COMMISSIONER OF INCOME-TAX VS PRABHAT ZARDA FACTORY
1998 PTD 2183
[221 I T R 791]
[Patna High Court (India)]
Before D.P. Wadhwa, C.J. and S. J. Mukhopadhaya, J
COMMISSIONER OF INCOME-TAX
versus
PRABHAT ZARDA FACTORY
Tax Case No. 13 of 1986, decided on 25/04/1996.
(a) Income-tax--
----Return---Interest---Delay in filing returns---Levy of interest under S.139(8)---Notice need not be given before levy of interest---Indian Income Tax Act, 1961, S.139.
Notice need not be given to the assessee before levy of interest under section 139(8) of the Income Tax Act, 1961, for delay in filing returns.
CIT v. Bishwanath Tulsyan (1996) 220 ITR 178 (Pat.) fol.
(b) Income-tax--
----Return---Appeal---Reference---Interest---Delay in filing return---Levy of interest-- Waiver of interest---Interest can be waived by Appellate Authority-Finding that there was sufficient reason for delay in filing returns---Finding of fact---Indian Income Tax Act, 1961, Ss. 139 & 256.
An appeal is a continuation of the original assessment proceeding. Therefore, the Commissioner of Income-tax (Appeals) as well as the Tribunal are quite competent in law to cancel the interest imposed under section 139(8) of the Act.
The finding that there was sufficient cause for the delay in filing returns is a finding of fact:
Held, that the assessee had played for extension of time for filing the return and twice filed Form No.6. In one Form No.6,.it had taken the ground that the accountant was ill and in the other Form No.6, it was mentioned that the verification of the accounts of the suppliers could not be made. The Appellate Authority on the basis of the record had come to the conclusion that there was sufficient cause for the assessee not to have furnished the return within the time prescribed. The Tribunal was justified in deleting the penal interest levied under section 139(8) of the Act.
Bihar State Road Transport Corporation v. CIT (1984) 149 ITR 208 (Pat.); Central Provinces Manganese Ore Co. Ltd. v. CIT (1986) 160 ITR 961 (SC); CIT v. Devichand Pan Mal (1986) 160 ITR 545.(Raj.); CIT v. Eastern Art Corporation (1985) 156 ITR 881 (Delhi); CIT v. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC); CIT v. Lalit Prasad Rohini Kumar (1979) 117 ITR 603 (Cal.); CIT v. Mahabir Parshad & Sons (1980) 125 ITR 165 (Delhi); CIT v. Mangal Brothers (1984) 146 ITR 125 (MP); Golecha Properties (P.) Ltd. v. CIT (1988) 171 ITR 47 (Raj.); Govindaraju (S.) v. CIT (1982) 138 ITR 495 (Kar.) and Jute Corporation of India Ltd. v. CIT (1991) 187 ITR 688 (SC) ref.
S.K. Sharan for the Commissioner.
L.N. Rastogi, Senior Advocate, Sanjeet Kumar, A.K. Rastogi and Sandeep Kumar for the Assessee.
JUDGMENT
The Income-tax Appellate Tribunal, Patna Bench, on an application made by the Revenue under section 256(2) of the Income Tax Act, 1961 (in short, "the Act"), has referred to this Court for opinion the following questions for the assessment year 1979-80:
"(1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in deleting the penal interest imposed by the Income-tax Officer under section 139(8) of the Income Tax Act, 1961?
(2) Whether the charging of interest on account of delay in filing the return under section 139(8) of the Income Tax Act which is in the nature of compensation is illegal if no show-cause is given?
(3) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in not remanding the case regarding the charging of interest to the Commissioner of Income-tax (Appeals) for consideration of the matter afresh after giving reasonable opportunity to the assessee as has been done in the case in S. Gavindaraju v. CIT (1982) 138 ITR 495 (Kar.) if the answer of question No. 2 is against the Revenue?"
Questions Nos. 2 and 3 are covered by the judgment of this Court delivered on April 23, 1996, in Tax Case No.156 of 1985-CIT v. Bishwanath Tulsyan (1996) 220 ITR 178. We, therefore, following that judgment answer these questions Nos.2 and 3 in favour of the Revenue in the affirmative (sic) and against the assessee.
