Citation Codes

Equivalent Citations

citation codes

Case Number

Income-tax Reference No. 2 of 1974

Judges

Hon'ble Mr. Justice Dibyendu Mohan Sen
Hon'ble Mr. Chief Justice M. C. Pathak

Acts

section 139 of Income-tax Act, 1961.The Income-tax OfficerUnder sec. 139(1), (2), (3) of the Income-tax Act, 1961,
section 139(2) of the Income-tax Act, 1961 (hereinafter called the Act),
sections 33(4) and 66(1) of the Income-tax Act
section 271(1)(a) of the Income-tax Act, 1961,
section 256(1) of the Income-tax Act, 1961,
6, rule 13 of the Income-tax Rules, 1962,
sec. 140 of the Income-tax Act, 1961.5.
rule 13 of the Income-tax Rules, 1962.
sub-section (2) to section 139
sub-section (1) to section 139.
rule 13)Application
INCOME TAX ACT

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Smart Summary

Case Summary — Reference under Section 256(1) of the Income-tax Act, 1961

Factual and Procedural Background

This is a reference under section 256(1) of the Income-tax Act, 1961, made by the assessee in relation to questions of law arising from the Income-tax Appellate Tribunal's orders in I.T. As. Nos. 3238 (Gau) of 1969–70 and 3387 (Gau) of 1969–70.

Key factual and procedural points set out in the opinion:

A notice under section 139(2) of the Income-tax Act, 1961 dated 25 May 1963 was served on the assessee-company on 29 May 1963 for the assessment year 1963–64.
The assessee did not file a return in response to that notice by the due date (admitted due date: 28 June 1963).
The Income-tax Officer (ITO) initiated action under section 271(1)(a) for failure to furnish a return.
The assessee submitted an application in Form No. 6 (as prescribed by rule 13 of the Income-tax Rules, 1962) on 25 April 1964 (letter dated 24 April 1964) seeking extension of time to file the return up to 30 April 1964. This application was made long after the due date.
The ITO's assessment order (dated 7 April 1964) recorded the application, concluded it was filed long after the due date and that the reasons for delay were not convincing, and imposed a penalty at the prescribed rate under section 271(1)(a).
The assessee appealed to the Appellate Assistant Commissioner and then to the Tribunal contending (a) the ITO should have passed a specific order on the extension application and absence of such order should be deemed grant of extension, (b) the ITO could not impose penalty while ignoring the extension petition, and (c) the penalty order was defective because it did not expressly quantify the amount.
The Tribunal upheld the penalty. The assessee sought a reference on two questions of law to the High Court under section 256(1), which gave rise to this opinion.

Legal Issues Presented

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Income-tax Officer was justified in imposing the penalty under section 271(1)(a) of the Income-tax Act, 1961, ignoring the petition for extension of time filed by the assessee on 24 April 1964?
Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the order of the Income-tax Officer was valid as the period of default and the quantification of the amount of penalty could be found from the order of the Income-tax Officer?

Arguments of the Parties

Assessee's Arguments

The ITO should have passed a specific order on the Form No. 6 application for extension of time; absence of a specific order should be treated as deemed grant of the extension.
The ITO could not impose a penalty under section 271(1)(a) while effectively ignoring the petition for extension of time.
The penalty order was defective because the ITO did not quantify the amount of penalty in the order; therefore the order should be invalidated.

Revenue's Arguments

The language of Form No. 6 suggests that the application should be made before the due date — revenue pointed to the opening phrase “I/we have to file a return,” contending this implies the due date had not expired when the application is made.
The ITO was not bound to treat a belated application (filed after the due date) as automatically granted and was entitled to exercise discretion under the proviso to section 139(1) [as discussed in the opinion].
The penalty amount could be computed from the ITO's order and the statutory formula; omission to specify the figure in the order did not render it invalid.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
T. Venkata Krishnaiah & Co. v. Commissioner of Income-tax, [1974] 93 ITR 297 (A.P.)	The principle that an application for extension filed after the time given by the notice under section 139(2) is not one on which the Income-tax Officer is bound to pass any order; an assessee cannot presume a belated application is automatically granted; the discretion must be exercised fairly and there is no deeming provision in the statute.	The court expressed respectful agreement with these observations and relied on them to support the view that the ITO is not obliged to treat or deem a belated application as granted and that an assessee must apply before expiry of the due date to secure an extension.
Income-tax Reference No. 6 of 1973 — Commissioner of Income-tax v. Smt. Ratna Kanti Bhuyan (disposed 9-7-74)	The proposition that omission by the Income-tax Officer to record specifically the basis for calculating a penalty is not material where the basis is prescribed by statute and the calculation is readily determinable from the statutory provision and uncontroverted facts.	The court relied on this earlier view to hold that failure to quantify the penalty in the order did not invalidate it because the penalty was computable from section 271(1)(i) and the undisputed facts.
In re Trikamlal Maneklal (authority cited regarding remand and admissibility of reference)	The principle that an order of the Appellate Tribunal remanding the matter to the Appellate Assistant Commissioner may still be the subject of a reference under the relevant statute (i.e., a remand does not render a reference under the statute inadmissible).	The court applied this reasoning to conclude that the Tribunal's remand to the Appellate Assistant Commissioner did not make the reference under section 256(1) inadmissible.

