sub-section (8) has been amended shows that the Legislature became conscious of the lacuna that had been left in the language of this section before its amendment and which has now been removed by introducing the amendment. The assessee, therefore, was entitled to the benefit of the said lacuna, and could not be called upon to pay interest, unless he had applied for extension of time and the extension sought for had been granted.'

13. The first view appears to be based on the assumption that it was the intention of the Legislature to charge interest in cases falling under

Sub-section (4) of Section 139, whether an application for extension of time is filed by the assessee or not. But in order to proceed on that assumption, the intention of the Legislature must be clear. A plain reading of Sub-section (4) would make applicable the entire provisions of Clause (iii) of the proviso to Sub-section (1) of Section 139. Unless some words in Clause (iii) of the proviso are treated as redundant it is not possible to adopt the first view referred to above. If no part of Clause (iii) of the proviso is treated as redundant, then the provisions of Sub-clause (iii) must be read along with the opening words of the proviso, namely :

' Provided that, on an application made in the prescribed manner, the Income-tax Officer may, in his discretion, extend the date for furnishing the return.'

14. Hence, if no part of Sub-clause (iii) is treated as redundant, then interest will be chargeable only if an application has been filed for extension of time and the ITO does extend the date for furnishing the return.

15. The Act as a whole must be construed in case there is ambiguity. Under Section 271 of the Act penalty can be levied on the assessee only if he has failed to furnish the return within the time specified under Sub-section (1) of Section 139 or by notice given under Sub-section (2) of Section 139 or 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. Hence, if the return is filed within the time extended by the ITO on an application made under the proviso to Sub-section (1) of Section 139, no penalty can be levied on the assessee for the delay in filing his return

under Section 271 of the Act. Sub-section (4) of Section 139 applies to cases where the return is not filed within the time allowed under Sub-section (1) or Sub-section (2) of Section 139. If an application is filed by the assessee for extension of time either under the proviso to Sub-section (1) or under the proviso to Sub-section (2) and if the return is filed within the extended time, then such return must be deemed to be a return within the time allowed under Sub-section (1) or Sub-section (2). Hence, to such cases Sub-section (4) of Section 139 does not apply. Thus, an assessee who filed application for extension of time under the proviso to Sub-section (1) of Section 139 escapes the liability to pay penalty under Section 271. But an assessee who files his return beyond the prescribed time under Sub-section (1) of Section 139, but within the time specified under Sub-section (4) and has not filed any application for extension of time does not escape the liability to be proceeded with for levy of penalty under Section 271 of the Act. Hence, the intention of the Legislature may be to levy penalty only on the assessees who file their returns late, but within the period specified in Sub-section (4). Hence, it cannot be assumed that it was the intention of the Legislature to charge such assessees with interest also. It may be the intention of the Legislature to charge interest on assessees who get the benefit of exemption from the levy of penalty and to exempt assessees who are liable to penalty from the liability to pay interest.

16. Thus, it cannot be said definitely that the intention of the Legislature was to charge interest also on assessees who are liable to be proceeded with under Section 271, that is, assessees who had neither filed any application for extension of time for filing the return nor had been granted such extension of time. Hence, the construction cannot be put on Sub-section (4) of Section 139 incorporating the provisions of Sub-clause (iii) of the proviso by omitting some of the words in that sub-clause. Such an artificial construction cannot be put unless the intention of the Legislature is clear.

17. In CIT v. Ajax Products Ltd. : [1965]55ITR741(SC) the rule of construction of a taxing statute was considered and it has been observed as follows (p. 747) :

' The rule of construction of a taxing statute has been pithily stated by Rowlatt J. in Cape Brandy Syndicate v. IRC [1921] 1 KB 64, thus:

' In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.'

To put it in other words, the subject is not to be taxed unless the charging provision clearly imposes the obligation. Equally important is the rule of construction that if the words of a statute are precise and unambiguous, they must be accepted as declaring the express intention of the legislature.'

18. In CIT v. Naga Hills Tea Co. Ltd. : [1973]89ITR236(SC) , it has been observed as follows (p. 240) :

' If a provision of a taxing statute can be reasonably interpreted in two ways, that interpretation which is favourable to the assessee, has got to be accepted. This is a well accepted view of law.'

19. In Crates on Statute law, 7th Edn., at page 113, the rules on interpretation of a taxing statute have been stated as follows, quoting Lord Cairns in [1869] LR 4 (HL) 100 (Partington v. Attorney-General) :

' In Partington v. Att.-Gen., Lord Cairns said : 'I am not at all sure that, in a case of this kind--a fiscal case--form is not amply sufficient; because, as I understand the principle of all fiscal legislation, it is this : if the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other band, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be. In other words, if there be admissible, in any statute, what is called an equitable construction, certainly such a construction is not admissible in a taxing statute, where you simply adhere to the words of the statute'.'

