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Kishanlal Vs. Commissioner of Income-tax, M. P. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 337 of 1965
Reported in[1967]64ITR285(MP)
AppellantKishanlal
RespondentCommissioner of Income-tax, M. P.
Excerpt:
.....the assessee is required to do and the failure of doing which constitutes default. in regard to the second question, there was no dispute before the tribunal that if section 271(1) applied, then the penalty imposed on the assessee under clause (i) for his failure to submit the returns in time was proper......second question, there was no dispute before the tribunal that if section 271(1) applied, then the penalty imposed on the assessee under clause (i) for his failure to submit the returns in time was proper. the contrary centred round the question whether, having regard to the use of the express in '(the period) during which the default continued' occurring in clause (i) of the penalty provisions of section 271(1), that clause could at all be applied when the default of the assessee in not filing the returns in time occurred before 1st april, 1962. it was contended by the assessee before the tribunal that the aforesaid clause (i) applied to those defaults of the assessee occurring after 1st april, 1962, and, as in this case there was not default on the part of the assessee after 1st april,.....
Judgment:

DIXIT C.J. - This consolidated reference by the Income-tax Appellate Tribunal, Bombay, at the instance of the assessee, Kishanlal of Baghana, Neemuch, arises out of the Tribunals common order dismissing two appeals relating to the assessment years 1960-61 and 1961-62 preferred by the assessee. The Tribunal upheld the order of the Income-tax Officers order, imposing penalty on the assessee for his failure to file returns under section 22 (1) of the Indian Income-tax Act, 1922, withing 65 days of the publication of public notices under that section. The two questions which have been placed before us for decision are :

'1. Whether, on the facts and in the circumstances of the case, the Tribunal acted rightly in upholding the application of section 297(2)(g) read with sections 271(1)(a) of the Income-tax Act, 1961, for the delay in the submission of returns for the assessment years 1959-60 and 1960-61 (sic).

2. In the event of question No. 1 being answered in the affirmative, whether on the facts here, and on a proper interpretation of section 271(1), the penalty levied has been properly computed ?'

For the assessment year 1960-61 the assessee filed his return on 20th March, 1962. The assessment for that year was completed on 20th September, 1962. He filed his return on 31st March, 1962, for the next assessment year, namely, 1961-62. The assessment for that year also was completed on 20th September, 1962. Admittedly, the returns for these two assessment years were not filed within time by the assessee. Consequently, the Income-tax Officer imposed on the assessee a penalty of Rs. 10,600 under section 271(1)(a) of the Income-tax Act, 1961, for his failure to file in time the return for the assessment year 1960-61. The penalty was imposed after complying with section 274 of the 1961 Act. Similarly, a penalty of Rs. 4,000 was imposed on the assessee for his failure to file in time the return for the assessment year 1961-62. The Income-tax Officer rejected the contention of the assessee that if he had not filed the returns in time, then penalty should have been imposed under section 28 of the Income-tax Act, 1922, and not under the 1961 Act. The contention was repeated unsuccessfully before the Appellate Assistant Commissioner and the Appellate Tribunal and the appeals preferred by the assessee were dismissed by the Appellate Assistant Commissioner and by the Tribunal.

The material provisions to be considered while answering the questions referred are section 297(2) (a) and (g) and section 271(1) of the 1961 Act and section 28 (1) of the 1922 Act. Sub-section (1) of section 297 repeals the 1922 Act. Then sub-section (2) enumerates the 'savings'. That sub-section, so far as it is material here, is as follows :

'(2) Notwithstanding the repeal of the Indian Income-tax Act, 1922 (XI of 1922) (hereinafter referred to as the replaced Act), -

(a) where a return of income has been filed before the commencement of this Act by any person for any assessment year, proceedings for the assessment of that person for that year may be taken and continued as if this Act had not been passed;....

(g) any proceeding for the imposition of a penalty in respect of any assessment for the year ending on the 31st day of March, 1962, or any earlier year, which is completed on or after the 1st day of April, 1962, may be initiated and any such penalty may be imposed under this Act;....'

