S.S Sandhawalia, C.J:— Whether the statutory liability to pay interest under section 139 of the Income-tax Act, 1961 (prior to its amendment with effect from the 1st of April, 1971) for the delayed filing of returns arises only from an application for extension of time and is not at all attracted in the absence of such an application, is the significant controversial question necessitating this reference to the Full Bench. Directly under challenge is the ratio of the Division Bench Judgment of this Court in Commissioner of Income-tax, Bihar v. Bahri Bros. (P) Ltd. (102 ITR 443) holding to this effect.

2. Undoubtedly there still persists some cleavage of judicial opinion on the point aforesaid within the country. On the one hand are the Division Bench judgments of the High Courts of Patna, Delhi and Jammu and Kashmir whilst, on the other side, are arrayed the massive catena of decisions of the Full Bench of the Andhra Pradesh and the Gauhati High Courts as also the Division Bench Judgments of the High Court of Gujarat, Calcutta, Madhya Pradesh, Allahabad, Kerala, Karnataka and Rajasthan. With such a mass of judicial opinion and, indeed, if one may say so, a maze of precedent, it seems not only unnecessary but really wasteful to now launch on a fresh dissertation on principle. It would, therefore, be amply sufficient to broadly indicate the reasons for agreement with the one or the other stream of judicial thought.

3. Inevitably one must now advert first, albeit briefly, to the matrix of facts giving rise to the question herein. Regretfully it has to be noticed that we are yet dealing with a case in which the accounting year is one ending with Diwali on the first October, 1968. The assessee under the law was required to file the return for the assessment year in question by the 30th of June, 1969. No return was filed by that date. On the 15th of November, 1971 the Revenue issued notice under section 139(2) of the Income-tax Act, 1961 (hereinafter to be referred to as the ‘Act’). In response to the notice, return was then filed on the 29th of November, 1971. The Income-tax officer, after assessing the tax liability of the assessee, imposed the statutory interest upon the assessee for the late filing of return. In appeal to the Appellate Assistant Commissioner, the assessee, apart from challenging the assessment on merits, contended that it having not made any application for extension of time for the filing of the return and no extension having been granted, there could be no liability to pay interest under section 139. This submission found favour with the Appellate Assistant Commissioner. He set aside the interest imposed. Aggrieved thereby, the Revenue came up by way of an appeal to the Income-tax Appellate Tribunal wherein cross-objection were filed on behalf of the assessee as well. On the material point of the liability to pay interest, the Tribunal conferred, with the Appellate Assistant Commissioner by primarily relying on the Division Bench judgment of this Court in C.I.T Bihar v. Bahri Brothers (P) Ltd. (102 ITR 443). The Revenue then preferred a reference application and the following question has been referred by the Tribunal to this Court:—

“Whether on the facts and in the circumstances of this case the Tribunal was correct in law in holding that interest under section 139 of the Income-tax Act, 1961 was not exigible in this case?”

4. The matter came up originally before a Division Bench presided over by my learned Brother, Uday Sinha, J. Before them a firm reliance was placed on Bahri Brothers' case (supra) by the assesses while an equally strenuous challenge to its correctness was laid on behalf of the Revenue. Noticing the conflict of precedent on the point and expressing a doubt about the correctness of the view propounded in Bahri Brothers' case the matter has been referred to the Full Bench.

5. Inevitably one must now advert to the language on the relevant part of section 139 as it stood before its amendment by the Taxation Laws (Amendment) Act of 1970 which came into force on the 1st of April, 1971:

“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 chargeble to income-tax, shall furnish a return of his income or 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 be 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 clause (i) and (ii), in which case, interest at nine per cent per annum shall be payable from the 1st day of October or the 1st day of January, as the case may be, of the assessment year to the date of the furnishing of the return;

(2) in the case of any person who, in the income-tax Officer's opinion, is assessable under this Act, whether on his own total income or on the total income of any other person during the previous year, the Income-tax Officer may, before the end of me relevant assessment year, serve a notice upon him requiring him to furnish, within thirty days from the date of service of the notice, a return of his income or the income 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:

Provided that on an application made in the prescribed manner the Income-tax Officer may, in his discretion, extend the date for the furnishing of the return, and when the date for furnishing the return, whether fixed originally or on extension, falls beyond the 30th day of September or, as the case may be, the 31st day of December of the assessment year, the provisions, of sub-clause (iii) of the proviso to sub-section (1) shall aupply.

(4)(a) 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 clause (iii) of the proviso to sub-section (1), shall apply in every such case.

