Commissioner of Income Tax vs Oriental Dyeing and Finishing Mills

N.K. Sud, J.—At the instance of the Revenue, the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short "the Tribunal"), has referred the following question of law arising out of its order dt. 18th July, 1985, relating to asst. yr. 1973-74 for the opinion of this Court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in remitting the penalty for late filing of return u/s 271(1)(a) ?"

The return in this case was due u/s 139 of the IT Act, 1961 (for short "the Act"), on or before 30th June, 1973. It was, however, filed on 9th March, 1977. The ITO levied the penalty in a sum of Rs. 18,331 u/s 271(1)(a) of the Act for the delay in filing the return. However, in appeal by the assessee, the AAC reduced the same to Rs. 9,166.

Both, the assessee as well as the Revenue preferred appeals before the Tribunal. The assessee disputed levy even of Rs. 9,166 whereas the Revenue disputed reduction in penalty from Rs. 18,331 to Rs. 9,166.

The Tribunal by its consolidated order dt. 18th July, 1985 held that since the ITO had levied interest u/s 139(8) of the Act, the return was deemed to have been filed within the extended time allowed by the ITO. Thus, it was held that no penalty u/s 271(1)(a) could be levied. For this purpose, the Tribunal '' followed the ratio of the decision of the Supreme Court in Commissioner of Income Tax, Andhra Pradesh Vs. M. Chandra Sekhar, .

Learned Counsel for the Revenue has pointed out that the judgment of the Supreme Court in M. Chandra Sekhar''s case (supra) was rendered on the basis of the interpretation of proviso (iii) to Section 139(1) as it existed at the relevant time. He further pointed out that by virtue of amendment made to Section 139 of the Act under the Taxation Laws (Amendment) Act, 1970, w.e.f. 1st April, 1971, the levy of interest u/s 139 has become automatic unlike the earlier provisions which had been considered by the apex Court. He, therefore, contended that the Tribunal has lost sight of this distinction.

Counsel has further contended that in the present reference, the matter under consideration relates to asst. yr. 1973-74 and, therefore, amended provisions were attracted. In support of this contention, he placed reliance on the decisions of the Patna High Court in Jamunadas Mannalal Vs. Commissioner of Income Tax, and Madras High Court in RAVI STEEL CORPORATION Vs. Income Tax OFFICER AND OTHER., .

We find merit in the contention raised by the counsel for the Revenue. It has been correctly pointed out that the Supreme Court under the unamended provisions of Clause (iii) of the proviso to Section 139(1) had held that interest becomes payable only if the ITO, acting on the application made by the assessee for the purpose, had extended the date of furnishing the return. However, after the amendment, the AO does not have any discretion in the matter of levy of interest u/s 139(8) of the Act which is automatic on the return being filed late. The two authorities cited by the counsel for the Revenue support this proposition.

In view of the above, we are of the view that the Tribunal was ''not justified in cancelling the penalty merely on the ground that the interest u/s 139(8) of the Act had already been levied. The question is, therefore, answered in the negative i.e., in favour of the Revenue and against the assessee.

However, since the Tribunal has not gone into the other questions raised before it, the matter shall now be decided by it afresh by disposing of other questions raised before it. No costs.