20. Again at page 114, the following observations in IRC v. Wolfson [1949] 1 All ER 865, have been quoted :

' 'It is not the function of a court of law to give to words a strained and unnatural meaning,' said Lord Simons, ' because only thus will a taxing section apply to a transaction which, had the legislature thought of it, would have been covered by appropriate words'. In IRC v. Saunders [1958] AC 285 ; [1958] 34 ITR 827 , Lord Reid said : 'It is sometimes said that we should apply the spirit and not the letter of the law so as to bring in cases which, though not within the letter of the law, are within the mischief at which the law is aimed. But it has long been recognised that our courts cannot so apply taxing Acts'. '

21. Hence, the best that can be said in favour of the respondent is that both the first view as well as the second view are possible on the interpretation of Sub-section (4) of Section 139. Even on that assumption, the rule of construction referred to above has to be applied, namely, the interpretation which is in favour of the assessee has to be adopted. We must, therefore, adopt the second view referred to above, namely, that interest is chargeable only in cases where the assessee has applied for extension of time for filing the return.

22. The next question to be considered is whether the petitioner is not liable to be charged with interest on his share of the income of the registered firm. For the purposes of assessing tax under the Act, a registered firm as well as a partner of such registered firm are separate entities. Both the

registered firm as well as its partner can be assessed to tax independently, the registered firm on its income and the partner on his share of the income of the registered firm, the income in each case being computed under the provisions of the Act. Under Section 139 both the registered firm as well as its partners individually are liable to be charged with interest. Under Clause (a) of Sub-clause (iii) of the proviso to Sub-section (1) of Section 139 a registered firm is liable to be charged with interest as if it had been an unregistered firm. But merely because the registered firm has been treated as an unregistered firm for the purposes of charging interest, the liability of the partner of the registered firm to be charged with interest on his share of the income does not cease. It is only if the registered firm had been treated as an unregistered firm for assessment of tax under the Act that the liability of the partner to be assessed to tax would cease. But in this case it is only for the purpose of charging interest under Section 139 that the registered firm is treated as an unregistered firm. For the purposes of assessment of tax under the Act the registered firm continues to be treated as a registered firm and its partners continue to be similarly treated. Hence, the mere fact that for the purpose of charging interest, the registered firm is treated as if it is an unregistered firm does not take away the liability of the partner of the registered firm to be charged with interest on his share of the income under Clause (b) of Sub-clause (iii) of the proviso to Sub-section (1) of Section 139. Hence, this contention of the petitioner is to be rejected.

23. Hence, since the petitioners succeed on the first point, these petitions are to be allowed and the impugned notices in each of these petitions are to be quashed. The petitioners would be entitled to costs from the respondents in each of these petitions. Advocate's fee is assessed at Rs. 100.

B.N. Sarma, J.

24. I have had the privilege of going through the judgment just read by my Lord the Chief Justice and with great respect I regret my inability to agree with my Lord in regard to the first point which fell for our determination. So far as the second point is concerned, I respectfully agree. I now propose to give the reasons for my inability to agree with my Lord in regard to the first point.

25. The relevant facts have been set out in the judgment of my Lord and need no repetition. The two points which fell for our determination in the three writ petitions are :

(i) Whether the ITO can charge interest under Sub-section (4) of Section 139 of the I.T. Act (hereinafter referred to as 'the Act') in the absence of any application by the assessee to the ITO for extension of time to file his return and

(ii) Whether the partner of a registered firm is liable to be charged with interest for his share of income from such firm if it was treated as an

unregistered firm and assessed with interest accordingly under Sub-clause (a) of Clause (iii) of the proviso to Sub-section (1) of Section 139 of the Act

There is conflict of judicial opinion of different High Courts on the first point. Some of the High Courts, including ours, have taken the view that no application by the assessee for extension of time to file his return is necessary to enable the ITO to charge interest under Section 139(4) of the Act. Reference may be made in this regard to the decisions in (1) Ganesh Das Sreeram v. ITO ; (2) Biswanath Ghosh v. ITO : [1974]95ITR372(Orissa) ; (3) Chhotalal & Co. v. ITO : [1976]105ITR230(Guj) ; (4) Indian Telephone Industries Co-operative Society Ltd. v. ITO : [1972]86ITR566(KAR) and (5) M. Nagappa v. ITO : [1975]99ITR32(KAR) . The view taken in these decisions has been referred to as the first view in the judgment of my Lord. A contrary view has been taken in (1) Kishanlal Haricharan v. ITO : [1971]82ITR660(AP) ; (2) CIT v. Bahri Bros. (P.) Ltd. : [1976]102ITR443(Patna) ; (3) Garg & Co. v. CIT : [1974]97ITR639(Delhi) and (4) Mulakh Raj Bimal Kumar v. ITO . The view taken by these High Courts has been referred to as the second view by my Lord in his judgment. For the sake of convenience, I also propose to refer to these two views as the first view and the second view, respectively.

