- (1.) THIS is a reference by the Income-Tax Appellate Tribunal, Delhi Bench 'a', hereinafter called the "tribunal", under Section 256 (1) of the Indian, Income-Tax act, 1961, hereinafter called the Act, made at the instance of the Commissioner of income-Tax.
(2.) MESSERS. Indra and Company, Jodhpur, a registered firm under the Act and one of its partners Shri Jiwanlal Maheshwari had to submit their income-tax returns under Section 139 (1) of the Act by or before 30th June, 1962. Both of them made applications to the Income-Tax Officer, A Ward, Jodhpur, for extending the time for filing their returns and the time was extended upto 31-8-62 in both the cases. Again, applications were made for extension of the time and they were granted time upto 20-9-62 and further extension was granted upto 30-9-62, but the returns were not filed even on that day. The said Income-tax Officer then served notice on the assessees under Section 139 (2) of the Act calling upon them to file returns within thirty days and the returns were then filed on 25-4-63. During the course of assessment proceedings, the Income-Tax Officer issued notices against the assessees to show cause why penally should not be imposed for failure to submit the returns under Section 139 (1) of the Act. The assessees submitted applications showing cause for delay but the Income-Tax officer did not hold their explanation to be reasonable and imposed penalties on both of them under Section 271 (1) (a) of the Act. Both the assessees preferred appeals before the Appellate Assistant Commissioner raising two contentious. The first contention was that as soon as notices under Section 139 (2) of the Act were issued, it must be taken that the delay in filing the returns under Section 139 (1)was condoned by the Income-Tax Officer and as such no action could be taken for not filing the returns in time as laid down under Section 139 (1 ). The other contention was that the Income-tax Officer had not mentioned in the assessment order that the penalty proceedings were being initiated for default under Section 139 (1) and as such penalty proceedings could not be said to be initiated during the course of the assessment proceedings. The Appellate Assistant Commissioner rejected both the arguments and confirmed the orders of the Income-tax Officer. The assessees then preferred appeals before the Tribunal and the Tribunal took the view that as in each case the assessment proceedings had been initiated and completed on the basis of the returns submitted under Section 139 (2), it was not permissible under law that penalty should be imposed for any default committed in not submitting the returns under section 139 (1 ). On application by the Commissioner of Income-tax the Tribunal has submitted the following question for the opinion of this Court : "whether the tribunal rightly held that the orders of penalties in question under Section 271 (1) (a) of the Income-tax Act, 1961, were not tenable in law, In order to appreciate the argument of the Tribunal for taking the view that penalty could not be imposed on the assessees for any default committed in furnishing the returns as required under Section 139 (1), it is necessary to set-out the following relevant portions of section 271 (1) (a) of the Act and Section 28 of the Indian Income-Tax Act, 1922 :-- "section 271 (1 ). If the Income-tax Officer or the Appellate Assistant commissioner in the course of any proceedings under this Act, is satisfied that any person- (a) has without reasonable cause failed to furnish the return of total income which he was required to furnish under Subsection (1) of Section 139 or by notice given under Subsection (2) of Section 139 or Section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by Sub-section (1) of Section 139 or by such notice, as the case may be, or (b) XXXXX (c) XXXXX he may direct that such person shall pay by way of penalty,- (i) in the cases referred to in clause (a), in addition to the amount of the tax, if any, payable by him, 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; (ii) XXXXX (iii) XXXXX" "section 28. (1) If the Income-tax Officer, the Appellate Assistant commissioner or the Appellate Tribunal in the course of any proceedings under this Act, is satisfied that any person- (a) has without reasonable cause failed to furnish the return of his total income which he was required to furnish by notice given under Sub-section (1) or Sub-section (2) of Section 22 of Section 34 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by such notice, or (b) XXXXX (c) XXXXX he or it may direct that such person shall pay by way of penalty, in the case referred to in Clause (a), in addition to the amount of the income-tax and super-tax, if any payable by him, a sum not exceeding one and a half times, that amount. . . . . . " The Tribunal contrasted the language of Section 271 (1) (a) of the Act with the language of Section 28 (1) (a) of the old Act and noticed that the words "as the case may be" were added in Clause (a) of Subsection (1) of Section 271 of the Act and these words substantially modified the corresponding provisions of Section 28 (1) (a) of the old Act. The Tribunal proceeds to say that under the Act minimum penalty is provided and that minimum penalty is to be calculated for every month during which default continued and this calculation is possible only when the limits of time during which the default continued can be determined. The Tribunal took the view that so far as the time of commencement of the default is concerned, it was known and definite in the instant case. It was, however, not possible to determine the point of time when the default ceased in either of these two cases, for the simple reason that the defaults in these cases never ceased as none of the assessees had filed any return as required under Section 139 (1 ). We have, to examine whether this reasoning is correct.
(3.) The addition of the words "as the case may be" at the end of Section 271 (1) (a) of the Act presents us with no problem in interpretation. Under this section, the defaults contemplated are of four kinds :-1. any person who without reasonable cause has failed to submit return of total income which he was required to furnish under Sub-section (1)of Section 139; or 2. any person who without reasonable cause has failed to furnish the return of total income which he was required to furnish by notice given under Sub-section (2) of Section 139 or Section 148; or 3. any person who without reasonable cause has failed to furnish it within the time allowed and in the manner required by Sub-section (1)of Section 139; or;