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G.S. Atwal and Co. Vs. Commissioner of Income-tax, Central - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 190 of 1974
Judge
Reported in[1979]117ITR171(Cal)
ActsIncome Tax Act, 1961 - Sections 139(1), 139(2) and 271(1)
AppellantG.S. Atwal and Co.
RespondentCommissioner of Income-tax, Central
Appellant AdvocateD. Pal, ;Pranab Pal and ;R.N. Datta, Advs.
Respondent AdvocateAjit Sengupta and ;Pranab Majumdar, Advs.
Cases ReferredMullapudi Venkatarayudu v. Union of India
Excerpt:
- .....which the penalty under section 271(1)(a) is to be imposed should start from the date on which the return of income became due under section 139(1) of the act?'2. the assessee is a registered firm. the reference relates to the assessment year 1964-65.3. for this assessment year, the return of income was due to be filed under sub-section (1) of section 139 of the 1961 act by the 30th june, 1964. a notice under section 139(2) was served on the 13th july, 1964, according to which the return was due to be filed in august, 1964.4. the return of income was filed only on the 27th october, 1965. hence the ito in course of the assessment proceedings, initiated action for penalty under section 271(1)(a). the ito did not accept the assessee's contention that since the return of income had.....
Judgment:

Sankar Prasad Mitra, C.J.

1. In this reference under Section 256(1) of the I. T. Act, 1961, the questions referred to this court are as follows:

'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that penalty under Section 271(1)(a) of the I. T. Act, 1961, could be imposed ?

(2) Whether the Tribunal was justified in holding that the period of the default for which the penalty under Section 271(1)(a) is to be imposed should start from the date on which the return of income became due under Section 139(1) of the Act?'

2. The assessee is a registered firm. The reference relates to the assessment year 1964-65.

3. For this assessment year, the return of income was due to be filed under Sub-section (1) of Section 139 of the 1961 Act by the 30th June, 1964. A notice under Section 139(2) was served on the 13th July, 1964, according to which the return was due to be filed in August, 1964.

4. The return of income was filed only on the 27th October, 1965. Hence the ITO in course of the assessment proceedings, initiated action for penalty under Section 271(1)(a). The ITO did not accept the assessee's contention that since the return of income had ultimately been filed before the completion of assessment no penalty could be imposed under Section 271(1)(a). The ITO also stated that even after the service of notice under Section 139(2) the assessee continued to make default and the return was filed as late as on 27th October, 1965. He imposed a penalty of Rs. 2,40,462 under Section 271(1)(a). The assessee had lost both before the AAC and the Tribunal and, ultimately, the two questions set out above were referred to this court.

5. Question No. 1 in this reference is fully covered by the judgment of this court in Income-tax Reference No. 133 of 1971 (Major (Dr.) S. K. Ghosh v. CIT) delivered on the 18th December, 1974, by the Hon'ble Mr. Justice Sabyasachi Mukharji sitting with the Hon'ble Mr. Justice R. N. Pyne. The argument advanced before this Bench appears to be more or less the same as those advanced before us. Mr. Justice Sabyasachi Mukharji has followed the decision of another Division Bench in Appeal from Original Order No. 59 of 1972 (Namin Das Paramanand Das v. ITO) delivered by the Hon'ble Mr. Justice Salil K. Roy Chowdhury on the 17th July, 1974 (since reported in : [1979]117ITR174(Cal) infra) to which I had concurred.

6. The views expressed in these two judgments have also been expressed by other High Courts, e.g., in K. P. Reddy v. CIT : [1968]68ITR638(AP) , K. C. Vedadri v. CIT : [1973]87ITR76(Mad) , Addl. CIT v. Santosh Industries : [1974]93ITR563(Guj) , Poorna Biscuit Factory v. CIT : [1975]99ITR41(AP) and CIT v. Gangaram Chapolia : [1976]103ITR613(Orissa) .

7. The law appears to be well settled and question No. 1 is accordingly answered in the affirmative and in favour of the revenue.

8. We now come to question No. 2. Learned counsel for the applicant has referred us to a decision of the Patna High Court in Addl. CIT v. Bihar Textiles reported in : [1975]100ITR253(Patna) . In this case, the Patna High Court has held that once a notice under Sub-section (2) of Section 139 of the I.T. Act, 1961, has been issued to an assessee during the relevant assessment year, there cannot be any penalty under Section 271(1) for failure to furnish the return as required by Sub-section (1) of Section 139.

9. We are unable to agree with the view of the Patna High Court. Our view is that once a default is committed under Section 139(1), the fact that a notice under Section 139(2) has been served would not make any difference to the date of imposition of penalty, namely, the date of default under Section 139(1). This view was taken by the Rajasthan High Court in the case of CIT v. Indra and Co. reported in . The Rajasthan High Court has said that an assessee is liable to pay penalty for not submitting his return as required under Section 139(1) of the I. T. Act, 1961, even though he subsequently files a return in pursuance of a notice under Section 139(2) and an assessment is made on the basis of that return. Disagreeing with the Tribunal in that case the Rajasthan High Court has stated at page 706 :

'If the view taken by the Tribunal is adopted, the result will be that if a person has not filed any return under Section 139(1), he cannot be penalised if he has filed a return after a notice has been given under subsection (2) of Section 139. It may be pointed out that before taking any assessment proceedings, it is incumbent on the Income-tax Officer to issue notice under Sub-section (2) of Section 139. Such a view would mean that any person liable to pay income-tax may sit comfortably without any fear of the imposition of penalty and not furnish his return as required under Section 139(1) and wait till a notice is given to him under Section 139(2) and then file a return within the time mentioned in that notice. This view does not appeal to us.'

10. We are inclined to agree with the Rajasthan High Court. It is to be noted that an ITO, before he makes a best judgment assessment under Section 144, is bound to give a notice under Section 139(2). An assessee cannot, therefore, be allowed to wait till a notice is given under Section 139(2) and escape the consequences of penalty imposable under Section 271(l)(a).

11. The same view has been taken by the Delhi High Court in CIT v. Hindustan Industrial Corporation reported in : [1972]86ITR657(Delhi) . The Delhi High Court says that the plain language of Section 139(2) cannot be construed by saying either that the assessee is absolved of his statutory obligation to file a return of his income voluntarily under Section 139(1) and the default committed in not filing a return voluntarily under Section 139(1) cannotbe taken note of for initiating proceedings for imposition of penalty if a notice under Section 139(2) is issued or that the period of default shall cease from the date when the notice under Section 139(2) is served on the assessee.

12. A reference in this connection may also be made to the decision of the Andhra Pradesh High Court in Mullapudi Venkatarayudu v. Union of India reported in : [1975]99ITR448(AP) . The Andhra Pradesh High Court is of opinion that because the ITO issues a notice under Section 139(2) after the termination of the period prescribed by Section 139(1), the ITO cannot be deemed to have condoned the non-compliance to furnish a return under Section 139(1).

13. In the premises aforesaid our answer to question No. 2 in this reference is also in the affirmative and in favour of the revenue.

14. We make no order as to costs.

Deb, J.

15. I agree.


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