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Commissioner of Income-tax Vs. Laxmi Rattan Cotton Mills Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 722 of 1970
Judge
Reported in[1974]97ITR285(All)
ActsIncome Tax Act, 1961 - Sections 271(1); General Clauses Act
AppellantCommissioner of Income-tax
RespondentLaxmi Rattan Cotton Mills Co. Ltd.
Appellant AdvocateR.K. Gulati, Adv.
Respondent AdvocateKameshwar Prasad, Adv.
Excerpt:
- - in view of the partial success and failure of the parties, they shall bear their own costs......on the facts and in the circumstances of the case, the tribunal was correct in holding that the word 'month' occurring in section 271(1)(a)(i) referred to english calendar month? 2. whether, on the facts and in the circumstances of the case, the tribunal was correct in holding that the penalty should be calculated with reference to the tax found due on the date of the completion of the assessment after deducting, inter alia, taxes paid by the assessee as advance tax and tax as per provisional assessment ?' 2. the assessee did not file his return for the assessment year 1958-59 by november 15, 1958, up to which date the income-tax officer had allowed time. the return was filed on february 18, 1959, after about three months of the expiry of that date. after the assessment had been.....
Judgment:

C.S.P. Singh, J.

1. The Income-tax Appellate Tribunal, Allahabad, has under Section 256(1) of the Income-tax Act, 1961, referred the following two questions for our opinion :

'1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the word 'month' occurring in Section 271(1)(a)(i) referred to English calendar month?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the penalty should be calculated with reference to the tax found due on the date of the completion of the assessment after deducting, inter alia, taxes paid by the assessee as advance tax and tax as per provisional assessment ?'

2. The assessee did not file his return for the assessment year 1958-59 by November 15, 1958, up to which date the Income-tax Officer had allowed time. The return was filed on February 18, 1959, after about three months of the expiry of that date. After the assessment had been completed on April 1, 1962, the Income-tax Officer initiated penalty proceedings under Section 271(1)(a) of the Income-tax Act, 1961, and after giving an opportunity to the assessee, imposed a penalty of Rs. 1,00,348.

3. The assessee, thereafter, filed an appeal before the Appellate Assistant Commissioner. The appellate authority rejected the contention of the assessee that the penalty under the new Act could not be imposed for a default committed under the old Act. On merits, the Appellate Assistant Commissioner concluded that there was no reasonable cause for the default, but it accepted the assessee's contention that the period of default should be counted from the date up to which the assessee was allowed time to file its return. Thereafter, the Appellate Assistant Commissioner worked out the period of default to be of three months and three days, and held that the assessee was liable to penalty under Section 271(1)(a)(i) of the Act for a default of three months, at the rate of 6% (3X2 of the total tax). Two appeals were thereafter filed, one by the department and the other by the assessee. The appeal filed by the department was dismissed, inasmuch as the Tribunal took the view that the appeal had been filed by the department in the penalty matter only as it has not accepted the decision of the Appellate Assistant Commissioner in the quantum appeal, and the department's appeal to the Tribunal in that quantum matter had already been dismissed.

4. In respect of two questions which have been referred to us, it was urged by the assessee that inasmuch as the word 'month' had not been defined in the Act, the meaning given to that word in Section 3(35) of the General Clauses Act should be adopted, and the word 'month' should be taken to be the English calendar month, and as such the period of default committed by the assessee would be of only two months, inasmuch as a part of November and a part of February in which default occurred was not for the whole calendar month, and had as such to be excluded. As regards the amount of penalty that could be imposed for the default, it was contended that while computing 'the tax payable' on which the penalty had to be imposed, the advance tax and the taxes paid as per provisional assessment had to be deducted, and the penalty had to be workedout on the basis of this reduced amount. The Tribunal held that the word 'month' occurring in Section 271(1)(a)(i) of the Act meant a full calendar month, and inasmuch as the assessee was in default for only two full calendar months, i.e., December and January, the penalty could be levied only in respect of two months' default. It also held that inasmuch as the penalty is imposable under Section 271(1)(a) of the Act, on the basis 'of tax, if any, payable' and not on the total amount of tax, the penalty that was imposable on the assessee was to be calculated with reference to tax found due on the date of the completion of the assessment, subject to its final computation by the appellate authorities.