The material portion of section 271(1) runs thus :

'271. (1) Failure to furnish returns, comply with notices, concealment of income, etc. - If the Income-tax Officer or the Appellate Assistant Commissioner, in the course of any proceedings under 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-section (1) of section 139 or by notice given under sub-section (2) of section 139 or section 148 or has without reasonable cause failed to furnish it 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, or

(b) has without reasonable cause failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) of section 143, or

(c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income,

he may direct that such person shall pay by way of penalty, -

(i) 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 default continued, but not exceedings in the aggregate fifty per cent. of the tax.....'

The material part of section 28 (1) of the 1922 Act was in the following terms :

'28. (1) Penalty for concealment of income or improper distribution of profits. - If the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal, in the course of any proceedings under this Act, is satisfied that any person -

(a) has without reasonable cause failed to furnish the return of his total income which he was required to furnish by notice given under sub-section (1) or sub-section (2) of section 22 or section 34 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by such notice, or

(b) has without reasonable cause failed to comply with a notice under sub-section (4) of section 22 or sub-section (2) of section 23, or

(c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income,

he or may direct that such person shall pay by way of penalty, in the case referred to in clause (a), in addition to the amount of the income-tax and super-tax if any, payable by him a sum not exceeding one and a half times that amount, and in the cases referred to in clauses (b) and (c), in addition to any tax payable by him, a sum not exceeding one and a half times the amount of the income-tax and super-tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income.....'

It will be seen that clauses (a), (b) and (c) of section 28 are substantially similar to clauses (a), (b) and (c) of section 271(1) of the 1961 Act, the only difference being that in clauses (a) and (b) section 28 (1) the provisions referred to are provisions corresponding to those referred in clauses (a) and (b) of section 271(1) of 1961 Act.

It may be stated here that in the first question the reference is to the delay in the submission of returns for the assessment years 1959-60 and 1960-61. There seems to be some error on the part of the Tribunal in stating the correct assessment years. In the statement of the case the assessment years in question have been through out stated to be 1960-61 and 1961-62. In view of the facts stated in the statement of the case, the first question must be answered taking the fact that the delay on the part of the assessee in the submission of the returns was for the assessment years 1960-61 and 1961-62. Now, the Income-tax Act, 1961, came into force on 1st April, 1962. The assessee filed his returns for the assessment years 1960-61 and 1961-62 on 20th March, 1962, and 31st March, 1962, respectively. These returns having been filed before the commencement of the 1961 Act, clause (a) of sub-section (2) of section 297 applied and the proceedings for assessment for the two years could be only under the 1922 Act. Admittedly, the two returns were not filed by the assessee within time as required by section 22 (1). The assessee thus rendered himself liable to penalty for his failure to furnish the returns in time as required of him by section 22 (1). Before any penalty could be imposed on the assessee under section 28 (1), that Act was repealed by the 1961 Act. But clause (g) of section 297(2) of the 1961 Act clearly provides that any proceeding for the imposition of a penalty in respect of the any assessment for the year ending on 31st March, 1962, or any earlier year, which is completed nor after 1st April, 1962, may be initiated and any such penalty may be imposed under the 1961 Act. As here the assessment year were 1960-61 and 1961-62 and the assessment for those years was completed after 1st April, 1962, clause (g) directly became applicable for the initiation and imposition of penalty for the assessees failure to submit his returns in time. The plain effect of clause (g) is that in cases falling under that clause the penalty would be that prescribed by section 271(1).

Shri Chitaley, learned counsel appearing for the assessee, however, contended that section 297(2)(g) was only a machinery provision and not a charging provision and the 1961 Act did not prescribe any penalty for the assessees failures mentioned in section 28 (1) (a), (b) and (c) of the 1922 Act, in respect of any assessment for the year ending on 31st March, 1962, or any earlier year; that section 271(1) only referred to the assessees lapses under the specific provisions referred to in clause (a) and (b) and for his failure described in clause (c) and not to his failure stated in clauses (a) and (b) of section 28 (1) of the 1922 Act in respect of any assessment for the year ending on 31st March, 1962, or any earlier year; and that, therefore, the penalty provisions contained in section 271(1) could not be applied in the case of an assessee who had rendered himself liable to penalty under section 28 (1) in respect of any assessment for the year ending on 31st March, 1922, or any earlier year.

