Civil Appeal Nos
1299 A to 1303 of 1973 From the Judgment and order dated the 3rd February 1972 of the Andhra Pradesh High Court in case referred No 61 of 1970 section T Desai M N Tandon and Miss A Subhashini for the Appellant
A Subba Rao for the respondent
The Judgment of the Court was delivered by PATHAK J
These appeals by special leave are directed
against the judgment of the High Court of Andhra Pradesh disposing of a reference under Sub section
1 of section 256 of the Income tax Act 1961 on the following questions of law 1
Whether on the facts and in the circumstances of the case the Appellate Tribunal was justified in concluding that the charging of interest indicated that the Income tax officer was satisfied that there was sufficient cause for delay in filing the return of income  2
Whether on the facts and in the circumstances of the case the Tribunal was justified in cancelling the penalties levied under section 271 1 a  The respondent assessee is a partner in the firm Ms Manik Rao  Brothers
He filed voluntary returns for the assessment years 1959 60 1960 61 1961 62 and 1962 63 all on August 2 1963
The return for the assessment year 1963 64 was filed on August 2 1964
On account of the delay in filing the returns the Income Tax officer treated the assessee as being in default and imposed penalties under cl
2 of Sub section
1 of section 271 of the Act
In appeal before the Appellate Assistant Commissioner of Income Tax the assessee contended that as the returns had been furnished before the end of four years from the end of the relevant assessment years that is to say the period prescribed by Sub section
4 of section 139 of the Act he was not liable to any penalty
It was also pointed out by the assessee that interest had been levied under clause iii of the proviso to Sub section
1 of section 139 and therefore no question arose of imposing a penalty
Both contentions were rejected by the 218 Appellate Assistant Commissioner
In second appeal before the A income Tax Appellate Tribunal the assessee raised substantially the same contentions
The Appellate Tribunal took the view that in cases falling under Sub section
1 Sub section
2 and Sub section
4 of section 139 the Income Tax officer was empowered to grant time for filing a return
and on such time being granted the assessee would be liable to pay interest
It pointed out that the assessee had in fact given his reasons for the delay in filing the returns both for the purpose of levy of interest under cl
1 of section 139 and also the levy of penalty under cl
a of Sub section
1 of section 271
It held that as the Income Tax officer had levied interest upto the date of the filing of the returns it must be presumed that the Income Tax officer had extended the time for filing the returns after satisfying himself that it was a case for extension of time
The presumption was founded in the principle that an officer entrusted with a judicial or quasi judicial duty must be presumed to have discharged his duties in a proper and bona fide manner
The appellate Tribunal allowed the appeals and cancelled the penalties
At the instance of the Commissioner of Income Tax the Appellate Tribunal made a reference to the High Court of Andhra Pradesh
The High Court held that the Appellate Tribunal was justified in relying upon the presumption that official acts had been regularly performed and that therefore it must be presumed that the Income Tax officer had extended the time upon grounds made out by the assessee because otherwise the Income Tax officer could not have charged interest
Holding that no penalty was livable in the circumstances the High Court answered the reference in favour of the assessee
To appreciate the true scope of the questions referred it is necessary to understand the scheme enacted in section 139 of the Income tax Act 1961
Broadly the scheme envisages a voluntary return by the assessee under Sub section
1 of section 139 a return consequent upon a notice by the Income Tax officer under Sub section
2 of section 139 and a return in the circumstances mentioned in Sub section
4 of section 139
We are not concerned where with a return under Sub section
3 of section 139 disclosing a loss nor are we concerned with a revised return under Sub section
S of section 139
In the case of a voluntary return Sub section
1 of section 139 prescribes the period within which such returns must be filed
Where no return can be filed within the prescribed period 219 the assessee is entitled to apply to the Income Tax officer for extending the date for furnishing the return
The lncome Tax officer is empowered to extend the date in his discretion
In a case covered by cl
i of the proviso to Sub section
1 of section 139 the period may be extended upto September 30 of the assessment year without charging any interest and in a case covered by cl
ii of the proviso the period may be extended upto December 31 of the assessment year similarly without charging any interest
But where the period is extended beyond the dates mentioned in clauses i and ii then under cl
iii the assessee is liable to pay interest from october 1 or January I as the case may be of the assessment year to the date of the furnishing of the return on the amount of tax payable on the total income reduced by the advance tax paid and any tax deducted at source
Similarly in the case of a return furnished under Sub section
2 of section 139 the Income Tax officer has power to extend the date for furnishing the return subject to payment of interest in the circumstances set forth in relation to voluntary returns under Sub section
1 of section 139
Where however the assessee does not furnish a return within the time allowed to him under Sub section
1 or Sub section
2 of section 139 then before any assessment is made he may under Sub s 4 of section 139 furnish a return for any previous year at any time before the end of four assessment years from the end of the assessment year to which the return relates and in that event the provisions of Sub cl
iii of the proviso to Sub section
1 of section 139 relating to payment of interest would apply to the case
Sub section 8 of section 139 was inserted by the Finance Act 1963 with effect from April 28 1963
It declared that notwithstanding anything contained in cl
iii of the proviso to Sub section
