Bralco Metal Industries Pvt. Ltd. vs Commissioner of Income Tax

T.D. Sugla, J.—The questions raised in this references at the instance of the assessee are :

"(1) Whether the Tribunal erred in law in holding that mens rea is not an essential ingredient for imposition of penalty u/s 271(1)(a) of the Income Tax Act, 1961 ?

(2) Whether the Tribunal erred in law in holding that the levy of interest u/s 139 has nothing to do with the levy of penalty u/s 271(1)(a) of the Income Tax Act, 1961 ?

(3) Whether the Tribunal ought to have held that the expression for every month during which the default continued referred to a completed calendar month and not to a period of thirty days ?"

The assessee is a company. The proceedings relate to the assessment year 1970-71. Its previous year ended on June 30, 1969. The return for the year was due to be filed on or before June 30, 1970. By an application dated June 29, 1970, the assessee applied for extension of time for filing the return up to September 30, 1970, for further extension of time for filing the return by one month. This application was granted up to October 19, 1970, only. The return was filed on December 24, 1970.

While completing the assessment, the Income Tax Officer charged interest under proviso (iii) to section 139(1) of the Income Tax Act for the period from October 1, 1970, up to December 23, 1970. He also initiated penalty proceedings u/s 271(1)(a) and required the assessee to show cause why penalty under that section should not be levied. The assessee''s explanation that it was prevented by reasonable cause in not filing the return within the extended time was rejected by the Income Tax Officer who levied penalty u/s 271(1)(a) for a period of two months as the statutory rate. There is no dispute that the assessee''s explanation that it was prevented by reasonable cause in not filing the return within the extended time was rejected both by the Appellate Assistant Commissioner and the Income Tax Appellate Tribunal.

Shri Dastoor, learned counsel for the assessee, submits that question No. 2 is covered by the Supreme Court decision in the case of Commissioner of Income Tax, Andhra Pradesh Vs. M. Chandra Sekhar, . It is pointed out that like the present case, in that case also, the returns were filed beyond time without there being an application for extension of time and an order thereon extending the time as a matter of fact. However, interest under proviso (iii) to section 139(1) was charged. The Supreme Court approved the view taken by the High Court that the time for filing the return should be deemed to have been extended by the Income Tax Officer and once the time for filing the return is deemed to have been extended, there is no question of imposition of penalty u/s 271(1)(a) on the ground that the return was not filed within time. Dr. Balasubramanian fairly conceded that the second question is covered by the Supreme Court decision. Accordingly, following the Supreme Court decision in Commissioner of Income Tax, Andhra Pradesh Vs. M. Chandra Sekhar, , we answer the second question in the affirmative and in favour of the assessee, namely, that the Tribunal erred in holding that the levy of interest u/s 139 had nothing to do with the levy of penalty u/s 271(1)(a) of the Act.

Counsels are agreed that in view of our answer to question No. 2, it is not necessary to consider questions Nos. 1 and 3. These two questions are, therefore, not answered. No order as to costs.