On the other hand, it was urged by Shri Adhikari, learned advocate appearing for the department, that in cases falling under clause (g) of section 297(2) of the 1961 Act, the penalty that could be imposed was only that which was prescribed in the later part of section 271(1); and that the fact that in clauses (a) and (b) of section 271(1), certain specific provisions of the 1961 Act had been enumerated did not in any way make in applicable the 'penalty' provisions contained in section 271(1) to an assessee who had rendered himself liable to penalty under section 28 (1) for his failure in respect of any assessment year ending on 31st March, 1962, or any earlier year. Learned counsel proceeded to say that the enumeration of certain sections in clauses (a) and (b) of section 28 (1) or in clause (a) and (b) of section 271(1) was nothing but a brief description of the failure of the assessee to do what was required of him under the enumerated provisions. It was said that both under clause (a) of section 28 (1) and under section 271(1)(a), the assessee is liable to penalty for his failure to submit his return in time; and that, therefore, in cases falling under clause (g) the assessee would be liable to penalty under section 271(1) for his failure to file in time his return in respect of any assessment for the year ending on 31st March, 1962, or any earlier year.

We are unable to accept the contention advanced by learned counsel for the assessee that clause (g) of section 297(2) is only a machinery provisions for the initiation of proceedings for the imposition of penalty and is not a provision for the imposition of penalty under the 1961 Act. The language of clause (g) is very clear and distinctly says that any proceedings for the imposition of penalty in respect of the assessment year referred to in the clause may be initiated and any such penalty may be imposed under the 1961 Act. To construe the clause as empowering only the initiation of proceedings for the imposition of penalty and not the imposition of penalty itself under the 1961 Act is to render altogether nugatory the words 'any such penalty may be imposed under this Act', occurring in that clause. The conclusion that clause that clause (g) deals not only with the initiation of proceedings for the imposition of penalty but also with imposition of penalty itself is reinforced if clause (g) is compared with the preceding clause, namely, clause (f). Clause (f) provides that 'any proceedings for the imposition of a penalty in respect of any assessment completed before the 1st day of April, 1962, may be initiated and any such penalty may be imposed as if that Act had not been passed.' The plain meaning of the expression 'proceedings may be initiated and any such penalty may be imposed as if that Act had not been passed' is that in cases covered by clause (f), proceedings for the imposition of a penalty may be initiated and the penalty away be imposed under the Act of 1922. If clause (f) means that any proceedings for the imposition of a penalty in respect of the assessment completed before 1st April, 1962, can be initiated and any penalty can be imposed under the 1922 Act, then clause (g) would also necessarily mean that in cases within the purview of that clause, proceedings for the imposition of penalty may be initiated and the penalty may be imposed under the Act of 1961. The expression 'proceedings may be initiated and any such penalty may be imposed' has the same meaning in both the clauses. If, as used in clause (f), that expression means that penalty proceedings can be initiated and penalty also can be imposed under the 1922 Act, then its use in clause (g) must be taken as meaning that proceeding for the imposition of penalty may be initiated and penalty may be imposed under the Act of 1961.