6. Without any over-elaboration, the broad features of the scheme of section 139 emerging from its provisions have first necessarily to be noticed. It is clear that a return has to be filed without waiting for any individual notice before the 30th of June, the 30th of September, as the case may be, under the provisions of clause (a) or (b) sub-section (1) of section 139. However, it is provided under clause (1) of the proviso to sub-section (1) of the said section that on an application made by the assessee in the prescribed manner the Income-tax Officer may, in his discretion, extend the date for furnishing the return, up to the 30th of September or the 31st of December, as the case may be. If such date is extended on an application made by the assessee, no interest is to be charged up to the date of 30th September or the 31st of December, as the case maybe. However, on an application made in the prescribed manner, the Income-tax Officer may also extend the date for furnishing the return beyond 30th September or 31st December; but if the date which is thus extended falls beyond these two termini then interest at 9 per cent per annum has to be paid. Clauses (i) and (ii) of the proviso deal with cases where no interest is chargeable. The primal benefit which the assessee gets is that by virtue of the application made by him, he avoids the payment of penalty and gets the convenience of extension without payment of interest. However, if the date which is thus extended falls beyond 30th of September or 31st of December, as the case may be, interest has to be paid at 9 per cent per annum from 1st October or 1st January of the assessment year in question up to the date of furnishing of the return under clause (iii).

7. Sub-section (2) of section 139 then contemplates a situation where an individual notice is served by the Income-tax Officer on the assessee calling upon him to furnish the return within thirty days from the date of the service of the notice. If after service of the notice, the assessee asks for extension of time for furnishing the return, the Income-tax Officer may, in his discretion, extend the date for furnishing the return. The proviso to sub-section (2) makes it clear that when the date for furnishing the return, whether fixed originally or on extension, falls beyond the 30th September or 31st December of the assessment year, as the case may be, the provision of clause (iii) of the proviso to sub-section (1) shall apply, i.e, interest at 9 per cent per annum has to be paid from 1st October or 1st January, as the case may be, up to the date of the filing of the return. Yet again under sub-section (4)(a) of section 139 any person who has not furnished a return within the time allowed to him under sub-section (1) or 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 (a) and, in such a case, the provisions of clause (iii) of the proviso to sub-section (1) shall apply to that case. That in effect means that it is open to the assessee to file the return within a period of four years, three years or two years, as the case may be, as provided in sub-section (4)(b). But in every such case from the 1st of October or the 1st of January of the assessment year under consideration the assessee has to pay Interest at 9 per cent per annum up to the date of the filing of the return. Sub-section (4), as it now stands, was substituted with effect from 1st April, 1968 by the Finance Act of the said year. In the instant case we are concerned with the above provision of section 139 as it stood before its amendment. However, it is worth recalling that by the Taxation Laws (Amendment) Act, 1970, which came into force on the 1st of April, 1971 substantial amendments in section 139 were made and some of its provisions were recast and sub-section (8) thereto was substituted which, in term, was subsequently amended by Finance Act, 1972, with effect from April 1, 1972.

8. It is common ground before us that after the aforesaid amendment which come into effect from April 1, 1972 there is no scope for any controversy now of the type which has arisen betwixt the different High Courts for assessment years prior to this amendment. Not much light is thrown regarding the intention of the legislature in inserting in new sub-section (8) of section 139 and the notes on clauses which were circulated along with the Bill, which ultimately was enacted as the Amendment Act, do not throw much light as to reasons why the legislature enacted this provision of sub-section (8).

9. To be somewhat more precise and for the sake of clarity, the sallient features of the scheme of section 139 that emerge are:—

(i) It is rested on the termini of the due dates prescribed for filing the returns by clauses (a) and (b) of sub-section (1) thereof.

(ii) Clauses (i) and (ii) of the proviso to sub-section (1) confer the power of extending the prescribed time of filing the returns on the Income-tax Officer in his discretion without charging any interest up to the 30th day of September or the 31th day of December of the preceding assessment year, as the case may be.

(iii) Beyond the aforesaid two dates the power of the Income-tax Officer to extend the period is inflexibly hedged in by the payment of interest at the statutory rate of 9 per cent per annum by virtue of clause (iii).

(iv) Where the delinquent assessee files a return beyond the due date without applying for extension, he would become automatically liable to pay the statutory rate of interest and also to the penalty, if any imposable under section 271 of the Act.