1 of section 139 it was open to the Income Tax officer in certain prescribed cases and circumstances to reduce or waive the interest payable by any person under any provision of section 139
It may be noted that the language of Sub section
8 of section 139 suffered material change with effect from April 1 1971
Now it will be apparent that delay in filing a return of income results in the postponement of payment of tax by the assessee resulting in the State being deprived of a corresponding amount of revenue for the period of the delay
It seems that in order to compensate for the loss so occasioned Parliament enacted the provision for payment of interest
It is apparent also from the language of cl
iii of the proviso that interest becomes payable only upon the 220 Income Tax officer acting on an application made by the assessee for the purpose and extending the date for furnishing the return
At the relevant time the proviso to Sub section
1 of section 139 read 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 i in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired on or before the 31st day of December of the year immediately preceding the assessment year and in the case of any person referred to in clause b up to a period not extending beyond the 30th day of September of the assessment year without charging any interest ii in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired after the 31st day of December of the year immediately preceding the assessment year upto the 31st day of December of the assessment year without charging any interest and iii up to any period falling beyond the dates mentioned in clauses i and ii in which case interest at nine per cent per annum shall be payable from the 1st day of October or the 1st day of January as the case may be of the assessment year to the date of the furnishing of the return a in the case of a registered firm or an unregistered firm which has been assessed under cl
b of section 183 on the amount of tax whichwould have been payable if the firm had been assessed as an unregistered firm and b in any other case on the amount of tax payable on the total income reduced by the advance tax if any paid or by any tax deducted at source as the case may be It is only where the Income Tax officer extends the time for 221 furnishing the return beyond September 30 or December 31 as the case may be that interest becomes payable
Now the contention on behalf of the Revenue is that there is no material to warrant the finding that an application had been made by the assessee for extension of time and that upon such application the Income Tax officer extended the time
It is urged that the imposition of interest does not warrant the assumption that an application for extension of time was made by the assessee and allowed by the Income Tax officer
The proviso to Sub section
1 of section 139 requires the assessee to make an application for extension of time in the prescribed manner and the prescribed form of the application set forth is Form No 6 pursuant to rule 13 of the Income Tax Rules which requires the assessee to state the reasons on which the extension of time is sought
All this learned counsel contends contemplates that the Income Tax officer should apply his mind to relevant material before him before deciding in his discretion whether the time should be extended
Learned counsel however has not been able to satisfy us why the presumption raised by the Appellate Tribunal and endorsed by the High Court should not prevail
It cannot be disputed that the Income Tax officer could extend the date for furnishing the return in respect of each assessment year
It was open to him to do so under the statute and he was entitled to charge interest only on the basis that the extended period fell beyond September 30 or December 31 as the case may be
In the ordinary course of things the Income Tax officer could have extended the date only upon being satisfied that there was good reason for doing so and that would have been on grounds pleaded by the assessee
We consider that in the circumstances of this case a presumption could validly be raised that all that was done
No attempt was made by the Revenue to show that the Income Tax officer acted arbitrarily and contrary to the procedure envisaged by the statute
The Appellate Tribunal considered the matter carefully and found circumstances on the record in favour of raising the presumption
The High Court approved of the approach adopted by the Appellate Tribunal and did not find it contrary to law
We do not see any reason to differ from the opinion expressed by the High Court
In the instant case the extension was a matter falling within Sub section
1 of section 139 and the returns furnished by the assessee must be attributed to that provision
They were not returns furnished 222 within the contemplation of Sub section
4 of section 139
Therefore the decision of the Gujarat High Court in Additional Commissioner of Income Tax Gujarat vs Santosh Industriesl of the Karnataka High court in M Nagappa and others vs Income Tax officer Central Circle l Bangalore and othersa of the Andhra Pradesh High Court in Poorna Biscuit Factory vs Commissioner of Income Tax AP3 of the Orissa High Court in Commissioner of Income Tax Orissa V Gangaram Chapolia4 and of the Allahabad High Court in Metal India Products vs Commissioner of Income Tax Lucknow  cannot be invoked in the instant case
They are cases dealing with a return filed in the circumstances mentioned in Sub section
4 of section 139
our attention has also been drawn to the decision of this Court in Commissioner of Income Tax Punjab vs Kulu Valley Transport Co P Ltd That was a case where the returns were filed under Sub section
3 of section 22 of the Indian Income Tax Act 1922
They were not returns furnished within the time allowed by or under Sub section
1 or Sub section
2 of section 22 of that Act
Accordingly that case also need not be considered
In the result we uphold the answer returned by the High Court to the first question raised in the reference
The second question raises the point whether the Appellate Tribunal was justified in cancelling the penalties levied under cl
a of Sub section
1 of section 271
That provision reads 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 Sub section
1 of section 139 or by notice given under Sub section