To decide question No. 1, as to what are the facts in this case we may refer to certain facts from the statement of case which are as follows:
Proceeding relates to the assessment year 1979-80. The accounting period relevant to this assessment year was the financial year ended on March 31, 1979. The assessee is a registered firm. It has business of the manufacture of chewing tobacco and kimam, etc. The assessee could not file its return within the time prescribed under section 139(1) of the Income-tax Act. The last date for the filing of the return under section 139(1) was July 31, 1979. The assessee made an application in Form No.6 seeking extension of time till September 30. 1979, for the filing of the return on the ground that the verification of accounts with various suppliers was to be completed. The Inspecting Assistant Commissioner (Assessment) allowed time till September 30, 1979. On September 26, 1979, the assessee asked for further time till October 31, 1979, on the plea that the accountant had fallen ill. The time asked for was again allowed by the Inspecting Assistant Commissioner (Assessment). The assessee filed its return on October 30, 1979. As the return had not been filed within the time allowed under section 139(1), the Inspecting Assistant Commissioner (Assessment) charged interest of Rs.75,237 under section 139(8) for the late filing of the return.
Being aggrieved by this order of the Inspecting Assistant Commissioner (Assessment), the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) cancelled the interest on the ground that the assessee was prevented by sufficient cause from furnishing the return earlier.
Being aggrieved by the order of the Commissioner of Income-tax (Appeals), the Department filed an appeal before the Income-tax Appellate Tribunal. The contention of the Department in that appeal was that the Commissioner of Income-tax (Appeals) had erred in cancelling the interest charged under section 139(8). It was argued on behalf of the Department before the Tribunal that even if the Commissioner of Income-tax (Appeals) was satisfied that there was a reasonable cause for the delay in filing the return, he should have restored the matter to the Inspecting Assistant Commissioner (Assessment) for consideration whether interest levied under section 139(8) was liable to be reduced or waived under rule 117-A of the Income-tax Rules. It was argued that discretion for reduction or waiver of interest had rested with the Assessing Officer and not with the appellate authority. The Departmental representative had stated that the matter be restored to the file of the Inspecting Assistant Commissioner (Assessment) for being decided afresh with reference to rule 117-A. The Tribunal, taking into consideration the fact that interest had been levied without giving any show-cause notice to the assessee and feeling satisfied that there was sufficient cause for. the delay in filing of the return, upheld the order of the Commissioner of Income-tax (Appeals) cancelling the interest.
Before answering question No. 1, it will be convenient to refer to the relevant provisions of law as were existing. The proviso to section 139 provided that, on an application made in the prescribed manner, the Income- tax officer may, in his discretion, extend the date for furnishing the return, and, notwithstanding that the date is so extended, interest shall be chargeable in accordance with the provisions of subsection (8)(a):
"Where the return under subsection (1) or subsection (2) or subsection (4) for an assessment year is furnished after the specified date, or is not furnished, then whether or not the Assessing Officer has extended the date for furnishing the return under subsection (1) or subsection (2), the assessee shall be liable to pay simple interest at fifteen per cent. per annum, reckoned from the day immediately following the specified date to the date of the furnishing of the return, or, where no return has been furnished, the date of completion of the assessment under section 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source:
Provided that the Assessing Officer may, in such cases and under such circumstances as may be prescribed, reduce or waive the interest payable by any assessee under this subsection."
Rule 13 of the Income-tax Rules provided that an application to the Income-tax Officer under the proviso to subsection (1) of section 139 for seeking extension of the date for furnishing the return shall be in Form No.6. This Form No.6 has now been omitted from the Rules. Rule 117-A of the Rules provides for reduction or waiver of interest payable under section 139. This rule now also stands deleted.
Mr. Sharan, learned counsel for the Income-tax Department, submitted that the Tribunal had no jurisdiction to delete the penal interest inasmuch as no appeal can be filed under section 246 of the Act against levy of penal interest. He has referred to a decision of the Supreme Court in Central Provinces Maganese Ore Co. Ltd. v. CIT (1986) 160 ITR 961, referring to the following observations made therein "that no appeal lay in regard to the improper exercise of discretion to waive or reduce interest under section 139(8).