26. The relevant provisions of Section 139 of the Act have been quoted in extenso in the judgment of my Lord and I do not propose to repeat. From the provisions of Clauses (a) and (b) of Sub-section (1) it is seen that every person having income assessable under the Act has got to file his return before the expiry of six months from the end of the previous year or before the 30th day of June of the assessment year, as the case may be. Under these two clauses, the statute itself, without any application from the assessee, gives time for filing the return, as above. Then there is the proviso under the said subsection enabling the ITO to grant further extension of time, in his discretion, on an application made in the prescribed form in that behalf. There are three clauses under this proviso. Clause (i) and Clause (ii) enable the ITO to extend time up to certain dates, as mentioned therein without charging interest and Clause (iii) enables the ITO to extend time up to any period falling beyond the dates mentioned in Clauses (i) and (ii) but subject to payment of interest at 6 per cent. (at the relevant time) from the first day of October or first day of January, as the case may be, of the assessment year up to the date of furnishing of the return. Clause (iii) of the proviso, with the opening words, reads as below :

' Provided that, on an application made in the prescribed manner, the Income-tax Officer may, in his discretion, extend the date for furnishing the return--....

(iii) up to any period falling beyond the dates mentioned in Clauses (i) and (ii), in which case, interest at 6 per cent. per annum shall be payable from the 1st day of October or 1st day of January, as the case may be, of the assessment year to the date of the furnishing of the return.'

27. Sub-sectiion (4) of Section 139 is in the following terms :

' (4) Any person who has not furnished a return within the time allowed to him under Sub-section (1) or Sub-section (2) may before the assessment is made furnish the 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 the provisions of Sub-clause (iii) of the proviso to Sub-section (1) shall apply in every such case.'

28. Now, the High Courts which have taken the second view are of the opinion that, in terms of Sub-section (4) of Section 139 of the Act, if interest is to be charged on the basis of Clause (iii) of the proviso to Sub-section (1), the entire proviso along with the opening words, namely, ' Provided that, on an application made in the prescribed manner, the Income-tax Officer may, in his discretion, extend the date for furnishing the return ' must be read as forming part of Sub-section (4) of the Act. In other words, according to this view, the proviso to Sub-section (1) of Section 139 cannot be dissected into three separate parts ; the various parts of the proviso, including Sub-clause (iii), are so inter-dependent that no one part can stand by itself. In this view of the provisions of Sub-section (4) of Section 139 of the Act, it has been held that interest could be demanded from an assessee only in case an application in the prescribed manner was made by him as contemplated by the proviso and the ITO in his discretion extended the date for furnishing such return.

29. With great respect, I am unable to agree with the above view. If the entire proviso with the opening words are to be read along with Sub-section (4) of Section 139 it will make no sense. As has been pointed out by Divan C.J., speaking for the Gujarat High Court in Chottalal & Co. v. ITO : [1976]105ITR230(Guj) Sub-section (4) of Section 139 contemplates a situation which is altogether different from the situation contemplated by the proviso, Clause (iii) to Sub-section (1) of Section 139. Clause (iii) of the proviso to Sub-section (1) enables the ITO to grant extension of time up to any period beyond the dates mentioned in Clause (i) and (ii), subject to payment of interest at 6 per cent. from the first day of October or the first day of January, as the case may be, of the assessment year to the date of furnishing of the return. Under this clause, the ITO cannot charge interest if an assessee having obtained extension of time from the ITO up to some date beyond the dates mentioned in Clauses (i) and (ii) failed to file his return within the time so extended but filed his return some time beyond the extended period. In such a case, interest can be charged only under Sub-section (4) read with Clause (iii) to Sub-section (1) if the necessary conditions mentioned therein are fulfilled. It is thus evident that

incorporation of the entire proviso to Sub-section (1) in Sub-section (4) or literal application of the entire proviso to cases coming under Sub-section (4) is not possible. If made, it will make no sense.