10. That appears to be the plain intent of the legislature.

11. It is both necessary and instructive to trace the history of the judicial controversy in this context, which would be done hereinafter. Yet are one goes to that, it is equally imperative to settle one basic premise because some misapprehension about the same seems to have led one stream of judicial opinion astray. It may be that there might have been some controversy earlier; but by now there is a total consensus of opinion that the payment of statutory interest under clause (iii) of the proviso to sub-section (1) of section 139 is neither an additional tax nor in any way a penalty. Indeed, the fallacy herein stems from a loose terminology labelling the same as penal interest. In fact and in law, it is not so. The penal provisions in the context of a delayed return are expressly laid out in Sections 271(1)(a). The liability to pay the statutory interest under section 139, therefore, is nothing more or less than a commercial compensation for the delayed payment of tax which would inevitably result from delayed filing of the return herein this interest is a simple quid pro quo for the delayed tender of tax in the treasury and, in ordinary commercial terms, to pay interest for the money so withheld. This appears to be well settled on principle. But if authority were needed, it is there in the words of Chief Justice P.N Bhagwati in Additional Commissioner of Income-tax, Gujrat v. Santosh Industries, (1974) 93 ITR 563):

“In the first place, it is not correct to say that interest chargeable to a person who files his return of income under section 139, sub-section (2), is ‘penal interest’ though that is an expression which is commonly in use in income-tax parlance. It is not by way of penalty that interest is chargeable from a person who does not file his return within the time allowed to him under sub-section (1) of section 139. If we took at clause (iii) of the proviso to sub-section (1) of section 139, it is clear that even where the Income-tax Officer grants extension of time to a person to file his return of income, the person to whom extension of time is granted is liable to pay interest, if the extended date falls 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 is not in default Interest is not charged to him by way of penalty but he is 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 is, then fore, by way of compensation for delay in realisation of tax that interest is required to be paid by the assessee. Now, obviously, if a person who obtains extension of time beyond a certain date is required to pay interest, a person who does not seek extension of time but files the return of income under sub-section (4) of section 139 after the time specified in sub-section (1) of section 139 cannot be allowed to escape payment of interest. The latter cannot be placed in a better position than the former and, therefore, with a view to putting the latter on par with the former in this respect, the legislature made the provision in clause (iii) of the proviso to sub-section (1) applicable in a case where a person files his return of income under section 139, sub-section (4). This interest which a person filing his return under section 139, sub-section (4), is required to pay is thus not by way of penalty but it is only by way of compensation for delay in realisation of tax. It is very much different from the penalty for default in furnishing return of income within the time allowed under sub-section (1) or sub-section (2) of section 139. There is, therefore, no question of imposition of double penalty on the interpretation contended for on behalf of the Revenue.”

12. Even elsewhere in the same judgment it has been rightly and forcefully highlighted that no question of double penalty or double jeopardy arises in this context because clearly the liability to pay statutory interest under clause (iii) of the proviso is compensatory in nature and not penal.

13. Now once it is held as above that under section 139 the concept of payment of statutory interest is one of commercial compensation for the delayed tender of tax and not on imposition in anyway penal in nature, basic rationale underlying the contrary view drops out like a false bottom.

14. As a matter of judicial history, the controversy herein seems of stem from the earlier judgment in Kishenlal Haricharan v. Income tax Officer. A War ??? (1971) 82 ITR 660. Reference to the brief judgment therein would show that at that stage the matter was decided as one of first impression. Neither any earlier precedent was cited nor any detailed discussion on principle was made. It would appear that the learned counsel I was somewhat remiss in not adequately ??? the issue before the Bench. Consequently, after quoting the relevant provision and proceeding on the assumption that the payment of statutory interest was penal and expressly labeling it so, it was held in a few lines that an assessee is liable to pay statutory interest only if he asks for extension of time under that clause and not otherwise. Now once this Division Bench judgment was rendered, it seems to have been unquestionably followed by the Delhi High Court in Messrs Garg & Company…Petitioner v. Commissioner Of Income-Tax…, (1974) 97 ITR 639. Later, these two judgments were followed by the Jammu and Kashmir High Court in Mulakh Raj v. Income-tax Officer. (1977) 107 ITR 382). Equally the Patna High Court in (1976) 102 ITR 443 (supra) had followed the time. It thus seems plain that the contrary opinion seems to be primarily rested on—and, to my mind, basically influenced by—the earliest judgment of the Andhra Pradesh (at lease the one brought to our notice) in Kishanlal Haricharan v. Income-tax Officer, A Ward, Nizamabad, (1971) 82 ITR 660.