Now, clause (g) no doubt is concerned with initiation of penalty proceedings and with imposition of penalty for defaults committed before 1st April, 1962. This is evident from the use of the words 'in respect of any assessment for the year ending on the 31st day of March, 1962, or any earlier year.' The question, therefore, that arises is whether the 1961 Act provides for any penalty for defaults committed before 1st April, 1962, for which the assessee would have been liable to penalty under section 28 (1) of the 1922 Act if clause (g) of section 297(2) had not been enacted. Under section 28 (1) and assessee is liable to penalty if he -

(a) has without reasonable cause failed to furnish the return of his total income which he was required to furnish by public notice, requiring every person whose total income during the previous year exceeded the maximum amount which is not chargeable to income-tax furnish, within the period specified in the notice, a return of his income; or if he has failed to submit a returning response to a notice issued by the Income-tax Officer requiring him to furnish a return within the period specified in the notice; or if he has failed to submit a return in compliance with a notice issued to him for the escaped assessment; or has without reasonable cause failed to furnish the return within the time allowed and in the manner required by such notice; or

(b) has without reasonable cause failed to comply with a notice issued to him by the Income-tax Officer to produce such accounts or documents as the Income-tax Officer may require or with a notice issued to him by the Income-tax Officer requiring him on a date specified in the notice, either to attend the Income-tax Officers office or to produce or cause to be produced any evidence on which the assessee relies in support of the return submitted by him;

(c) has concealed the particulars of his notice or deliberately furnished inaccurate particulars of such income.

These are precisely the defaults for which penalty can be imposed under section 271(1) of the 1961 Act. This because clear if section 271(1) is read after substituting for the reference to certain provisions occurring in clauses (a) and (b) thereof, the acts which the assessee is required to do and the failure of doing which constitutes default. The substances of the matter is the nature of the fact and omissions of the assessee for which he is liable to penalty and not the particular provisions, whether of the 1922 Act or the 1961 Act, under which the assessee is required to do those acts or is restrained from doing them. The defaults for which an assessee is liable to penalty under section 28 (1) or section 271(1) being of the same nature, it is altogether erroneous to say that notwithstanding clauses (g) of section 297(2), provisions prescribing the measure of penalty contained in section 271(1) cannot be applied to the defaults of the assessee before 1st April, 1962, referred to in section 28 (1) of the 1922 Act, inasmuch as clauses (a) and (b) of section 271(1) do not contain any reference to the provisions of any section of the 1922 Act, Section 271(1) has to but construed in harmony with section 297(2)(g) and not in a manner so as to render clause (g) meaningless or redundant.

In our judgment, an assessee is liable to penalty under section 271(1) of the 1961 Act for his defaults referred to in section 28 (1) of the 1922 Act in respect of any assessment for the year ending on 31st March, 1961, or any earlier year, which is completed on or after 1st April, 1962. The first question must, therefore, be answered in the affirmative.

In regard to the second question, there was no dispute before the Tribunal that if section 271(1) applied, then the penalty imposed on the assessee under clause (i) for his failure to submit the returns in time was proper. The contrary centred round the question whether, having regard to the use of the express in '(the period) during which the default continued' occurring in clause (i) of the penalty provisions of section 271(1), that clause could at all be applied when the default of the assessee in not filing the returns in time occurred before 1st April, 1962. It was contended by the assessee before the Tribunal that the aforesaid clause (i) applied to those defaults of the assessee occurring after 1st April, 1962, and, as in this case there was not default on the part of the assessee after 1st April, 1962, no penalty could be imposed. The Tribunal held that if clause (i) of section 271(1) applied to defaults of the osseous before 1st April, 1962, then the period 'during which the default continued' would include period prior to 1st April, 1962. The Tribunal was right in taking this view. As clause (g) deals with initiation of penalty proceedings and imposition of penalty for defaults of an assessee before 1st April, 1962, the construction of sought to be put by the assessee on clause (i) section 271(1), if accepted, would nullify the effect of clause (g) and cannot, therefore, be accepted. The default of the assessee for which he has rendered himself liable to penalty having occurred before 1st April, 1962, the expression '(the period) during which the default continued' must necessarily mean the period commencing from a date prior to 1st April 1962, on which the assessee became a defaulter and ending on a date on which he ceased to be so. Therefore, our answer to the second question must also be the affirmative.

For the foregoing reasons, both the questions referred to us are answered in the affirmative. The assessee shall pay the costs of this reference. Counsels fee is fixed Rs. 600.

Questions answered in the affirmative.


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