30. Sub-section (4) of Section 139 is attracted, as we have already seen, when a person submits his return beyond the time allowed to him under Sub-section (1) or Sub-section (2). It has already been noticed that time is allowed to a person in two ways for furnishing his return, namely, (i) by the statute itself and (ii) by the ITO on an application made by him. The language of Sub-section (4) does not spell out that this is to be applied only in cases where the assessee files an application for extension of time and the ITO grants such extension. The words 'shall apply in every such case' occurring at the end of this sub-section mean in all cases where the assessee who failed to submit his return within the time allowed under Sub-sections (1) and (2) (both by the statute itself and on application) furnishes his return for any previous year before the assessment is made at any time before the end of four assessment years from the end of the assessment year to which the return relates. To interpret the provisions of this sub-section as having application only in such cases where the assessee already applied for extension of time and the ITO has granted the same will amount to doing violence to the language used by the Legislature.

31. It was also contended by the learned counsel for the petitioner that a person who files his return late beyond the time allowed under Sub-sections (1) and (2) is liable to pay penalty under Section 271 of the Act and, therefore, it is difficult to believe that the Legislature intended to put such a person in double jeopardy by making him liable to pay interest as well. According to him, it was not the intention of the legislature, in enacting Sub-section (4), to charge interest on such person. It was further contended that if two views are possible, one favourable and the other unfavourable to the assessee, the view which is favourable to the assessee is to be accepted.

32. The above argument is not at all convincing. As already noticed, one of the contentions of the learned counsel for the petitioner is that Sub-section (4) is applicable only in a case where the assessee applies for extension of time and the ITO has granted him such extension. The other contention, which conflicts with the first contention, is that it is not the intention of the Legislature to charge interest for such belated submission of return as the persons concerned in such a case are liable to pay penalty under Section 271 of the Act. If extension of time for submission of return is prayed for and granted by the ITO and the return is filed within such time, the question of liability to pay penalty would not arise as, in that case, there would be no default. In such a case Sub-section (4) is not attracted at all. This sub-section is attracted if the return is not filed within the time allowed to an assessee under Sub-section (1) or Sub-section (2), but is filed before the assessment is made and

before the end of the four assessment years from the end of the assessment year to which the return relates. Section 271 of the Act will have application in such a case as there is clear default in filing the return in time. Thus, if the first contention of the learned counsel for the petitioner, namely, that Sub-section (4) is applicable only when an assessee filed an application for extension of time and the same is granted by the ITO is accepted, the assessee will be liable to be charged with interest as well as penalty. If, on the other hand, it is held, accepting the second argument of the learned counsel for the petitioner that it is not the intention of the legislature to charge interest on such assessee for his belated return as he is liable to pay penalty under Section 271 of the Act, Sub-section (4) of Section 139 of the Act will become otiose.

33. On a plain reading of the provisions of Sub-section (4) of Section 139, it is clear that the manifest purpose of the legislation is to charge interest in cases of belated returns coming within the purview of that sub-section.

' The first business of the courts is to make sense of the ambiguous language, and not to treat it as unmeaning, it being a cardinal rule of construction that a statute is not to be treated as void, however oracular.' (vide Craies on Statute Law, 17th edn., page 95).

As Viscount Simon L. C. observed in Nokes v. Doncaster Amalgamated Collieries Ltd. [1940] AC 1014, 'If the choice is between two intepretations, the narrower of which would fail to achieve the manifest purpose of the legislation, we would avoid a construction which would reduce the legislation to futility and should rather accept the broader construction based on the view that Parliament would legislate only for the purpose of bringing about an effective result.'

34. As observed by Maxwell on the Interpretation of Statutes, 12th edn., at page 228 :

'Where the main object and intention of a statute are clear, it must not be reduced to a nullity by the draftsman's unskilfulness or ignorance of the law, except in a case of necessity, or the absolute intractability of the language used.'

35. It was also contended on behalf of the petitioner that if the first view is taken, the opening words of the proviso as well as of Clause (iii) itself will have to be treated as redundant and that a court while interpreting a statute is not entitled to do so. This contention is not well founded. A court of law will reject words as surplusage, if it appears, as observed by Coleridge J. in R. v. East Ardsley (Inhabitants) [1850] 14 QB 793 ''by attempting to give a meaning to every word we should have to make the Act of Parliament insensible', or if it is clear that otherwise the manifest intention of the Legislature will be defeated.' (See Craies on Statute Law, 17th edn., p. 106).

36. Having regard to the language of Sub-section (4) of Section 139 of the Act and the scheme of this section, I am in respectful agreement with the view expressed by Divan C. J., in Chhotalal & Co. v. ITO : [1976]105ITR230(Guj) that:

' ...the legislature has incorporated by reference to the provisions of Clause (iii) of the proviso to Sub-section (1) in Section 139(4) and once these provisions are read as having been so incorporated, so much of these provisions of Clause (iii) of the proviso have to be read in Section 139(4) as may be applicable and as may be consistent with the language of the two provisions.'