We are afraid that this passage is taken out of the term. It relates to an application where an application has been filed separately before the Income-tax Officer for waiver or reduction of penal interest. As. a. matter of fact in this very judgment the Supreme Court has observed as under (page 966):
"Now, the question is whether orders levying interest under subsection (8) of section 139 and under section 215 are appealable under section 46 of the Income-tax Act. Clause (c) of section 246 provides an appeal against an order where the assessee denies his liability to be assessed under the Act or against any assessment order under subsection (3) of section 143 or section 144, where the assessee objects to the amount of income assessed or to the amount of tax determined or to the amount of loss computed or to the status under which he is assessed. Inasmuch as the levy of interest is a part of the process of assessment, it is open to an assessee to dispute the levy in appeal provided he limits himself to the ground that he is not, liable to the levy at all."
Mr. Rastogi, learned counsel for the assessee, also relied upon the aforesaid judgment of the Supreme Court in Central Provinces Maganese Ore Co. Ltd. v. CIT (1986) 160 ITR 961. To support the contention he referred to decisions of the various High Courts that an appeal does lie if filed against the assessment made under section 246(c) of the Act, wherein the question of interest under section 139 may also be dealt with by the appellate authority. He referred to the decisions of CIT v. Eastern Art Corporation (1985) 156 ITR 881 (Delhi); CIT Mahabir Parshad & Sons (1980) 125 ITR 165 (Delhi); CIT v. Mangal Brothers (1984) 146 ITR 125 (MP); CIT v. Lalit Prasad Rohini Kumar (1979) 117 ITR 603 (Cal); Golecha Properties (P.) Ltd. v. CIT (1988) 171 ITR 47 (Raj) and CIT v. Devichand Pera Mal (1986) 160 ITR 545 (Raj). He also relied upon the Full Bench decision of this Court in Bihar State Road Transport Corporation v. CIT (1984) 149 ITR 208.
Mr. Rastogi further contended that an appellate authority has also the same power which the original authority may have prescribed under the law. He referred two decisions of the Supreme Court in Jute Corporation of India Ltd. v. CIT (1991) 187 ITR 688 and CIT v. Kanpur Coal Syndicate (1964) 53 ITR 225.
There cannot be any dispute that an appeal is a continuous process of the original proceeding. We are, therefore, of the opinion that the Commissioner of Income-tax, the appellate authority as well as the Tribunal are quite competent in law to cancel the interest imposed under section 139(8) of the Act.
The question then arises whether the penal interest has been rightly deleted. Subsection (8) of section 139 provides that interest could be levied where the return is furnished after the specified date whether or not the Income-tax Officer has extended the date for furnishing the return. That being so merely extending time for furnishing a return by filing Form No.6 will itself not amount to grant of waiver or deletion of interest on the ground that there were sufficient cause for the same. Though at the time when the extension is granted by the officer, it can be said that he exercised his discretion in a reasonable manner, but according to rule 117-A, it has to be seen independently that there is sufficient cause for not furnishing the return in time.
In this case, the submission of Mr. Sharan, learned counsel for the Revenue, is that there was no material before the appellate authority to grant any relief to the assessee. But then the Income-tax Officer could have in the manner imposed penal interest on the assessee without reference to the record before him. The fact remains that the assessee had prayed for extension of time for filing the return and twice filed Form No.6. In one Form No.6 he had taken the ground that the accountant was ill and in the other Form No.6, it was mentioned that the verification of the accounts of the suppliers could not yet be made. These were certainly the grounds which could have been considered by the Income-tax Officer at the time when he was imposing penal interest on the assessee as indicated above under clause (v) of rule 117-A. Rule 117-A states that if the assessee has shown sufficient cause that he could not furnish the return within time the interest could be waived or reduced. The appellate authority on the basis of the record has come to the conclusion that there was sufficient cause for the assessee not to have furnished the return within the time prescribed and particularly when the time had been extended by the Income-tax Officer. Thus, it is a matter of finding of fact as to whether there was sufficient cause or not. Nevertheless since the question is a mixed question of law 9ttd fact, it has been referred to this Court for its opinion.
Keeping in view, the law and the facts and the circumstances of the present case, we are of the opinion that this question has to be answered in the affirmative, in favour of the assessee and against the Revenue.
There shall be no order as to costs.
M.B.A./1326/FCReference answered.