The Judgment of the Court was delivered by

Sabyasachi Mukharji, J.:— This is an application challenging the assessment made under section 144 of the Income-tax Act, 1961, for the assessment years 1967-68 and 1968-69. The assessee is National Hotel which runs a popular eating house in Calcutta known as Dilkusha Cabin. The assessee was represented by a receiver appointed by this court in Suit No. 890 of 1969. After the receiver took possession he found that no return had been filed for the assessment years 1967-68 and 1968-69. The receiver had received a notice under section 139(2) of the Income-tax Act, 1961. As he was unaware of the true position he applied for time to enable him to deal with the notice. The receiver, thereafter, found that no return had been filed nor any application had been made for extension of time to submit return. The receiver also did not file any application for extension of time to file return. These facts are not in dispute. Thereupon, the petitioner appeared on the 7th of October, 1971, before the respondent, Income-tax Officer, and the Income-tax Officer on the 15th of October, 1971, completed the assessments for the aforesaid two years under section 144 of the Income-tax Act, 1961, to the best of his judgment. In the said assessment orders, which are annexures to this petition, it has been stated by the Income-tax Officer that no return had been filed and no application was made for extension of time for filing returns. From the said assessment orders and demand notices it appeared that interest as contemplated under section 139 for late filing of the returns had been charged. The petitioner contends that the respondent, Income-tax Officer, was not entitled to levy or impose any interest under section 139 of the Income-tax Act, 1961, for late filing of returns. The relevant provision of section 139(1) of the Act at the material time stood as follows:

“139. Return of income.—(1) Every person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall furnish a return of his income or the income of such other person during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed—

(a) in the case of every person whose total income, or the total income of any other person in respect of which he is assessable under this Act, includes any income from business or profession, before the expiry of six months from the end of the previous year or where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year, or before the 30th day of June of the assessment year, whichever is later;

(b) in the case of every other person, before the 30th day of June of the assessment year:

Provided that, on an application made in the prescribed manner, the Income-tax Officer, may in his discretion, extend the date for furnishing the return—

(i) in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired on or before the 31st day of December of the year immediately preceding the assessment year, and in the case of any person referred to in clause (b), up to a period not extending beyond the 30th day of September of the assessment year without charging any interest;

(ii) in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired after the 31st day of December of the year immediately preceding the assessment year, up to the 31st day of December of the assessment year without charging any interest; and

(iii) up to any period falling beyond the dates mentioned in clauses (i) and (ii) in which case, interest at nine per cent. per annum shall be payable from the 1st day of October or 1st day of January, as the case may be, of the assessment year to the date of the furnishing of the return—

(a) in the case of a registered firm or an unregistered firm which has been assessed under clause (b) of section 183, on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm; and

(b) in any other case on the amount of tax payable on the total income, reduced by the advance tax, if any, paid or by any tax deducted at source, as the case may be.”

2. It appears that as a result of the amendment by the Finance Act, 1972, the provisions of section 139 were altered after 1st of April, 1972. The said provisions were to the following effect:

“139. (1) Every person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall furnish a return of his income or the income of such other person during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed—

(a) in the case of every person whose total income, or the total income of any other person in respect of which he is assessable under this Act, includes any income from business or profession, before the expiry of four months from the end of the previous year or where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year, or before the 30th day of June of the assessment year, whichever is later;

(b) in the case of every other person, before the 30th day of June of the assessment year:

Provided 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) ……….

(8) (a) Where the return under sub-section (1) or sub-section (2) or subsection (4) for an assessment year is furnished after the specified date, or is not furnished, then (whether or not the Income-tax Officer has extended the date for furnishing the return under sub-section (1) or sub-section (2), the assessee shall be liable to pay simple interest at twelve per cent. per annum, reckoned from the day immediately following the specified date to the date of the furnishing of the return or, where no return has been furnished, the date of completion of the assessment under section 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source ……….”