37. In this view of the provisions of Section 139(4) read with Clause (iii) of the proviso to Sub-section (1) of Section 139, it has got to be held that an assessee who does not furnish his return within the time mentioned in Sub-section (1) of Section 139 or within the time given to him in the notice under Sub-section (2) of Section 139 may file his return before the assessment is made so long as it is filed within the period of four years from the end of the assessment year under consideration, subject, however, to the condition that such belated filing would attract the provisions of Clause (iii) of the proviso to Sub-section (1) and would make the assessee liable to pay interest as mentioned in the said clause. Filing of an application for extension of time by the assessee and grant of such extension by the ITO are not the conditions precedent for application of Sub-section (4) of Section 139 of the Act. There is no scope for taking any other view of the matter, in my opinion. Hence, the first point, mentioned earlier, must be decided against the petitioner who has challenged the charging of interest under Section 139(4) of the Act, relying on the second view, and I decide accordingly.

38. In the result, the petitions in all the three civil rules fail and are accordingly dismissed. In the circumstances of the case, I, however, leave the parties to bear their own costs.

N. Ibotombi Singh, J.

39. I have had the advantage of reading the judgment of my Lord, the Hon'ble Chief Justice and that of my Lord, Sarma J. I agree fully with the reasoning of my Lord, Sarma J. but I, would like to add a few words which, in my view, lend support to the construction that my Lord, Sarma J., has put on Sub-section (4) of Section 139 of the I.T. Act, 1961, in regard to the interest imposable on the assessee in the case of belated filing of return, although no application is made to the ITO for extension of time.

40. Sub-section (4) of Section 139 of the Act is intended to meet a different situation, not covered by Sub-section (1) or Sub-section (2) of Section 139 of the Act. That is to say, the assessee can file his belated return, which is valid, within the period stipulated therein, although he makes no application to the ITO for extension of time or he fails to file the return within the extended time allowed by the ITO. To such a belated return, interest is leviable on the

assessee under the provisions of Clause (iii) of the proviso to Sub-section (1) which is incorporated in Sub-section (4).

41. The merit of legislation by incorporation is brevity. Clause (iii) of the proviso to Sub-section (1) which is incorporated by reference into Sub-section (4) of Section 139 of the Act, becomes part and parcel of the latter sub-section; and Clause (iii) so bodily transposed is quite independent of Sub-section (1) of Section 139 of the Act. What is transposed by reference under Sub-section (4) is only Clause (iii) of proviso to Sub-section (1) and not the entire provisions of the proviso to Sub-section (1). Proviso to Sub-section (1) speaks of, (a) making of an application by the assessee to the ITO for extension of time, (b) granting of extension of time up to a certain period without interest, and (c) with interest at the prescribed rate from the first day of September or first day of January, as the case may be, under Clause (iii).

42. As only Clause (iii) has been transposed to Sub-section (4), as stated above, the other parts of the proviso to Sub-section (1), which are not so brought in by incorporation, cannot be read as to limit the clear meaning of Clause (iii) or to control Clause (iii), namely, levying of interest in the case of belated return filed by the assessee under Sub-section (4) of Section 139 of the Act.

43. In the case of Mayor, Aldermen and Burgesses of the Borough of Portsmouth v. Charles Bovill Smith, James Goldsmith the younger and John Baker Goldsmith [1885] 10 App Cas 364, the House of Lords, at page 371, observed:

' Where a single section of an Act of Parliament is introduced into another Act, I think it must be read in the sense which it bore in the original Act from which it is taken, and that consequently it is perfectly legitimate to refer to all the rest of that Act in order to ascertain what the section meant, though those other sections are not incorporated in the new Act. I do not mean that if there was in the original Act a section not incorporated, which came by way of a proviso or exception on that which is incorporated, that should be referred to. But all others, including the interpretation clause, if there be one, may be referred to.'

44. On the principle of law above, where only Clause (iii), and no other portions of the proviso to Sub-section (1) of Section 139 of the Act, has been transposed to Sub-section (4) of Section 139 of the Act, there is no escape from the conclusion that the interest as provided in Clause (iii) is imposable on the assessee in the case of belated filing of return, even though no application is made by the assessee for extension of time to the ITO.

45. I, however, agree with the reasoning of my Lord the Chief Justice on the other question.

46. In the result, I would dismiss the three writ petitions, and I make no order as to costs.


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