Commissioner of Income Tax vs The Cochin Malabar Estates and Industries Ltd.

Sujatha V. Manohar, C.J.—This is a petition u/s 256(2) of the Income Tax Act, 1961 read with Section 18 of the companies (profits) Sur Tax Act, 1964. The Assessee in the present case is the Cochin Malabar Estates and Industries Ltd. The assessment year in 1967-68. The present petition is at the instance of the Department requesting us to direct the Tribunal to refer the following two questions to us:

Whether on the facts and circumstances of the case, the levy of penalty u/s 9 of the Companies (Profits) Sur Tax Act, 1964 is valid and with jurisdiction?

Whether on the facts and in the circumstances of the case, the tribunal is right in law in cancelling the penalty and on the ground that the same is "not at all warranted" and the officer is ''not at all competent'' to invoke Section 9 for imposing the penalty?

The Assessee had to file the return of chargeable profits as per the Companies (Profits) Sur Tax Act, 1964 for the assessment year 1967-68 on or before 30th September 1967. The Assessee however filed its return on 31st January 1979. On the basis of the return so filed, the Income Tax Officer completed the assessment on 6th March 1979 on a chargeable profit of Rs. 1,26,900 and levied sur tax of Rs. 44,415. As the Assessee had not filed its return within the Statutory period, penalty proceedings u/s 9 of the Sur Tax Act were initiated. The Income Tax Officer was not satisfied with the explanation offered by the Assessee for the delay in filing the return. He therefore levied a penalty of Rs. 22,200 u/s 9(a) of the said Act. On appeal the Commissioner of Income Tax (Appeals) confirmed the order of the Income Tax Officer. The Assessee find second appeal before the Tribunal. The Tribunal found that the Income Tax Officer had completed the assessment on the basis of the return filed by the Assessee and the Assessee filed there tufn before the assessment was completed. The Tribunal therefore held that the Income Tax Officer was not competent to invoke Section 9 for imposing the penalty on the ground of late filing of return. Being aggrieved by the order of the Tribunal the Department filed a petition u/s 256(1) of the Income Tax Act read with Section 18(1) of the Sur Tax Act seeking reference of the above two questions, which petition has been dismissed by the Tribunal. Hence the present petition has been filed before us.

The relevant sections which require to be considered in this connection are Sections 5 and 9 of the Companies (Profits) Sur Tax Act, 1964. u/s 5(1) of the Companies (Profits) Sur Tax Act, 1964, every company whose chargeable profits assessable under this Act exceeded during the previous year, the amount of statutory deduction, is required to file a return of the chargeable profits during the previous year in the prescribed form before the 30th of September of the assessment year provided that on an application made in this behalf, the assessing officer may in his discretion extend the date for the furnishing of the return.

Section 5(3) is as follows:

Any Assessee who has not furnished a return during the time allowed under Sub-section (1) or Sub-section (2), or having furnished a return under Sub-section (1) or Sub-section (2) discover any omission or wrong statement therein, may furnish a return or a revised return, as the case may be, at any time before the assessment is made.

The relevant portions of Section 9 are as follows:

If the Assessing Officer, in the course of any proceedings under this Act, is satisfied that any person, has without reasonable cause, failed to furnish the return required u/s 5, he may direct that such person shall pay, by way of penalty in addition to the amount of sur tax payable a sum not exceeding.

(a) Where the person has filed to furnish the return required u/s 5, the amount of sur tax chargeable under the provisions of this Act.

The provisions of Section 9 would therefore be attracted only if the assessing officer is satisfied that a person has, without reasonable cause, failed to furnish the return as required u/s 5. u/s 5(1) the Assessee is required to file his return on or before the 30th September of the assessment year. There is also a power in the assessing officer to extend the date for furnishing the return. Section 5(3) further provides that any Assessee who has not furnished the return during the time allowed under Sub-section (1) may furnish a return at any time before the assessment is made. Therefore the Assessee has a right to furnish the return before the assessment is made. There is no provision u/s 9 which imposes a penalty for filing the return after the 30th of September of any assessment year of the extended date and before the assessment is made. In other words, there is no provision in Section 9 for levying a penalty only for a late filing of the return, even though the return may be filed before the assessment is made. The provisions of Section 9 would not be attracted in a case where the Assessee had in fact filed the return before the assessment is made and the assessment has been made on the basis of the return filed by the Assessee.

Looked at slightly differently, since u/s 5(3) a return can be filed by an Assessee before the assessment is made, it cannot be said in the case of an Assessee who has filed the return before the assessment is made, that he has failed to furnish the return as required u/s 5. The Assessee in the present case having furnished the return within the time prescribed in Section 5(3) cannot, therefore be considered as having failed to furnish the return as required u/s 5. We are fortified in our conclusion by decisions of at least three High Courts which were pointed out to us.

In the case of Calcutta Chromotype Pvt. Ltd. Vs. Income Tax Officer and Others, , the Calcutta High Court considered the provisions of Section 6(1) of the Super Profits Tax Act, 1963 and Section 10 of the said Act. u/s 6(3) of the Super Profits Tax Act also the Assessee who has not furnished the return during the time allowed by the Income Tax Officer may furnish a return before the assessment is made. The penal provision of Section 10 is similar to Section 9 of the Companies (Profits) Sur Tax Act. Interpreting this provision, the Calcutta High Court has held that if it was the intention of the legislature to penalise an Assessee for filing a return not within the time allowed under the section, while permitting the Assessee to file such a return at any time before the assessment was actually completed, then unless there were specified words in the section imposing such penalty as there are in the corresponding sections of the Income Tax Act, no penalty could be imposed for failure to file a return, provided that the return was filed before the assessment was made and the Income Tax Officer had completed the assessment on the basis of such return. The Calcutta High Court has examined the relevant provisions of the Income Tax Act in this connection in contradistinction to the provisions of Section 10 of the Super Profits Tax Act. The same reasoning would apply to the present case also.

The Allahabad High Court has taken a similar view in the case of Commissioner of Income Tax (Central) Vs. Anchor Pressing (P.) Ltd., The Allahabad High Court has interpreted the provisions of Section 9 of the Companies (Profits) Sur Tax Act and has held that in Section 9 levy of penalty has been provided only for failure to furnish a return without reasonable cause as required u/s 5. If a returns is filed under Sub-section (3) of Section (5) before the assessment is made, there will be no default and hence the Income Tax Officer is not entitled to impose any penalty u/s 9. It has further observed that if theaAssessee files a return u/s 5(3) it would also be a return required by the provision of Section 5. Hence the penal provisions of Section 9 could not be attracted to such a case.

In the case of Commissioner of Income Tax, Delhi-II Vs. Triveni Engineering Works Ltd., the Delhi High Court has taken a similar view. The Delhi High Court also held that u/s 9 of the Companies (Profits) Sur Tax Act, penalty could be imposed only for failure to file the return and not for late filing of the return. It also held that the Tribunal had accepted the Assessee''s explanation for the late filing of the return and hence the case is concluded by a finding of fact.

In view of the above decisions and looking at the language of Sections 5 and 9 of the Companies (Profits) Sur Tax Act, 1964, it is clear that in Section 9 mere is no provision for penalty for late filing of return. So long as the return is filed u/s 5(3) before the assessment is made and the assessment is on the basis of the return so filed, penal provisions of Section 9 are not attracted. We are, therefore, in respectful agreement with the observations made by the above three High Courts. No useful purpose would be served by allowing the Tribunal to raise the two questions and refer them to us.

The original petition is therefore dismissed.

*A reproduction from ILR (Kerala Series).