3. It appears to me that the proviso 2 of sub-section (1) of section 139 at the relevant time was dealing with the power of the Income-tax Officer, on an application made in the prescribed manner, to extend the date for furnishing the return. Clause (i) and clause (ii) of the said proviso dealt with-certain kinds of cases and in respect of those cases the Income-tax Officer was given the power to extend time for furnishing the return without charging any interest. Clause (iii) of the said proviso dealt with the period beyond the dates mentioned in clauses (i) and (ii) and provided “in which case” interest at 9 per cent. shall be payable in the manner indicated in sub-clauses (a) and (b) of clause (iii) of the proviso. Therefore, the interest which was made payable by sub-clause (iii) of the proviso was in respect of cases where the Income-tax Officer extended the time on an application made by the assessee. Sub-section (4)(a) of section 139 provided at the relevant time that any person who had not furnished a return within the time allowed to him under sub-section (1) or sub-section (2) might before the assessment was made, furnish the return for the previous year at any time before the end of the period specified in clause (b) and in that case the provisions of clause (iii) of the proviso to sub-section (1) would be applicable. In the instant case before me it has to be noted that no return, even within the period of four years or prior to the making of assessment, was filed by the assessee. In the instant case, therefore, on the construction of the section, I am of the opinion that by virtue of the provisions of the statute as these were at the relevant time, in a case where the assessee had not applied for extension of time and there was no extension of time granted and where the assessee had not filed any return before the making of the assessment, interest as contemplated under sub-section (1) of section 139 of the Income-tax Act, 1961, cannot be charged. The position, however, is different since 1st of April, 1972. I am fortified in this view by the observations of the Division Bench of the Andhra Pradesh High Court in the case of Kishanlal v. Income-tax Officer [1971] 82 ITR 660 at page 662 (AP) of the report. Counsel for the revenue, however, drew my attention to the decision of the Gauhati High Court in the case of Ganesh Das Sreeram v. Income-tax Officer [1974] 93 ITR 19 (Gauhati). There the court observed that where the assessee had failed to furnish returns within the time allowed under sub-section (1) or subsection (2) of section 139 of the Income-tax Act, 1961, and furnished it under section 139(4), clause (iii) of the proviso to section 139(1) would be attracted which empowered the Income-tax Officer to charge interest for late submission of returns. The court further observed that an application by the assessee and a consequent order extending the time for furnishing returns were not conditions precedent for authorising the Income-tax Officer to charge interest under clause (iii) of the proviso to section 139(1). As would be evident, the facts of the case were entirely different. There the assessee had furnished return within sub-section (4) of section 139. By the terms of sub-section (4) of section 139 clause (iii) of the proviso to section 139(1) was attracted as I have mentioned before and that necessarily attracted the power of the Income-tax Officer to levy interest. In a case, however, where the return was not filed within the time contemplated by sub-section (4) of section 139 no question of attracting the provision of clause (iii) of the proviso to section 139(1) arises. The next case upon which reliance was placed by the counsel for the revenue was the decision of the Gujarat High Court in the case of Additional Commissioner of Income-tax v. Santosh Industries [1974] 93 ITR 563 (Guj). In that case before the Division Bench of the Gujarat High Court the facts were that the assessee-firm did not file its return for the assessment year 1961-62, within the time given by the notice under section 22(1) of the Indian Income-tax Act, 1922, and had not asked for extension of time to file the return, but filed the return before the expiry of four years from the end of the assessment year 1961-62, and before any assessment had been made under section 139(4) of the Income-tax Act, 1961. After making an assessment, the Income-tax Officer levied penalty on the assessee under section 271(1)(a) of the Income-tax Act, 1961, for not having filed the return within time. The Appellate Assistant Commissioner, on appeal, confirmed the order of penalty; on further appeal the Appellate Tribunal held, relying on certain observations in the decision of the Supreme Court in Commissioner of Income-tax v. Kulu Valley Transport Co. P. Ltd. [1970] 77 ITR 518 (SC), that the return having been filed before assessment within four years from the end of the assessment year 1961-62, as contemplated under section 139, sub-section (4), must be