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V. Krishna Chettiar Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case No. 905 of 1977 (Reference No. 635 of 1977)
Judge
Reported in[1984]150ITR455(Mad)
ActsIncome Tax Act, 1961 - Sections 139, 139(1) and 139(4)
AppellantV. Krishna Chettiar
RespondentCommissioner of Income-tax
Appellant AdvocateP.P.S. Janarthana Raja, Adv. for Subbaraya Aiyar and ;Padmanabhan and ;Ramamani, Advs.
Respondent AdvocateJ. Jayaraman and ;Nalini Chidambaram, Advs.
Excerpt:
.....assessee will lead to a ridiculous result, in that, in cases where the assessee did not file its return in time, he will be in a better position than the persons who, realising their obligations to file the return, approached the authorities and asked for extension of time and that such unreasonable construction has to be avoided. ito [1979]119itr931(ker) .8. in these sets of decisions, it has been uniformly held that the language of sub-section (4) of section 139 does not say that it is to be applied only in cases where the assessee filed an application for extension of time for riling the return and the ito grants such extension, that the words 'shall apply in every such case',occurring at the end of sub-section (4), mean, in all cases, where the assessee who failed to submit his..........assessee will lead to a ridiculous result, in that, in cases where the assessee did not file its return in time, he will be in a better position than the persons who, realising their obligations to file the return, approached the authorities and asked for extension of time and that such unreasonable construction has to be avoided. in support of the said view, the learned counsel for the revenue relied on the following decisions :1. indian telephone industries co-operative society ltd. v. ito : [1972]86itr566(kar) . ganesh das sreeram v. ito . addl. cit v. santosh industries : [1974]93itr563(guj) . m. nagappa v. ito : [1975]99itr32(kar) . progressive engineering company v. ito : [1976]105itr226(ap) , 6. chhotalal and co. v. ito : [1976]105itr230(guj) . ito v. secunderabad tin industries.....
Judgment:

Ramanujam, J.

1. The assessee in this case is a firm carrying on business of purchasing paddy, converting the same into rice and selling the resultant rice. It filed its return of income disclosing a sum of Rs. 18,306 as income for the assessment year 1965-66, the same being estimated at 10% of the turnover of Rs. 1,83,060 as per its books. There was a raid in the assessee's premises by the officers of the Income-tax Department on February 1, 1965, and during that raid certain incriminating documents were seized. The ITO, after scrutiny thereof, noticed that certain purchases made on certain dates had not been recorded in its books of account. He further noticed that payment of wages to its employees as per register did not tally with the corresponding entries made in the accounts. Holding that the account books maintained by the assessee were not reliable, and on considering the facts that the Sales Tax Appellate Tribunal had determined the turnover of the assessee for the relevant year as Rs. 23,46,371, the ITO estimated the gross profit of the assessee's firm for the assessment year under consideration at 4% thereof and after deducting the expenditure amount of Rs. 60,677, determined the total income from business as Rs. 33,178 and the tax payable thereon as Rs. 9,049. He also charged a sum of Rs. 2,923 by way of interest under Section 139 of the I.T. Act. Aggrieved by the said assessment, the assessee preferred an appeal to the AAC, but the said appeal came to be dismissed substantially. Thereupon, the assessee preferred an appeal to the Income-tax Appellate Tribunal contending, inter alia, that the charging of interest of Rs. 2,923 under Section 139 of the Act was not proper and that the interest could be charged only if it had applied for extension of time in submitting its returns to the ITO. Since the assessee had not applied for extension of time, the charging of interest was not proper. The Tribunal, however, rejected the appeal, upholding the assessment and charging of interest under Section 139(4) of the Act. At the instance of the assessee, the following question has been referred for the opinion of this court :

' Whether, on the facts and in the circumstances of the case, the levy of interest of Rs. 2,923 is justified in law '

2. The learned counsel for the assessee submits that the interest could be charged only if the assessee had applied for extension of time in submitting its return to the ITO. Since the assessee had not applied for extension of time, the interest could not be charged under Section 139(4) of the Act. For the purpose of appreciating the assessee's contention, it is necessary to refer to Section 139(1) and Section 139(4) of the I.T. Act.

3. Proviso 3 to Section 139(1) says that-....' on an application made in the prescribed manner, the Income-tax Officer may, in his discretion, extend the date for furnishing the return, and, notwithstanding that the date is so extended, interest shall be chargeable in accordance with the provisions of Sub-section (8). '

4. Section 139(4) says as follows :

' 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 the period specified in clause (b), and the provisions of Sub-section (8) shall apply in every such case. '

5. The learned counsel for the assessee contends that, having regard to the language used in the proviso to Section 139(1), which stands attracted by Section 139(4), the interest can be charged only in cases where the extension of time is sought for by the assessee. The proviso to Section 139(1), even if it stands attracted by Section 139(4), will not enable the Revenue to levy interest in cases where the assessee had not applied for extension of time. In support of this submission, he relied on the following decisions :

(1) Kishanlal Haricharan v. ITO : [1971]82ITR660(AP) , (2) Garg and Co. v. CIT : [1974]97ITR639(Delhi) CIT v. Bahri Bros. (P) Ltd. : [1976]102ITR443(Patna) Mulakh Raj Bimal Kumav v. ITO , (5) National Hotel & Dilkusha Cabin v. ITO : [1977]107ITR559(Cal) .

