Ramaprasada Rao, J.
1. The petitioner carries on business of the purchase and sale of tanned skins and to a limited extent magnesite. According to him, he sustained loss and he could not close his accounts regularly at the end of each accounting year. For the assessment years 1963-64 and 1964-65 he submitted voluntarily his returns of income on March 31, 1965. It is common ground that for the assessment year 1963-64 the returns ought to have been filed normally on September 30, 1963, and for the year 1964-65 on September 30, 1964. These returns were scrutinised by the revenue and the assessment proceedings were completed on February 15, 1966. It is claimed that the department accepted the returns as correct. The petitioner also says that he paid all taxes as per the orders of assessment. Subsequently, the Income-tax Officer purporting to act under Section 274 of the Income-tax Act, 1961, issued a notice dated March 21, 1966, calling upon the petitioner to show cause why penalty should not be levied in respect of the assessment year 1963-64, for submission of late returns, without sufficient cause. The petitioner sought to explain, but apparently his explanation was not accepted and the result was the Income-tax Officer by an order dated May 25, 1966, levied a penalty of Rs. 3,130, under Section 271(1)(a) for not filing the returns within the period provided under Section 139(1) of the Act. Thereupon, the petitioner filed a revision petition before the Commissioner of Income-tax under Section 264 of the Act questioning the order of penalty imposed bythe Income-tax Officer under Section 274 of the Act and invited the attention of the Commissioner that there is sufficient cause for the delayed finalisation of the income-tax returns and that, therefore, the Commissioner should exercise his discretion given in Section 271(4A) and give him the appropriate relief thereunder. In his revision petition the petitioner would state that the returns were filed voluntarily before a notice under Section 139(2) was given; he made full disclosure of his income and the returns have been fully accepted; that he co-operated in the enquiry relating to the assessment and that he made satisfactory arrangement for the payment of the tax. The Commissioner of Income-tax refused to exercise his discretion as provided under Section 271(4A) and stated, while rejecting the revision petition, that the provisions of Section 271(4A) are not attracted once the penalty has already been levied by the competent authority under the Act. It is against this order, the present writ petition for the issue of a writ of mandamus, which was subsequently converted into a writ of certiorari, directing the respondent to consider the application for revision filed by the petitioner under Section 264 of the Act in accordance with law and for issue of the necessary directions in consequence thereof.
2. In the counter-affidavit, the contention is that the respondent is not bound to grant the relief asked for under Section 271(4A) and that the said section has no application to the petitioners' case at all. Even otherwise, it is stated that as the remedy under Section 271(4A) is a discretionary one no compulsive direction can issue from this court either in the nature of a direction under Article 226 of the Constitution or by way of a rule of mandamus. It is claimed that the discretion is an administrative one exercisable purely on administrative grounds and which is collateral to the questions touching the cause of action for levy of penalty like non-submission of returns, concealment of income, etc. The respondent further states that in a revision petition under Section 264, it is not obligatory on the part of the respondent to exercise his discretion envisaged in Section 271(4A). The two contentions of the learned counsel for the petitioner are as follows:
The first one is that, as the return has been filed in a manner known to law and particularly in compliance with Section 139(4) of the Act, the Income-tax Officer has no jurisdiction to proceed under Section 271 of the Act and impose a penalty. The second contention is that once a revision petition under Section 264 is filed before the Commissioner, be it after the completion of the penalty proceedings initiated by the Income-tax Officer, the Commissioner of Income-tax is bound to act in accordance with the provisions of the Act which includes Section 271(4A) and grant the assessee relief. On the other hand, the argument of the revenue is that Section 139(4) merely prescribes an outer limit for the filing of returns by arecalcitrant assessee, who fails to file such a return within the time prescribed under Section 139(1) of the Act; but such a concession given in the matter of filing of such returns would not enable such an assessee to escape the penalty proceedings under Section 271 which proceedings are independent and separate and are based on considerations other than those arising by the fact of filing delayed returns. It is said that, as Section 271 enables the Income-tax Officer or the Appellate Assistant Commissioner, as the case may be, to impose a penalty if he finds that there was no reasonable cause for the furnishing of the returns of the total income within the time as prescribed under Section 139(1) and as this power is vested statutorily in the Income-tax Officer, it is in no way relatable to the statutory concessions which a petitioner could avail of for filing returns beyond the prescribed time but before the assessment is made. It is, however, vehemently contended that the assessee, if he wishes to take advantage of Section 271(4A), should not wait till the penalty proceedings are completed in a normal course, but he should approach the Commissioner for relief and seek for the exercise of his discretion prior to such completion and that not having been done in the instant case, the petitioner is not entitled to relief.