Court's Reasoning and Analysis

The court proceeded through a structured analysis focused on statutory interpretation, the effect of the Form No. 6 application, and the mechanics of penalty computation:

Interpretation of Form No. 6 and timing of application:
The court examined the language of Form No. 6 (rule 13) and observed alternative phrases such as "is not possible/has not been possible for me/us to file a return," which the assessee argued permitted belated applications. The revenue pointed to the opening phrase "I/we have to file a return" to argue the form presupposes an application made before the due date.
Reliance on precedent for the duty to apply before the due date:
The court referred to and expressed respectful agreement with the Andhra Pradesh High Court decision in T. Venkata Krishnaiah & Co., which held that an application received after the time fixed by the notice under section 139(2) is not one upon which the ITO is bound to act and that there is no presumption that a belated application has been granted. The court reiterated that it is the assessee's duty to file an extension application in advance and to obtain the extension on or before the date on which the return is required to be filed.
Statutory position on penalty and discretion:
The court emphasized that under section 271(1)(a) a penalty liability attaches if a person, without reasonable cause, fails to furnish a return in accordance with a notice under section 139(2) within the time allowed. The proviso to section 139(2) enables the ITO in his discretion to grant an extension on an application, but it does not impose an obligation to consider or grant every belated application. The ITO may, however, in his discretion consider a belated application so long as it is filed before the assessment order, provided there are prima facie valid grounds explaining the delay.
Application of facts to discretion:
The court found on the facts that the ITO did not ignore the application: he took cognizance of it, considered the reasons, found them unconvincing and imposed the penalty. Thus, the ITO's order was not an imposition made in disregard of the petition but a considered exercise of discretion.
Quantification of penalty:
The court acknowledged it would have been preferable for the ITO to quantify the penalty in the order but held that omission to state the precise figure does not invalidate the order when the penalty is readily computable from the statute. It noted the statutory formula under section 271(1)(i) (as quoted in the opinion) — two percent of the tax for every month of default, subject to an aggregate ceiling of fifty percent — and applied the undisputed facts (due date 28 June 1963; actual filing 30 April 1964; period of default 10 complete months) to conclude the penalty amount could be calculated without further factual controversy. The court also relied on its earlier decision in Commissioner of Income-tax v. Smt. Ratna Kanti Bhuyan to support the proposition that omission to record the basis of calculation is not material where the statutory provision fixes the quantum and the facts needed for computation are not in dispute.
Remand and admissibility of reference:
Although the Tribunal remanded the matter to the Appellate Assistant Commissioner for a clear finding on when the assessee received its accounts from Calcutta and Delhi and whether there was reasonable cause for delay, the court held that a reference under section 256(1) is not rendered inadmissible merely because of such a remand. The court relied on the principle in In re Trikamlal Maneklal to support the admissibility of the reference despite remand.

Holding and Implications

Holding: Both questions referred under section 256(1) were answered in favour of the revenue. The court held that:

DISPOSED OF: The Tribunal was justified in upholding the ITO's imposition of penalty under section 271(1)(a) despite the assessee's belated Form No. 6 petition for extension of time, because the ITO was not obliged to treat or deem the belated application as granted and, on the facts, the ITO had considered and rejected the application as not supported by convincing reasons.
The Tribunal was justified in holding that the ITO's order was valid even though the ITO did not expressly quantify the penalty in the order, because the period of default and the statutory formula made the penalty readily computable from the order and the statute.

Implications and immediate consequences:

The penalty imposed by the ITO under section 271(1)(a) stands as a valid levy on the facts and record before the court.
The matter was remanded by the Tribunal to the Appellate Assistant Commissioner to determine when the assessee received certain accounts (from Calcutta and Delhi) and whether there was reasonable cause for the delay; that remand remains operative and the Appellate Assistant Commissioner must decide whether any portion of the default period is excused by reasonable cause. If the Appellate Assistant Commissioner finds in favour of the assessee, the questions referred might not have further practical consequence; if he finds against the assessee, the court's answers will apply.
The court indicated no novel or broad new principle was established beyond applying existing statutory text and precedent; the decision follows established authorities and statutory interpretation rather than laying down a new legal doctrine.
Concurrence: M.C. Pathak, C.J., concurred with the judgment as recorded.

