JUDGMENT
S.K. Jha, J.
1. At the instance of the Additional Commissioner of Income-tax, Bihar, the Income-tax Appellate Tribunal, Patna Bench (hereinafter referred to as ” the Tribunal “) has submitted a statement of the case under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as ” the Act “, and referred the following questions of law for the opinion of this court:
” (1) Whether, on the facts and in the circumstances of the case, the delay under Section 139(1) is condoned if the notice under Section 139(2) is issued to the assessee ? ”
(2) If the answer to the above question is in the negative, then-
” Whether, on the facts and in the circumstances of the case, the period of default was rightly computed for a month ?” ‘
2. The facts of the case, shorn of all details, can be recapitulated from the statement of the case itself. The assessee is a firm which carries on business in silk. The previous year of the assessee ended on the 19th of June, 1966. The income-tax return under Section 139(1) of the Act was due to be filed on the 30th June, 1967, No such return was filed by the assessee. The Income-tax Officer then
issued a notice on the 1st of January, 1968, under Sub-section (2) of Section 139, before the end of the relevant assessment year. Thirty days’ time was given from the date of the receipt of the notice aforesaid to the assessee to file the return. The assessee, however, could not file the return within the thirty days allowed in the notice under Sub-section (2) of Section 139. The return was actually filed on the 26th of March, 1968. The assessee was assessed to tax on the return so furnished by it under Section 143 of the Act. The Income-tax Officer, however, initiated a proceeding under Section 271(1)(a) of the Act disbelieving the explanation of the assessee and held that the assessee, without reasonable cause, failed to file a return under Section 139(1) of the Act. The assessing officer, accordingly, imposed a penalty of Rs. 5,762. On appeal before the Appellate Assistant Commissioner, the contention put forward on behalf of the assessee was that the notice under Section 139(2) of the Act having been issued before the end of the relevant assessment year and thirty days’ time having been allowed to file the return under Section 139(2) and the return having been filed after about one month’s delay from the date when it was due under the notice under Sub-section (2) of Section 139 of the Act, the default, if any, for which penalty could be levied would be only with regard to the period of about one month from the date fixed in the notice under Section 139(2). This argument found favour with the Appellate Assistant Commissioner, who, agreeing with the assessee’s contention, held that once a notice under Section 139(2) was validly issued, the default, if any, for which a penalty under Section 271(1)(a) of the Act could be levied would be in respect of the default which the assessee had committed by not furnishing the return, as it was required to do by the notice “given under Section 139(2). The Appellate Assistant Commissioner, accordingly, determined the period of default for one month and directed the Income-tax Officer to recompute the penalty. The revenue having preferred an appeal before the Income-tax Appellate Tribunal, it was contended on behalf of the department, that, since the assessee did not file the return under Section 139(1), even though a notice under Section 139(2) was issued allowing thirty days’ time to the assessee, the default committed by the assessee for a breach of the mandatory requirements of Sub-section (1) of Section 139 still continued and that, therefore, the penalty had been rightly imposed by the assessing officer under Clause (a) of Sub-section (1) of Section 271. The Tribunal, however, rejected this contention and held as follows :
” No doubt, the assessee did not file the return within the time prescribed under Section 139(1) but when the assessing authority issued notice under Section 139(2), it allowed a period of 30 days for filing the return, by implication he condoned the delay made in the past and, therefore, the
Appellate Assistant Commissioner was justified to determine the period of default for a month and directed the Income-tax Officer to recompute the penalty.”
3. The appellate order of the Tribunal, a copy whereof is annexure “D” to the statement of the case, refers to the discussion of law in another batch of two cases, namely, Income-tax Appeals Nos. 325 and 326-Pat. of 1968-69, wherein the Tribunal has discussed the matter in detail, and, for the reasons recorded in that order and accepting the view as expressed by it in that judgment, the departmental appeal failed. A copy of the order of the Tribunal in the aforesaid two appeals has been made annexure “C” to the statement of the case. Although the Tribunal seems to have passed a very painstaking order in annexure “C” and has gone upon the footing that, by implication, a notice issued under Sub-section (2) of Section 139 would amount to condonation of default on the part of the assessee to file is return under Sub-section (1) of Section 139, the Tribunal has further observed that, although there is no power of condonation expressly prescribed by the statute, it should nevertheless be inferred that the issuance of a valid notice under Sub-section (2) of Section 139 could, by implication, amount to a condonation of the default of the requirements of Sub-section (1) of Section 139.
4. The question as to whether the delay or the default to comply with the requirements of Sub-section (1) of Section 139 of the Act was condoned or not is, in my view, not very material for the point involved in this case. The penalty proceedings have been initiated by the assessing officer under Section 271(1)(a) of the Act. If, on a true construction of the aforesaid statutory provision, it can be held that the default in complying with the requirements of the notice under Sub-section (2) of Section 139 would preclude a penalty being levied for a default committed in respect of the requirements of Sub-section (1) of Section 139, then that would sufficiently cover the point involved. On the facts and the discussion of law and from the findings of the Tribunal, I think the first question referred to this court has not covered the real point in controversy arising from the order of the Tribunal and it should be refrained as follows:
” Whether, on a true construction of Section 271(1)(a) of the Act, there can be any penalty imposed for failure to furnish the return, without reasonable cause, which the assessee was required to furnish under subsection (1) of Section 139, when once a notice is duly issued under subsection (2) of Section 139 ?
