Sabyasachi Mukharji, J. - (1.) In this reference for the assessment year 1963-64, the following question has been referred to this court : " Whether, on the facts and in the circumstances of the case and on a correct interpretation of Section 271(1)(a) of the Income-tax Act, 1961, the Tribunal was right in holding that the words ' every month during which the default continued ' appearing in the said section refer only to a month during the whole of which the default continued and not also to a month during only a part of which the default continued ? "
(2.) The assessee is the executor of the estate of K. L. Lohia, deceased. There was a little delay in the filing of the return of income and the period of the delay was more than one month but less than two months. The ITO was not satisfied with the assessee's explanation for the delay and imposed a penalty Under Section 271(1)(a) of the I.T. Act, 1961, on the basis of the period of default of two months. The penalty thus came to Rs. 6,170. Against the order of penalty the assessee went up in appeal before the AAC who confirmed the penalty imposed by the ITO. Against that the assessee went up before the Appellate Tribunal. The Appellate Tribunal held that the penalty Under Section 271(1)(a) has to be calculated on the basis of the tax found payable on the date of imposition of the penalty and on the basis of the period of default being complete months. Hence the aforesaid reference has been made.
(3.) Clause (a)(i) of Section 271 directs the ITO to impose a penalty " In addition to the amount of tax, if any, payable by him, a sum equal to two per cent. of the tax for every month during which the default continued ". This expression came up for consideration by the Allahabad High Court in the case of CIT v. Laxmi Rattan Cotton Mills Co. Ltd. [1974] 97 ITR 285: There, referring to the section, the Allahabad High Court observed that the word " month " occurring in Section 271(1)(a) must be taken to mean a period of thirty days. The Allahabad High Court was of the view that Section 271(1 )(a) was enacted for the purpose of imposing a penalty on an assessee who had not filed his return within the prescribed time and its object was to serve as a deterrent for such lapses. According to the Allahabad High Court that deterrent could not be effective if the month was not construed as 30 days and taken on the basis of the English calendar month. This view, however, was dissented from by a Division Bench of the Madras High Court in the case of CIT v. Kadri Mills (Coimbatore) Ltd. [1977] 106 ITR 846. There, their Lordships held that the word " month " occurring in Section 271(1)(a) of the I.T. Act, 1961, had to be reckoned according to the General Clauses Act, 1897. Accordingly, when an assessee who was granted time for filing his return for the assessment year 1961-62, till 15th January, 1962, actually filed the return on 15th February, 1962, he had filed its return on the last day of the default and hence the default had not lasted for a month for the purpose of levying penalty Under Section 271(1)(a) of the I.T. Act, 1961, and, therefore, no penalty could be imposed on such an assessee. In this connection it is to be mentioned that the expression " month " is not defined in the I.T. Act, 1961. The expression " month " has been used in different contexts in different sections of the I.T. Act.;