15. Now it is patent that the foundational base of the aforesaid view has been knocked out by the subsequent overruling of the judgment in Kishanlal Haricharan v. Income-tax Officer, A-Ward, Nizamabad (supra) by the later Full Bench of the Andhra Pradesh High Court itself in Income-tax Officer, Hyderabad v. Secunderabad Tin Industries, (1978) 113 ITR 1. The exhaustive judgment therein is a tribute to itself, and it is unnecessary to advert to it in any greater detail than saying that we are entirely agreement therewith. Entirely in line therewith is the view of the Full Bench of the Gujrat High Court in Shankarlal Goenka v. Income-tax Officer, B-Ward, Shillong, (1978) 119 ITR 229). There is then a spate of Other Division Bench authorities taking the identical view in Chhotalal & Co. v. Income-tax Officer, Morvi, (1976) 105 ITR 230 (Gujarat), Jagdish Rice Mills v. Commissioner of Income-tax, M.P, (1978) 114 ITR 817 (Madhya Pradesh), Narain Das Paramanand Das v. Income tax Officer, ‘E’ Ward, Dist. IV (1), Calcutta, (1979) 117 ITR 174 (Calcutta), Commissioner of Income-tax, Kanpur v. Tikam Chand Agrawal (1979) 119 ITR 248 (Allahabad), Roop Narain Contractor v. Addl. Commissioner of Income-tax, (1985) 153 ITR 670 (Rajasthan) and Commissioner of Income-tax, West Benagl-VI v. Dina Nath Kathoria (1984 Taxation Law Reports 833) (Calcutta) as also Indian Telephone Industries Co-operative Society Ltd. v. Income-tax Officer, Special Survey Circle, Bangalore (1972) 85 ITR 566 (Mysore). It is thus plain that the weight of precedent has now tilted entirely to the view that the liability to pay statutory interest under section 139 is not rested merely on an application for extention of time but on the broader base of a failure to file the return on the due date and consequently would be equally applicable in the case of an assessee who had not applied for or sought any extension.

16. It remains to advert to the case of our own High Court in Commissioner of Income-tax Bihar v. Bahri Bros. (P.) Ltd., (1976) 102 ITR 443, which has necessitated this reference. A perusal of the judgment would indicate that the matter was not adequately canvassed by the learned counsel for the parties before the Bench Primary reliance and, indeed, basic influencing factor herein again was the earlier case of the Andhra Pradesh High Court in (1971) 82 ITR 660 (supra). That judgment, as has already been noticed, stands overrnled in its home jurisdiction by the Full Bench in (1978) 113 ITR 1 (supra). Thus the basic plank, on which the conclusion was arrived at, is withdrawn and toppled. The learned Judge of the Division Bench also sought to distinguished the contrary views of the Gauhati High Court in (1979) 119 ITR 229 (supra) and of the Orissa High Court in Biswanath Ghosh v. Income-tax Officer, Ward B, (95 ITR 372). With respect, it appears to us that the reasons differed from those judgments do not appear, to us as sound. The only independent reason given for the conclusion arrived at was that a clue to its interpretation is to be found in the Finance Act of 1972 by which clause (a) of sub-section (s) of section 139 was substituted and corresponding changes were made in sub-section (1) and (2). This line of reasoning again, with the deepest respect, is untenable. The subsequent amendment of the law can hardly give an indication or a sure base for interpreting an earlier statute. We have already indicated that the notes on clauses of the Amending Act did not give any inkling of the object and reason therefor. The reverse is perhaps true that the earlier law may give a clue to the subsequent changes made therein and the reasons therefor, as is manifest from the celebrated dictum in he radon's case; but the converse that the subsequent amendment gives the clue to the interpretation cannot easily hold water. Even a close perusal of sub-section (8) which has been later substituted is in no way indicative of or helpful for the interpretation of the earlier provisions and in particular of the other sub-sections. Equally the view in Bahri Brothers' case (supra) now runs counter to the massive weight of precedent. This judgment has been expressly noticed and dissented from in (1978) 113 ITR I (Andhra Pradesh), (supra), Jagdish Rice Mills v. Commissioner of Income-tax, M.P, (1978) 114 ITR 817 (Madhya Pradesh). Shankarlall Goenka v. I.T.O, A-Ward, Shillong, (1979) 119 ITR 229 (Gauhati), C.I.T, Kanpur v. Tikam Chand Agarwal, (1979) 119 ITR 248 (Allahabad), C.I.T, West Bengal VI v. Dina Nath Kotharia (1984 Tax LR 833) (Calcutta) and Roop Narain Contractor v. Additional Commissioner of Income-tax, (1985) 153 ITR 670 (Rajasthan). With the greatest respect, therefore, this judgment does not lay down the law correctly and is hereby overruled.