3. As regards the first contention, no doubt, Section 139(1) of the Act appearing in Chapter 14, ' Procedure for Assessment ', enjoins on every person who is assessable to tax under the Act to furnish a return of his income in the prescribed form and verified in the prescribed manner and within the prescribed time. No doubt, power is given to the Income-tax Officer to extend the date for furnishing such a return. What appears therefore from Section 139(1) is that a date is prescribed by the statute for the furnishing of returns of income by persons who are assessable to income-tax. Section 139(4) deals with the person who does not furnish a return within the time allowed to him under Section 139(1), Such a person is enabled under this sub-section to furnish a return for any previous year before the assessment is made. The period within which such returns should be filed by persons who fail to furnish the normal return under Section 139(1) is set out in Section 139(4)(b). It is not necessary to set out such periods in the instant case. Sandwiched between Sub-section (1) and subsection (4) of Section 139 of the Act is Sub-section (2) which enables the Income-tax Officer to serve a notice on a person who, in his opinion, is assessable under the Act and who has not filed a return of his income as required. In the instant case, it is common ground that the Income-tax Officer did not take any action under Section 139(2). It is also not in dispute that the petitioner filed the returns not within the time prescribed under Section 139(1) but he took advantage of the statutory concession granted to an assessee, in case no action is taken under Section 139(2) by the revenue which entitled him to furnish a return before the assessment is made. Thequestion is, if such a delayed return in the sense that it was not a normal return within the meaning of Section 139(1), is furnished by an assessee, then could he be tackled at all by the revenue under Section 271 of the Act.
4. Section 271 is a provision appearing in Chapter 21, dealing with ' Penalties imposable '. This section enables the Income-tax Officer on being satisfied that any person has without reasonable cause failed to furnish a return of his income under Section 139(1), to direct the person to pay by way of penalty, in addition to the amount of 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. The first contention referred to already by me of Thiru Ramachandran, the learned counsel, is that Section 271 cannot be invoked at all by the Income-tax Officer or the Appellate Assistant Commissioner, as the case may be, once the return has been filed as required under Section 139(4) of the Act. Reliance is placed on the decision in Commissioner of Income-tax v. Kulu Valley Transport Co. P. Ltd., : 77ITR518(SC) .
5. I have already stated that under Sub-section (4) of Section 139, a statutory concession is given to a lethargic assessee who fails to furnish his normal returns as prescribed in Sub-section (1) of Section 139, This concession cannot be misunderstood as one which could be availed of by such an assessee for all times and under all circumstances posed in the Act. One such circumstance is that if he shows no sufficient cause as to why the returns were not furnished normally under Section 139(1), this circumstance enables the Income-tax Officer to levy a penalty under Section 271(1). Therefore, it follows that by the mere fact that an outer limit is fixed for the filing of a return in the absence of action under Section 139(2) by the revenue, the power of the Income-tax Officer to act under Section 271 and find out whether there was reasonable cause on the part of the delinquent assessee in the matter of furnishing of returns as prescribed under Section 139(1) is not affected or lost.
6. In Commissioner of Income-tax v. Kulu Valley Transport Co. P. Ltd. the Supreme Court was considering a case of a voluntary return disclosing a loss filed by an assessee. The main question that arose in that case was as to the relative impact and force of Sections 22(1) and 22(3) of the earlier Act of 1922, which corresponds to Section 139(1) and Section 139(4) of the 1961 Act. While dealing with the situation, the Supreme Court said that:
' Section 24(2) confers the benefit of losses being set off and carried forward and there is no provision in Section 22 under which losses have to be determined for the purpose of Section 24(2). The question which immediately arises is, whether Section 22(2A) places any limitation on that right. This sub-section which has been reproduced before simply says that inorder to get the benefit of Section 24(2) the assessee must submit his loss return within the time specified by Section 22(1). That provision must be read with Section 22(3) for the purpose of determining the time within which the return has to be submitted. It can well be said that Section 22(3) is merely a proviso to Section 22(1). Thus a return submitted at any time before the assessment is made is a valid return.'
7. This observation was made in the context and in the conspectus of facts which arose in that case as to whether an assessee could claim the benefit of set-off, his return being a loss return, or whether he would be deprived of such a benefit on the simple and only reason that he submitted such a loss return taking advantage of the statutory concession under Section 22(3) and he did not avail of a normal return under Section 22(1). The Supreme Court, therefore, did not have occasion to consider in that case whether the provisions relating to imposition of penalty which appeared in the earlier Act and which are contained in the later Act, 1961, are to be treated as otiose if and when a return is accepted by the department under the privileged provision, namely, Section 139(4). It may be that a return filed under Section 139(4) is a permissive return, in the sense the statute permits the furnishing of such a return beyond the time prescribed under Section 139(1). But, its propriety in the sense whether the delay in filing or furnishing of such returns was accidental or otherwise has to be adjudicated upon under the independent provision of Section 271 and this jurisdiction cannot be said to have been set at naught merely because the statute permits the acceptance of a return beyond the prescribed time under Section 139(1) and before the assessment proceedings are concluded. The propriety or regularity of a particular matter may relate to problems connected with time or manner of presentation or any defect inhered therein. If therefore Section 271 enables the Income-tax Officer to find whether there was reasonable cause for such a delayed return, then it cannot be said that by a mere acceptance of such a return, by invoking Section 139(4) of the Act, the substantive procedure which enables the imposition of a penalty under Chapter 21 cannot be resorted to by the revenue.