This summary is derived exclusively from the opinion text provided and does not add information beyond that text.

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Assam Frontier Veneer And Saw Mills v. Commissioner Of Income-Tax, Assam, Meghalaya, Nagaland, Manipur And Tripura.

D.M Sen, J.:— This is a reference under section 256(1) of the Income-tax Act, 1961, at the instance of the assessee, on certain questions of law arising out of the Income-tax Appellate Tribunal's order passed in I.T As. Nos. 3238(Gau) of 1969–70 and 3387 (Gau) of 1969–70. The questions of law that have been referred are:

“(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Income-tax Officer was justified in imposing the penalty under section 271(1)(a) of the Income-tax Act, 1961, ignoring the petition for extension of time filed by the assessee on April 24, 1964?

(2) Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that the order of the Income-tax Officer was valid as the period of default and the quantification of the amount of penalty could be found from the order of the Income-tax Officer?”

2. We have to state briefly the facts leading to this reference in order to appreciate the context in which these two questions of law have arisen and been referred to us. A notice under section 139(2) of the Income-tax Act, 1961 (hereinafter called “the Act”), dated May 25, 1963, had been served on the assessee-company on May 29, 1963, in respect of the assessment year 1963–64. The assessee did not, however, file any return, in spite of the said notice, whereupon the Income-tax Officer took action under section 271(1)(a) of the Act. The notice under section 274 of the Act had been served on the assessee fixing April 27, 1964, for hearing. On April 25, 1964, the assessee submitted an application for extension of the date for furnishing its return up to April 30, 1964, on grounds stated in its letter dated April 24, 1964. This application for extension of time was made in accordance with Form 6, as prescribed under rule 13 of the Income-tax Rules, 1962. The Income-tax Officer in his assessment order dated April 7, 1964, after taking note of this application, observed that it was made long after the due date for submission of return by the assessee and also held that the reasons for delay given by the assessee were not convincing. The Income-tax Officer, accordingly, imposed a penalty at the prescribed rate under section 271(1)(a) of the Act. The assessee contended, first, before the Appellate Assistant Commissioner and then before the Tribunal that the Income-tax Officer should have passed a specific order on its application for extension of time submitted in Form No. 6 and since the Income-tax Officer had failed to do so, it must be held that the Income-tax Officer did grant extension of time as prayed for. The Income-tax Officer, according to the assessee, could also not impose the penalty under section 271 ignoring the petition for extension of time. The assessee now urges in this reference that the Tribunal was wrong in upholding the said order of penalty passed in the above circumstances. The assessee further contends that the Tribunal was also wrong in upholding the order of penalty, as the Income-tax Officer had not quantified the amount but, instead, merely mentioned in his order that the penalty be imposed at the prescribed rate under section 271(1)(a) of the Act.

3. The questions of law have been referred to us on the above premises.

4. We shall first discuss as to whether the Tribunal was justified in holding that the order imposing the penalty under section 271(1)(a) of the Act can be sustained irrespective of the petition for extension of time filed by the assessee on April 24, 1964. In the instant case, it is not in dispute that the petition for extension of time had been filed long after the date when the return was due, that is, in this case June 28, 1963. The assessee, however, urges that the language in Form No. 6, as prescribed under rule 13 of the Income-tax Rules, 1962, would show that the application for extension of time can be made even after the expiry of the period by which the return is due. The Form No. 6 is reproduced below:

“FORM No. 6

(See rule 13)

Application for extension of the date for furnishing a return of income under section 139 of Income-tax Act, 1961.

The Income-tax Officer………

Under sec. 139(1), (2), (3) of the Income-tax Act, 1961, I/we have to file the return of assessable for the assessment year commencing on the 1st April, 19, before,….19…… For the reasons given below, for me/us to file the return before the said date.

2. It is, therefore, requested that the time for furnishing the return may be extended up to……

Signature…………………………

Date………19Name (in capital letters),….

Address………

Notes: 1. Delete the inappropriate words. 2. The application should be signed by a person who is entitled to sign a return of income as provided in sec. 140 of the Income-tax Act, 1961.”