6. In all these cases it has been held that the proviso to Section 139(1) applies only to cases where the assessee seeks extension of time for the submission of the return, that the interest cannot be charged under Section 139(4) merely because it refers to proviso 3 to Section 139(1) and that the language used in proviso 3 to Section 139(1) clearly indicates that the charging of interest is contemplated only in cases where the extension of time is sought for by the assessee for submission of the return.

7. The learned counsel for the Revenue, however, states that having regard to the object of Section 139(4), proviso 3 to Section 139(1) should be applied mutatis mutandis to cases covered by Sub-section (4), that is, with such modification as necessary, to suit the conditions in cases coming under Section 139(4) and that there is no question of blind application of proviso 3 to Section 139(1), in cases covered under Section 139(4). It is also submitted by the Revenue that the interpretation suggested by the assessee will lead to a ridiculous result, in that, in cases where the assessee did not file its return in time, he will be in a better position than the persons who, realising their obligations to file the return, approached the authorities and asked for extension of time and that such unreasonable construction has to be avoided. In support of the said view, the learned counsel for the Revenue relied on the following decisions :

1. Indian Telephone Industries Co-operative Society Ltd. v. ITO : [1972]86ITR566(KAR) . Ganesh Das Sreeram v. ITO . Addl. CIT v. Santosh Industries : [1974]93ITR563(Guj) . M. Nagappa v. ITO : [1975]99ITR32(KAR) . Progressive Engineering Company v. ITO : [1976]105ITR226(AP) , 6. Chhotalal and Co. v. ITO : [1976]105ITR230(Guj) . ITO v. Secunderabad Tin Industries : [1978]113ITR1(AP) (overruling Kishanlal Haricharan v. ITO : [1971]82ITR660(AP) and approving Progressive Engineering Company v. ITO : [1976]105ITR226(AP) , 8. Jagdish Rice Mills v. CIT : [1978]114ITR817(MP) , 9. Shankarlall Goenka v. ITO, , approving Ganesh Das Sreeram v. ITO . CIT v. Tikam Chand Agarwal : [1979]119ITR248(All) , 11. Koipally Bros. v. ITO : [1979]119ITR931(Ker) .

8. In these sets of decisions, it has been uniformly held that the language of Sub-section (4) of Section 139 does not say that it is to be applied only in cases where the assessee filed an application for extension of time for riling the return and the ITO grants such extension, that the words 'shall apply in every such case', occurring at the end of Sub-section (4), mean, in all cases, where the assessee who failed to submit his return within the time allowed under Sub-sections (1) and (2) furnishes his 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. To interpret the provisions of Sub-section (4) 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. The incorporation of the entire proviso 3 to Sub-section (1) in Sub-section (4) or the literal application of the entire proviso to cases coming under Sub-section (4) will make no sense. Therefore, the filing of an application for extension of time by the assessee and granting of such extension by the ITO are not conditions precedent for the application of Sub-section (4) of Section 139. Under the provisions of Section 139(4) read with proviso 3 to Section 139(1), an assessee who had not furnished 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 proviso 3 to Sub-section (1) and make the assessee liable to pay interest as mentioned in the said proviso.

9. Thus, there are conflicting judicial opinions by different High Courts, The High Courts of Karnataka, Gujarat, Madhya Pradesh, Andhra Pradesh, Gauhati, Allahabad and Kerala have taken the view that the interest is chargeable even in cases where the assessee did not apply for extension of time, but filed the return beyond the time fixed by the notice under Section 139(2). The High Courts of Delhi, Patna, Jammu and Kashmir and Calcutta have taken the contrary view that the interest can be charged only in a case where the assessee has applied for extension of time to file his return and the ITO grants time.

10. We are, however, in full agreement with the view expressed by the Full Bench of the Andhra Pradesh High Court in ITO v. Secunderabad Tin Industries : [1978]113ITR1(AP) , and the Full Bench of the Gauhati High Court in Shankarlall Goenka v. ITO , which considered the question in some detail and held that the interest is chargeable even in a case where the assessee has not applied for extension of time. Two substantial reasons had been given in those decisions, Firstly, Section 139(4) indicates the legislative intention to charge interest in all cases where the returns have not been filed within the prescribed time and that legislative intention can be effectuated only by reading down the proviso to Section 139(1) to suit the case contemplated under Section 139(4) and it is not, therefore, possible to literally apply proviso 3 to Section 139(1), in cases falling under Section 139(4). Another reason is that since the literal application of proviso 3 to Section 139(1), to cases arising under Section 139(4) defeats the legislative intention contained in Section 139(4), such a literal application of proviso 3 to Section 139(1) should be avoided. Such a construction of proviso 3 to Section 139(1) in its application to cases arising under Section 139(4) in the manner suggested will lead to an unreasonable and ridiculous situation, when those persons who are aware of their legal and statutory obligations approached the ITO with a petition for extension of time for filing the return will be worse off than those who did not bother at all to file the return. Such an unreasonable, construction should be avoided by courts. In this view off the matter, we have to hold that though the assessee did not file any petition for extension of time, he is liable to pay interest, as he had not filed the return within the prescribed time.

11. The question, is, therefore, answered in the affirmative and against the assessee. The assessee will pay the costs to the Revenue. Counsel's fee Rs. 500.


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