If the answer be in the negative, then, whether on the facts and in the circumstances of the case, the period of default was rightly computed for a month ? ”
5. Section 271(1)(a) of the Act reads thus :
“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 Section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by Sub-section (1) of Section 139 or by such notice, as the case may be, or……
He may direct that such person shall pay by way of penalty–…… ”
6. On a plain reading of the statutory provision it will be seen that Clause (a) of Sub-section (1) of Section 271 envisages three different kinds of default on the part of an assessee for which a penalty may be imposed. The three classes of default are these:
(i) failure of the assessee, without reasonable cause, to furnish the return within the time prescribed by Section 139(1); or
(ii) failure of the assessee, without reasonable cause, to furnish the return which he was required to furnish by notice given under Section 139(2); or
(iii) failure to furnish, without reasonable cause, the return in pursuance of a notice under Section 148 of the Act.
7. Can such a provision be so construed as to mean that the assessee can be penalised once for a default under Sub-section (1) of Section 139, and again for a default under Sub-section (2) of Section 139, and yet again for a default to comply with the requirements of the notice under Section 148 of the Act? The provisions in Clause (a) with regard to each of the three classes of default have been made disjunctive, and not conjunctive. In so far as the first two classes of default enumerated above are concerned, there is yet another part of Clause (a) of Sub-section (1) of Section 271 which would lend support to the view that once a valid notice under Section 139(2) is issued, then the default committed in respect of the requirements of that notice shall preclude any penalty being imposed for any default committed in respect of the failure to furnish the return within the period prescribed by Sub-section (1) of Section 139. The last part of Clause (a) aforesaid clearly says that the penalty may be imposed on the assessee “has without reasonable cause failed to furnish it within the time allowed and in the manner required by Sub-section (I) of Section 139 or by such notice (under Section 139 (2)), as the case may be”. (The brackets are mine). Once, therefore, a notice is issued under Section 139(2), the penalty under Clause (a) of Sub-section (1) of Section 271, if any, can be imposed for any default on the part of the assessee to comply with the directions in the notice. That obviously will preclude a penalty being imposed for failure to furnish the return under Sub-section (1) of Section 139. As a necessary corollary, it would follow that once a notice under Sub-section (2) of Section 139 is duly issued and time is granted therein by the Income-tax Officer, the law does not contemplate any penalty to be imposed in respect of any default for failure to comply with the provisions of Sub-section (1) of Section 139. To take a concrete case, for example, where an assessee does not file a return under Section 139(1), but does file the return within the time granted in the notice under Section 139(2), can it bs said that the assessee would still be held to be liable for penalty ? On a true construction of Section 271(1)(a), I am of the view that once a notice under subsection (2) of Section 139 is issued, that precludes the penal provision being attracted in so far as the failure to furnish the return under Sub-section (1) of Section 139 is concerned. If a contrary view is taken, it would lead not only to an anomalous result, but it would be doing violence to the express language of the statute. In so deciding the point, I am aware of the decision of the Supreme Court in the case of C. A. Abraham v. Income-tax Officer, Kottayam, [1961] 41 ITR 425 (SC) wherein it has been held that, in interpreting a fiscal statute, the court cannot proceed to make good deficiences, if there be any; the court must interpret the statute as it stands and in case of doubt in a manner favourable to the taxpayer. But where by the use of words capable of comprehensive import, provision is made for imposing liability for penalty upon the taxpayer guilty of fraud, gross negligence or contumacious conduct, an assumption that the words were used in a restricted sense so as to defeat the avowed objact of the legislature in respect of a certain class will not be lightly made. The instant case is one of such cases where the language of Section 271(1)(a), in my view, is clear enough ; and, even if it be held to be of ambiguous import, or if there be any doubt as to the true interpretation of the penal provisions contained in Section 27I(I)(a), the interpretation of the statute has, on the authority of the Supreme Court’s decision in Abraham’s case, [1961] 41 ITR 425 (SC) to be made in a manner favourable to the taxpayer.
8. There is yet another aspect of the matter which deserves notice in this connection. It is beyond any controversy that the Income-tax Officer is empowered under Section 139(2) of the Act to issue a notice even before the period prescribed under Section 139(1). And, if the assessee makes a default in complying with the terms of the notice under Section 139(2), even if the period fixed in such a notice requiring him to furnish a return is prior to the date or pariod fixed under Section 139(1), he would be liable to a penalty under Section 271(1)(a) of the Act. When once it is held that, under Sub-section (2) of Section 139, the Income-tax Officer has power to curtail the period prescribed under Section 139(1), it does not stand to reason as to why the power for extending such a time within any point of time in the relevant assessment year be not held to be inherent in him. Consequently, it must also be held that by issuance of a notice under Section 139(2) within the relevant assessment year, the period prescribed in Sub-section (1) of Section 139 was duly extended and no penalty could be levied for any default committed in respect of the provisions of Section 139(1).
9. For the reason stated above, I would answer the first question, as reframed above, in favour of the assessee and against the department, and hold that, once a notice under Sub-section (2) of Section 139 is duly issued during the relevant assessment year, there cannot be any penalty for failure to furnish the return, as required by Sub-section (1) of Section 139 of the Act. It automatically follows that the second question also must be answered in favour of the assessee and against the department, and it must be held that, on the facts and in the circumstances of this case, the period of default was rightly computed for one month. In the circumstances of the case, however, there will be no order as to costs.
S.N.P. Singh, C.J.
10. I agree.