17. Lastly, one must notice the hallowed rule of construction that an interpretation, which leads to anomalous or even mischievous result or render the working of a statute unworkable, must always be avoided. It is patent that if the view of Bahri Brothers' case is adhered to, the end result is that the honest and law-abiding assessee who applies for and seeks extension of time for the late filing of the return is liable to pay statutory interest. However, an evading, recalcitrant and delinquent assessee who files the return beyond time and does not even choose to apply for any extension would not be liable to pay interest. This will equally lead to the result that the assessee will avoid the provision for seeking an extension of time and render the whole provision of the imposition of statutory and compensatory interest as virtually nugatory and otiose such and has necessarily to be avoided.

18. To finally conclude, the answer to the question posed at the outset is rendered in the negative. It is held that the statutory liability to pay interest under section 139 of the Income-tax Act, 1961 (prior to its amendment with effect from 1st of April, 1971) for the delayed filing of returns, does not rest only on an application for extension of time but is independently attracted in the case of the filing of a return beyond the due date. Further, the contrary view in Commissioner of Income-fax, Bihar v. Bahari Bros. (P) Ltd., (1976) 132 ITR 443, is hereby overruled.

19. In the light of the above, the answer to the question referred by the Tribunal is rendered in the negative, i.e, in favour of the Revenue and against the assessee, and it is held that on the facts and in the circumstances of this case the Tribunal was not correct in law in holding that interest under section 139 of the Income-tax Act, 1961 was not exigible herein. As the assessee has not appeared in this case, there will be no order as to cost.

20. Uday Sinha, J.:— I agree with my Lord the Chief Justice and have nothing further to add.

21. S.K Jha, J., My initial reaction was against the view taken by my Lord the Chief Justice, tentative as it was, but after considering in great detail and depth the relevant provisions of the Act, as it stood before the Taxation Laws (Amendment) Act, 1970, which come into force with effect from April 1, 1971, as well as the Finance Act of 1972, by which clause (a) of sub-section (8) of section 139 of the Income-tax Act, 1961 was substituted and corresponding changes were made in both sub-sections (1) and (2) of that section and the matter in controversy in the instant case in all its ramifications, I am constrained to hold that the view taken by the learned Chief Justice can be the only view possible. It is true that the Division Bench of this Court in Commissioner of Income-tax, Bihar v. Bahri Bros. (P) Ltd. [(1976) 102 ITR 445] placed reliance on a decision of the Division Bench of Andhra Pradesh High Court in the case of Kishanlal Haricharan v. Income-tax Officer, A Ward, Nizamabad [(1971) 82 ITR 660]. The learned counsel for the Revenue cannot be blamed in any manner whatsoever for not pointing out to this Court that the decision of the Division Bench of the Andhra Pradesh High Court to above was overruled because the Full Bench judgment of the said High Court in the case of Income-tax Officer, Hyderabad v. Secunderabad Tin Indusries [(1978) 113 ITR 1], which overruled the Division Bench decision of the Andhra Pradesh High Court, was delivered on 20th July, 1977 while this Court had decided the case of Bahri Bros. (supra) much earlier on 19th November, 1974, at which point of time the Full Bench judgment of the Andhra Pradesh High Court was not in examination. Therefore, it cannot be said, with great respect to the learned Chief Justice, “that the learned counsel were somewhat remiss in not adequately canvassing the issue before the Bench”. It is also note-worthy that the assessee was unrepresented in this Court when this Court was seized with Bahri Brother's case (supra). If the Full Bench decision of the Andhra Pradesh High Court were existent on the day on which this Court decided the case of Bahri Bros. (supra), the result may have been entirely different and counsel for the Revenue may have been blamed for being ‘remiss’. Having gone through the provisions of section 139 both prior to the amendment brought about with effect from 1st April, 1971 ss well as the post-amendment period, and specially the judgment of P.N Bhagwati, C.J, in the Division Bench decision of the Gujarat High Court in the case of Additional Commissioner of Income-tax, Gujarat v. Santosh Industries [(1974) 93 ITR 563], which dealt with a case prior to the amendments in question and which has already been referred to earlier by the learned Chief Justice, I am constrained to hold that I am in full agreement with the judgment of the learned Chief Justice and I cannot disown the responsibility for having been a member of the Bench deciding the case of Bahri Bros. (supra) and having laid down the law incorrectly therein, albeit concurring in the view of S.N.P Singh, C.J It must, therefore, be held that the judgment in Commissioner of Income-tax, Bihar v. Bahri Bros. (P) Ltd. [(1976) 102 ITR 443] has to be overruled and is hereby so done.