2 of section 139 or 9 148 or has without reasonable cause failed to furnish it within the time 1 l974 2 3 4 5 6 223 allowed and ni the manner required by Sub section
1 of section 139 or by such notice as the case may be or A b  c          _ he may direct that such person shall pay by way of penalty i          _ ii          iii         
It is clear that penalty is attracted if the Income Tax officer is satisfied that assessee has without reasonable cause failed to furnish the returns within the time allowed
The time allowed for furnishing a voluntary return is the time specified in Sub section
1 of section 139
We have seen that the proviso to that sub section empowers the Income Tax officer to extend the date for furnishing the return
It was open to Parliament to specify by express enactment the date by which a return must be filed and also confer power on the Income Tax officer to extend the date for doing so
When the Income Tax officer extends the date he does so in the exercise of authority conferred by the statute and the additional time available to the assessee consequent upon such extension is for all relevant purposes of the same character and as effective as the statutory period specifically enacted by Parliament
For the purpose of furnishing a return it constitutes an integral part of the time allowed for furnishing a return
Therefore where the Income Tax Officer extends the date then all the time upto that date is the time allowed for furnishing the return
The additional period consequent upon such extension falls within the expression the time allowed in cl
a of Sub section Of section 271
That being so the conclusion must follow that the penalty provision does not come into play at all
In our opinion the High Court was right in answering the second question also in favour of the assessee
We express our agreement with the opinion of the High Court a on both the questions referred to it
Accordingly these appeals fail and are dismissed with costs
HS K Appeal dismissed


Summary:
The respondent assessee filed voluntary income tax returns for some assessment years after the date prescribed by Sub slof139 of the Income Tax Act 1961
The Income Tax officer treated the assessee as being in default and imposed penalties under cl
a of Sub s1 of s271 of the Act
In appeal before the Appellate Assistant Commissioner of Income Tax the assessee contended that since interest had been levied under cliii of the Proviso to Sub section
1 of sl39 no question arose of imposing a penalty
The Appellate Assistant Commissioner rejected the contention
In second appeal the Income Tax Appellate Tribunal held that as the Income Tax officer had levied interest upto the date of the filing of the returns it must be presumed that the Income Tax officer had extended the time for filing the returns after satisfying himself that it was a case for extension of time
The Appellate Tribunal allowed the appeals and canceled the penalties
On a reference being made
the High Court held that the Appellate Tribunal was justified in relying upon the presumption
Hence these appeals by the Revenue
The Revenue contended that there was 216 no material to warrant the finding that an application had made by the assessee A for extension of time and that upon such application the Income Tax officer extended the time
The Revenue urged that the imposition of interest does not warrant the assumption that an application for extension of time was made by the assessee and allowed by the Income Tax officer
Dismissing the appeals  HELD It cannot be disputed that the Income Tax officer could extend the date for furnishing the return in respect of each assessment year
It was open to him to do so under the statute and he was entitled to charge interest only on the basis that the extended period fell beyond September 30 or December 31 as the case may be
In the ordinary course of things the Income Tax officer could have extended the date only upon being satisfied that there a was good reason for doing so and that would have been on grounds pleaded by the assessee
We consider that in the circumstances of this case a presumption could validly be raised that all that was done
No attempt was made by the Revenue to show that the Income Tax officer acted arbitrarily and contrary to the procedure envisaged by the statute
The Appellate Tribunal considered the matter carefully and found circumstances on the record in favour of raising the presumption
The High Court approved of the approach adopted by the Appellate Tribunal and did not find it contrary to law
We do not see any reason to differ from the opinion expressed by the High Court
221E G Additional Commissioner of Income Tax Gujarat vs Santosh Industries  M Nagappa and others vs Income Tax officer Central Circle l Bangalore and others  Poorna Biscuit Factory vs Commissioner of Income Tax AP  Commissioner of Income Tax Orissa v Gangaram Chopolia 1976103 ITR 613 Metal India Products vs Commissioner of Income Tax Lucknow 1978 113 1TR 830 and Commissioner of Income Tax Punjab vs Kula Valley Transport Co P Ltd not applicable
Penalty under cl a of Sub s 1 of s271 of the Income Tax Act is attracted if the Income Tax officer is satisfied that the assessee as without reasonable cause failed to furnish the returns within the time allowed 
 The time allowed for furnishing a voluntary return is the time specified in Sub sl of s139
The proviso so that sub section empowers the Income Tax officer to extend the date for furnishing the return
When the Income Tax officer extends the date he does so in the exercise of authority conferred by the statute and the additional time available to the assessee consequent upon such extension is for all relevant purposes of the same character and as effective as the statutory period specially enacted by Parliament
For the purpose of furnishing a return it constitutes an integral part of the time allowed for furnishing a return
Therefore where the Income Tax officer extends the date then all the time upto that date is the time allowed for furnishing the return
The additional period consequent upon such extension falls within the expression the time allowed in cla of Sub sl of s271
That being so the conclusion must follow that the penalty provision does not come into play at all
223C G 217