5. It will be seen in the above Form that the words “is not possible/has not been possible for me/us to file a return” have been used alternatively. The assessee submits that the use of the phrase “has not been possible” would show that an application for extension of time is permissible, even after the due time for submission of return has expired, provided it is made before the actual assessment. On the other hand, the learned counsel for the revenue points out that the form starts with the words “I/we have to file a return”, which would show that the due date for submission of return should not have expired when that application was made.

6. The learned counsel for the revenue has also referred us to a decision in T. Venkata Krishnaiah & Co. v. Commissioner of Income-tax [1974] 93 ITR 297, 298 AP., where the above question came up for decision. A reference under section 256(1) of the Act was made to the Andhra Pradesh High Court, inter alia, on the following question:

“(1) Whether, on the facts and in the circumstances of the case, the Income-tax Officer should be deemed to have granted extension of time for filing the return when he did not pass any orders on the assessee's application dated September 16, 1963?”

7. It was held in the above case:

“In the light of the foregoing discussion we shall now examine the contention of the assessee that the Income-tax Officer must be deemed to have granted extension of time for filing the return when he did not pass any order on its application dated September 16, 1963. As pointed out earlier the application though dated September 16, 1963, was in fact received by the Income-tax Officer only on September 18, 1963. As the application for extension of time was not received by the Income-tax Officer on or before September 16, 1963, within which time the assessee was required as per the notice under sub-section (2) to section 139 to file his return, the Income-tax Officer was not bound under the provisions of the Act or any rules made thereunder to pass any order thereon. It is not open to the assessee to file an application beyond the period within which it was required to file its return as per the notice under section 139 and, thereafter, make no effort to know what happened to its application. The assessee should not assume or presume that any application filed by it for extension of time to file the return of income would automatically be granted. It is the duty of the assessee to file in advance an application for extension of time and obtain the extension on or before the date on which it is required to furnish its return of income. It admits of no doubt that whether to grant or refuse to grant extension of time for filing the return of any person is within the discretion of the Income-tax Officer. This view of ours gains support from the very use of the words ‘in his discretion’ in the proviso to sub-section (1) to section 139. This discretion vested in the Income-tax Officer, being a statutory one, must be exercised fairly, reasonably and objectively but not arbitrarily or with malice or caprice. There is no provision in the Act or the rules made thereunder which requires the Income-tax Officer to pass an order on an application filed by an assessee subsequent to the time given to him for filing his return pursuant to a notice under sub-section (2) to section 139. The Income-tax Officer has to apply his mind to the facts and circumstances of each case and decide whether it was a fit case to grant extension of time or not. There is no hard and fast rule of universal application. We may add that there is no scope for presuming or assuming that an application filed by an assessee for extension of time must have been granted in its favour when no order has been passed on its application by the Income-tax Officer. There is no scope for such a presumption or deeming provision in a taxing statute. The Income-tax Act is a self-contained code. The provisions of the Act and the Rules made thereunder must specifically provide for such a deeming provision. Otherwise, the assessee cannot claim any advantage or derive benefit when the Income-tax Officer did not pass any order on its application filed beyond the time within which it was required to furnish its return. In any event, we are clear in our minds that the assessee herein cannot compel the Income-tax Officer either to pass an order extending the time for furnishing the return or give reasons for refusal of the request. On the application of the aforesaid principles, the contention of the assessee that it must be deemed that the extension of time was granted when the Income-tax Officer did not pass any orders on its application merits rejection.”

8. We are in respectful agreement generally with the above observations and particularly with the one stating that it is the duty of an assessee to file his application for extension of time before the expiry of the due date of his return. In our opinion, the provisions of section 271(1)(a) of the Act are quite clear. By virtue of these provisions, a liability to penalty attaches to a person as soon as he, without reasonable cause, has failed to furnish the return of his total income in accordance with the notice given under sub-section (2) to section 139 within the time allowed. The proviso to section 139(2) only enables the Income-tax Officer to grant an extension, in his discretion, on an application made for the same. We, however, cannot agree that this proviso obliges the Income-tax Officer to consider an application for extension, however belatedly it may be made, and pass an order thereon, even when it has been made long after the due date of submission of the return. On the other hand, we also do not see that the Income-tax Officer would cease to have any power, under this proviso, to exercise his discretion to grant extension of time upon a belated application, provided it is filed before the assessment order.