8. The second contention is that, once a revision petition is filed under Section 264 to the Commissioner of Income-tax, then he is bound to make such an enquiry as is necessary and pass orders thereon subject to the provisions of the Act. Undoubtedly, Section 271(4A) is one such provision. The argument of the revenue is that, if the Commissioner is called upon to exercise his discretion under Section 271(4A) then the person concerned should seek for the exercise of such discretion before the penalty proceedings are completed. I am unable to agree. A person who files a delayed return under Section 139(4) of the Act cannot anticipate that the Income-tax Officer would not be satisfied that there was not reasonable cause forsuch delay. If only he can anticipate such a peculiar situation which is prejudicial to him, he could avail of the provision in Section 271(4A) and ask the Commissioner to exercise his discretion one way or the other. It would be in the nature of a quia timet action based on an apprehended injury to the person concerned. In the peculiar circumstances and the lay of the sections, I am unable to hold that a person who files a return under Section 139(4) should contemporaneously or sooner thereafter file an independent application under Section 271(4A) and move the Commissioner to exercise his discretion to reduce or waive the minimum penalty imposable by the Income-tax Officer or the Appellate Assistant Commissioner, as the case may be. If this is the position, the Commissioner instead of the Income-tax Officer should first decide whether the delay in filing returns could be satisfactorily explained. The provisions of the Act do not contemplate such a situation.
9. As a matter of fact, Section 264 which is too wide in its scope and application would cover revisions against orders of authorities subordinate to the Commissioner ; so long as the other limbs of Section 264 are satisfied, the Commissioner is bound to make an enquiry into such revision petitions and pass orders subject to the provisions of the Act. As rightly pointed out by the learned counsel for the petitioner, Section 264 is the main section which deals with the precedure whereunder an aggrieved person could obtain relief in revision before the Commissioner of Income-tax. In juxtaposition to this, Section 271(4A) deals only with the exercise of judicial discretion by the Commissioner while dealing with matters which come up before him for the purpose of reducing or waiving the amount of minimum penalty imposable, on an assessee who files a delayed return or who is said to have concealed his income, etc. The word ' reduce' in Section 271(4A) also gives the clue that he could only reduce the penalty which has already been imposed and naturally, therefore, it cannot refer to reduction of a penalty which is likely to be imposed or which may not be imposed at all. In this sense also and for the reason that this sub-section deals only with a power and is not indicative of procedure as is normally understood, the Commissioner of Income-tax is bound while exercising his jurisdiction under Section 264 to consider in appropriate cases whether he should exercise his judicial discretion as contemplated in Section 271(4A).
10. The text of Section 271(4A) which is the foundation for exercise of such a judicial discretion is also illustrative of the scope of such a power. The Commissioner while dealing with a situation like the one which has arisen in this case, has to find whether the person concerned has furnished accurate particulars of his income and that too voluntarily and in good faith ; has co-operated in any enquiry relating to the assessment of such income and has paid or made satisfactory arrangements for payment of tax, etc.,and thereafter pass necessary orders and might or might not exercise his discretion in favour of the assessee. Though the word used in Section 271(4A) is ' discretion ' it is obvious that the Commissioner who is deemed to be a quasi-judicial Tribunal for the purpose under consideration, should see that no principles of natural justice arc violated or no set prescriptions of law are ignored and that in any event he should judicially view the entire material before him and thereafter exercise his so-called discretion judiciously under this sub-clause.
11. In the instant case, the Commissioner of Income-tax rejected the application on the only ground that Section 271(4A) is not attracted once the penalty has already been levied by the competent authority under the Act. I have already given my reasons as to why this conclusion is not correct.
12. The order challenged, therefore, poses an apparent error. The rulenisi is made absolute as the petitioner is entitled in law to have his revisionapplication scrutinised and adjudicated upon in a manner known to law.The subject is remitted back to the Commissioner of Income-tax for him torestore the revision petition on file and deal with the same in accordancewith law and in the light of the observations in this judgment. There willbe no order as to costs.