Sriramulu, J. -
(1.)AT the instance of the assessee, the Income-tax Appellate Tribunal, under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), referred the following two questions of law for our opinion :
1. Whether, on the facts and in the circumstances of the case, penalty is leviable under Section 271(1)(a) when the assessee filed a voluntary return of income within the time prescribed under Section 139(4) of the Act ?
2. Whether, on the facts and in the circumstances of the case, it is open to the Income-tax Officer to levy the penalty under Section 271(1)(a) at a lesser rate than 2% of the tax ?"
(2.)THE material facts giving rise to the reference may briefly be stated: Under Section 139(1) of the Act the assessee had to file its return of income for the assessment year 1963-64 on or before September 30, 1963. THE assessee did not file the return by September 30, 1963, but filed an application dated October 15, 1963, requesting the Income-tax Officer to extend time up to November 15, 1963, for filing the return. No order was passed on that application. THE assessee filed the return on July 10,1964. After completing the assessment, the Income-tax Officer issued notice under Section 271(1)(a) of the Act to show cause why penalty against it should not be levied for the late filing of the return. THE assessee gave some explanation for not filing the return within the time allowed under Section 139(1) of the Act. THE Income-tax Officer did not accept that explanation as a reasonable cause, which prevented it from filing the return in time, and accordingly levied penalty of Rs. 2,170 on the assessee under Section 271(1)(a) of the Act.
On appeal, the Appellate Assistant Commissioner reduced the penalty to Rs 2,129 and a further appeal to the Income-tax Appellate Tribunal ended in its dismissal. Hence this reference.
The learned counsel, Sri Dasaradharami Reddy, appearing for the assessee contended that, (1) when the assessee had voluntarily filed the return of income under Section 139(4) of the Act within the time allowed by that sub-section, the Income-tax Officer could not impose penalty at all, but he could only levy penal interest, and (2) if penalty was at all leviable, it was open to the Income-tax Officer to levy penalty at a rate lesser than 2% of the tax for every month during which the default continued, subject to a maximum of 50% of the tax.
(3.)THE learned standing counsel, Sri P. Ramarao, appearing for the department, on the other hand, contended that the voluntary filing of the return under Section 139(4) of the Act did not absolve the assessee of its liability to pay penalty under Section 271(1)(a) of the Act and in a case where penalty is attracted the Income-tax Officer has no option except to levy penalty at the rate of 2% of the tax for every month of delay subject to a maximum 50% of the tax.
Under Section 139(1) of the Act every person whose total income exceeds the maximum, which is not chargeable to tax, is under a statutory duty to file his return of income within the time specified in the section or within the time extended by the Income-tax Officer, on an application filed by that person. If in the opinion of the Income-tax Officer a person has total income during the previous year, which is assessable to income-tax, he may issue notice to that person under Section 139(2) of the Act requiring him to file a return within 30 days from the date of service of notice or within the time extended by the Income-tax Officer on an application of that person. A person who fails to file a return of his income under Section 139(1) or under Section 139(2) of the Act, can file a voluntary return under Section 139(4) of the Act within the time specified therein. If a person files his return beyond the dates mentioned in Clauses (1) and (2) of Section 139, he shall be liable to pay penal interest at 9% per annum from the date specified therein up to the date of the filing of the return.