deemed to have been filed within the time allowed under section 22, sub-section (1) of the 1922 Act, and there was, accordingly, no default on the part of the assessee within the meaning of section 271(1)(a) of the 1961 Act, and set aside the order of penalty. On a reference at the instance of the Commissioner, it was contended for the assessee that sub-section (4) of section 139 was in the nature of a proviso to sub-section (1), that it had the effect of extending the time specified in section 139(1), that, therefore, if the assessee filed the return in conformity with section 139(4), he should be deemed to have filed the return within the time allowed under section 139(1) and section 271(1)(a) would not be attracted. The Division Bench of the Gujarat High Court disagreed with the Tribunal and rejected the contention of the assessee holding that the second clause of section 271(1)(a) applied where a person failed to furnish a return of income within the time allowed strictly under sub-section (1) or sub-section (2) of section 139 and filing of return after the expiration of such time but before the expiration of four years from the end of the assessment year under section 139(4) did not save him from penalty for the default contemplated under the second clause of sec-ton 271(1)(a). The words “within the time allowed…by sub-section (1) of section 139” in the second clause of section 271(1)(a), according to their plain natural meaning, must be taken to refer to the time specified in subsection (1) of section 139 or extended by the Income-tax Officer under the proviso to that sub-section and not so as to include the time within which the return of income may be filed under sub-section (4) of section 139. In my opinion, facts of this case are entirely different and counsel for the revenue cannot rely on the observations made by the Gujarat High Court. Reliance was also placed on the judgment of a learned single judge of Karnataka High Court in the case of M. Nagappa v. Income-tax Officer [1975] 99 ITR 32 (Kar). There the learned judge held that the interest levied under section 139(1) of the Income-tax Act, 1961, on a person who did not file his return within the time allowed was not penal in nature. Under the proviso to section 139(1) even where the Income-tax Officer granted extension of time to a person to file his return such a person was liable to pay interest if the extended date fell beyond a particular date. There is no question in such a case of levying any penalty on the person Concerned because extension of time having been granted to him he was not in default. He was required to pay it because by reason of extension of time the filing of the return would be delayed and that would, in its turn, delay the assessment and consequent realisation of tax from the assessee. It was, therefore, by way of compensation for delay in realisation of tax that interest is required to be paid by the assessee. If a person who obtained extension of time beyond a certain date was required to pay interest, a person who did not seek extension of time but filed the return of income under subsection (4) of section 139 after the time specified in sub-section (1) could not be allowed to escape payment of interest. The latter could not be placed in a better position than the former. Therefore, the legislature had made a person filing his return under section 139(4) also liable to pay interest which, again, was not by way of penalty but was by way of compensation for the delay in realisation of tax. As would be evident from the facts hereinbefore, that case was a case where the assessee had filed the return as contemplated under section 139(4) of the Act. That is not the case here. Reliance was also placed on the observations of the Andhra Pradesh High Court in the case of Poorna Biscuit Factory v. Commissioner Of Income-Tax, A.P [1975] 99 ITR 41 (AP). That case dealt with imposition of penalty. I am not concerned with that question in the instant case.

4. Having regard to the view I have taken, I am of the opinion that prior to amendment with effect from 1st of April, 1972, the interest could not be charged in the case of an assessee who had not filed the return prior to the assessment and to whom no extension of time had been granted by the Income-tax Officer on an application made. That was a lacuna in the legislation as it stood. The position seems to have been rectified by the subsequent amendment as indicated by me. That is also an indication that at the relevant time the Income-tax Officer had no power to charge interest.

5. In the aforesaid view of the matter, this rule must succeed and the assessment order quashed to the extent it imposes interest for non-submission of returns. To that extent, let a writ in the nature of certiorari issue accordingly and respondent be restrained from realising any amount as interest. Let a writ in the nature of mandamus also issue accordingly. The rule is made absolute. There will be no order as to costs.