9. We have also to note that the facts and circumstances of this case do not disclose that the Income-tax Officer had ignored the petition for extension of time filed by the assessee. On the contrary, the fact is that he took cognizance of that application for extension of time, but was not convinced of the reasons for the delay as given by the assessee and, therefore, imposed the penalty. We, thus, do not see that the Income-tax Officer had imposed the penalty, ignoring the assessee's petition for extension of time. Be that as it may, we are of the opinion, as already stated, that the Income-tax Officer is not obligated to take into consideration an application for extension of time filed by an assessee in accordance with Form No. 6, rule 13 of the Income-tax Rules, 1962, even when it is admittedly submitted long after the due date for filing the return, unless there be prima facie valid grounds taken therein, explaining the reasons for the delay. We, accordingly, answer the first question in the affirmative, that is to say, in favour of the revenue and hold that, on the facts and in the circumstances of the case, the Tribunal was justified in deciding that the order of the Income-tax Officer imposing the penalty under section 271(1)(a) of the Act was in order, although there had been a petition for extension of time filed by the assessee and on which no specific order had been passed by the said Income-tax Officer.

10. The next question relates to the quantification of the amount of penalty. It is contended by the assessee that the Income-tax Officer did not mention the amount of penalty in the penalty order and, as such, the order is defective and inoperative. We are, however, of the opinion that, although it would have been more appropriate if the amount of penalty had been quantified in the order passed by the Income-tax Officer, failure to do so, by itself, would not invalidate the said order, as long as it is computable by a mere reference to the relevant provisions of the Act. Under section 271(1)(i) of the Act, 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, is leviable as penalty for a default under section 271(1)(a). The admitted position in this case is that the assessee was required to file a return by June 28, 1963, whereas the return was, in fact, filed on April 30, 1964. Thus, the period of default comes to 10 complete months, which fact is also not in dispute. The tax due on the basis of the assessment order is also not in dispute. The amount of penalty, therefore, is a simple matter of calculation, on the basis of the relevant law applicable thereto. As such, we hold that the mere failure specifically to quantify the amount of penalty in the order cannot invalidate the same. We took a similar view also in Income-tax Ref. No. 6 of 1973 (Commissioner of Income-tax v. Smt. Ratna Kanti Bhuyan) disposed of on 9-7-74, where we held that:

“The discretion of the Income-tax Officer to levy or not to levy a penalty is thus preserved by this section. However, if a decision is reached to levy a penalty, it cannot be less than the prescribed minimum. Therefore, the omission on the part of the Income-tax Officer to record specifically the basis for his calculation of the penalty is not material in any manner whatsoever. Where the basis of the calculation has been laid down in the statute itself and, more so, where the quantum has been fixed as in section 271(1)(i), there can be no legal requirement for the Income-tax Officer to indicate what was the basis for his calculation, since a mere reference to the statutory provision and the uncontroverted facts apparent from the records would make the position abundantly clear.”

11. We, therefore, answer the second question also in the affirmative, that is to say, the Tribunal was justified in holding that the order of the Income-tax Officer was valid, as the period of default and quantification of the amount of penalty could be found in the order of the Income-tax Officer.

12. We also find that the Tribunal has passed an order remanding the matter to the Appellate Assistant Commissioner and requiring him to give a clear finding on the point as to when the assessee got his accounts from Calcutta and Delhi and thereafter to come to a decision whether there was any reasonable cause for delay, which would take him out from the penalty provisions for the entire or part of the period of his delay. No doubt, if the Appellate Assistant Commissioner comes to a decision in favour of the assessee and holds that the assessee has been able to establish a reasonable cause for his delay, there may be no further case for answering the questions referred to us by the Tribunal. If, however, on the contrary, the Appellate Assistant Commissioner comes to a finding adverse to the assessee, the questions would remain to be answered. It is in that view of the matter that we have answered them. We are also of the opinion that merely because of an order of remand by the Tribunal, a reference under section 256(1) of the Act does not become inadmissible. In this connection, we may refer to In re Trikamlal Maneklal, wherein it was held:

“There is nothing express or implicit in sections 33(4) and 66(1) of the Income-tax Act which requires that the order passed by the Appellate Tribunal against which an application for reference of a question of law to the High Court may be made must be an order finally disposing of the assessment of the assessee. The order that the Appellate Tribunal passes under section 33(4) on appeal from an order of the Appellate Assistant Commissioner may be one confirming the order of the Appellate Assistant Commissioner or setting aside his order or remanding the proceedings to him; and against any such order, which so far as the Tribunal is concerned decides questions about the rights or obligations of the assessee, an application for making a reference under section 66(1) may lie.”

13. We are, therefore, of the opinion that merely because the matter was remanded back to the Appellate Assistant Commissioner by the Tribunal, a reference under section 256(1) of the Act has not become inadmissible as contended by the learned standing counsel for the revenue. In the result, both the questions are answered in favour of the revenue as stated earlier. The reference is disposed of accordingly.

M.C Pathak, C.J:— I agree.

Assam Frontier Venee... v. Commissioner Of Inco...