5. Inasmuch as the answer to the question referred depends on the interpretation to be put on Section 271(1)(a)(i) of the Act, we are extracting that section :--

'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 tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent. of the tax.'

6. We propose to answer the second question first. This question now stands concluded by the decision of the Supreme Court in Civil Appeal No. 497 of 1970 decided on January 29, 1973 (Commissioner of Income-tax v. Vegetable Products Ltd., [1973] 88 I.T.R. 192 (S.C.)), wherein it has been held that the penalty leviable has to be calculated after deducting amounts of tax already paid, and not with reference to the gross tax assessed.

7. Coining now to the first question, Section 271(1)(a)(i) of the Act is a penal provision, and in the event of the default contemplated by this section, an assessee becomes liable to payment of penalty at the rate of 2% of the tax for 'every month during which the default continued'. The word 'month' has not been defined in the Act. The Tribunal has, however, taken this word to mean 'a calendar month' by referring to Section 3(35) of the General Clauses Act, which defines 'a month' as meaning a month reckoned according to the English calendar month. This definition, however, in view of the opening part of Section 3 of the General Clauses Act, can be read into a statute provided there is nothing repugnant in the subject or context of the statute. It as such has to be seen whether the meaning given in the General Clauses Act to the word 'month' is repugnant to the context. It is settled that the word 'month' is normally understood to mean 'a lunar month', i.e., a period of thirty days. (See Simpson v. Margitson, [1847] 11 Q.B. 23, 31, Ryalls v. R., [1848] 11 Q.B. 781, 798, Rogers v. Kingston-upon-Hull Dock Co., [1864] 4 New Rep. 494, 496, Schiller v. Peterson & Co. Ltd., [1924] 1 Ch. 394, 420, 421 (C.A.), Phips (P.) & Co. (Northampton and Towcester Breweries) Ltd. v. Rogers, [1925] 1 K.B. 14, 26, 27 (C.A ) and South British Fire and Marine Insurance Co. v. Brojo Nath Shaha, [1909] I.L.R. 36 Cal. 516 [F.B.]. Although these cases do not deal with the interpretation to be put on the word 'month' as occurring in a statute, and relate to cases relating to contract, they throw light on the meaning of the word as commonly understood. This court in the case of Misri Lal v. Jwala Prasad, [1962] I.L.R. 1 All. 761 has, however, taken the view that, in some cases, the word 'month', as occurring in a statute, may be taken to mean a period of thirty days. On an examination of the scheme and purpose of this section, we are of the view that the word 'month' as occurring in this sub-section must be taken to mean a period of thirty days. This provision was enacted for the purpose of imposing a penalty on an assessee who had not filed his return during the prescribed time, and was enacted to serve as a deterrent for such lapses. The penalty is imposable for every month during which the default continues. If the meaning ascribed to this word in the General Clauses Act is adopted, it may in some cases lead to a defaulting assessee escaping penalty altogether, in spite of default. To take an illustration: Let us assume that time is given to an assessee up to the 30th of January in a particular year for filing a return and he defaults. He, thereafter, files his return on the 27th February. If the word 'month' occurring in the section is taken to mean a full calendar month, the assessee in such a case would not be liable for any amount of penalty. Such a result is not contemplated by the language of the sub-section, for the sub-section in clear and unambiguous terms makes every assessee liable for penalty during the period of default. In the circumstances, it is not appropriate to import the meaning of the word 'month' given in the General Clauses Act in the sub-section, for it does not fit in with the context and scheme of the section, and results in some cases in setting at naught the purpose of the enactment. We are thus of the view that the Tribunal was not right in holding that the word 'month' occurring in this sub-section refers to the English calendar month.

8. We, therefore, answer the first question in the negative and in favour of the Commissioner, and the second question in the affirmative and in favour of the assessee. In view of the partial success and failure of the parties, they shall bear their own costs.


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