ORDER
T.V.K. Natarajachandran, Accountant Member
1. his is an appeal by the assessee which is directed against the order of the Dy. Commissioner of Income-tax (Appeals) L-Range, Bombay, dated 8-4-1988 wherein he has confirmed the penalty levied by the Income-tax Officer under Section 271(1)(a) of the Income-tax Act, 1961, for the delay in the submission of the return without reasonable cause.
The assessee has taken several grounds to urge that the learned DC(A) was not justified in confirming the penalty and therefore, the penalty sustained should be cancelled.
2. Assessee is an individual, who carries on brokerage business in motor car. No books of account have been maintained by the assessee for the business. For the assessment year 1982-83 for which the accounting year ended on 31-3-1982, the assessee filed return of income on 3-4-1984 showing a business income of Rs. 14,500 on an estimate basis. The ITO, inter alia, noticed that the drawings of the assessee and his father, who is separately assessed to tax, amounted to Rs. 14,400 but they were not sufficient, for a family of 10 members. Considering this aspect, the ITO determined the business income at Rs. 30,000 roundly on estimate basis, by his order dated 28-1-1985.
3. Pursuant to the assessment made, the Assessing Officer issued show-cause notice because the return was filed on 3-4-1984 though it was due by 31 -7-1982. The explanation offered by the assessee, as per letter dated 10-3-1987 was that as he had filed return admitting income of Rs. 14,500 voluntarily and as it was below the taxable limit, no penalty could be levied under Section 271(1)(a) read with the provisions of Section 271(3)(a).
4. The explanation offered was not accepted by the Assessing Officer for the reason that though the returned income is covered by Section 271(3)(a), the assessed income is much more and therefore the assessee ought to have filed the return in time declaring the correct income. Therefore, he levied minimum penalty of Rs. 560 under Section 271(1)(a) of the IT Act, 1961.
5. At this juncture, it must be stated for the purpose of completion of record that the assessee appealed against the quantum assessment and obtained relief of Rs. 5,000 on overall estimate of business income which was reduced to Rs. 25,000. After giving effect to the appellate order the total income was determined at Rs. 19,500 after giving deduction under Section 80-C of Rs. 5,500.
On appeal, the DC(A) sustained the penalty levied by the ITO and dismissed the appeal. According to him, the words “total income” defined under Section 3(45) means the total amount of income referred to in Section 5 computed in the manner laid down in this Act.
6. In the written statement filed by the counsel for the assessee, decisions in the case of SunderlalRethi v. ITO [1974] 97 ITR 183 (Cal.) and Essorde Industrial v. CIT[1977] 110 ITR 298 (Mad.) were relied upon, in support of the case of the assessee.
In the case of SunderlalRethi {supra), return was filed belatedly but before the assessment was made. It is for this reason the Calcutta High Court held that the acceptance of the return by the ITO filed out of time without applying for extension of time will not debar the ITO from imposing penalty upon the assessee for not filing the return within time. It also pointed out that Section 139(4) of the IT Act, 1961, only permits the assessee to file return beyond the time allowed under Section 139(1) or 139(2) of the Act before the assessment is made, but it does not exonerate the assessee from the liability to penalty under Section 271 (1)(a) of the Act which is applicable for violation of the requirements of Section 139(1) of the Act. In that case, the income of the registered firm was finally assessed at Rs. 31,692 even though the income shown in the return was only Rs. 16,839. The Calcutta High Court held the assessee could not claim exemption from penalty under Section 271(3)(a) on the ground that no penalty could be imposed as the taxable limit for a registered firm was Rs. 25,000.
In the case of Essorde Industrial {supra), the Madras High Court held that the provisions of Section 271(3)(a) applied only to a case where there has been a failure to submit a return in accordance with Section 139(1) and has no application to a case of a delayed return. Accordingly, the penalty levied in that case for delayed furnishing of return of income by a registered firm under Section 183(b) was held to be valid.
7. Although the aforesaid two judgments of the Calcutta and Madras High Courts are prima facie against the interest of the assessee, the assessee still relied on those judgments for making ingenious arguments that the provisions of Section 271(3)(a) are applicable to a return of income filed under Section 139(1) even though filed late where Form No. 6 has been filed. In this connection, the assessee has relied on certain decisions pertaining to interpretation of fiscal statutes wherein it is observed that the Court must interpret the statute as it stands and in case of doubt, in a manner favourable to the taxpayer, and also to the effect that if the court finds that the language of a taxing provision is ambiguous or capable of more meaning than one, then the court has to adopt that interpretation which favours the assessee, more particularly so where the provision relates to the imposition of penalty.
The learned Departmental Representative, on the other hand, supported the orders of the authorities. We have duly considered the rival submissions and the paper compilation filed by the assessee and the records. It is seen that the appeal filed by the assessee is barred by time by 14 days. When the assessee was called upon to explain as to why the appeal could not be dismissed as barred by time, he has filed an affidavit dated 11-9-1993 stating that to the best of his knowledge and belief, he had gone out of station from 26-1-1989 to 13-2-1989 for business purposes. This affidavit is nothing but a self- out of station from 26-1-1989 to 13-2-1989. The fact remains that the appeal was filed in person in the office of the Tribunal on 13-2-1989 and it was also verified on 13-2-1989. Therefore, the date of verification in Appeal memorandum and the declaration in the affidavit are contradictory and impeaches the veracity of the declaration and undermines the validity of the cause shown by the assessee. Therefore, we are satisfied that this is a case where the appeal is barred by time without there being sufficient cause. Be that as it may, coming to the merits of the case, the burden of the assessee is that penalty under Section 271 (1)(a) is not livable in terms of Section 271(3)(a) because that section refers to “income returned” and not “income assessed” as interpreted by the Dy. Commissioner (Appeals). Inasmuch as the assessee has returned income of Rs. 14,500 which is below the taxable limit of Rs. 15,000, the assessee wants to take recourse under Section 271(3)(a) to claim immunity from levy of penalty under Section 271 (1)(a). This interpretation given by the assessee is not valid and acceptable.
Firstly, the words “total income” defined in Section 2(45) means the total amount of income referred to in Section 5, computed in the manner laid down in this Act. Therefore, total income is one which is computed in accordance with Section 5 and in the manner laid down in the Income-tax Act. It is only when such determined income does not exceed the maximum amount not chargeable to tax in the case of an individual by Rs. 1,500 exemption or immunity is given from the levy of penalty under Section 271(1)(a). In other words, if the non-taxable limit of income in the case of an individual for the assessment year 1982-83 is Rs. 15,000 as claimed by the assessee, income determined up to Rs. 16,500 would not attract levy of penalty under Section 271 (3) (a). In case the total income determined exceeds the limit of Rs. 16,500, the bar contained in Section 271 (3) is lifted and the assessee falls within the mischief of Section 271(1)(a). Thus, the interpretation given by the assessee is not acceptable at all as it is not in accordance with the provisions of law. The judgment of the Calcutta High Court in the case of Sundarlal Rethi (supra) relied upon by the assessee actually supports the view taken by us. In that case, the return of income was filed by a registered firm under Section 139(4) [beyond the time limit specified under Section 139(1)] admitting income of Rs. 16,831 while the taxable limit for a registered firm was Rs. 25,000. The registered firm was finally assessed at Rs. 31,692. The assessee claimed immunity under Section 271(3)(a) stating that the income returned was below the taxable limit applicable to a registered firm. The Calcutta High Court held that where the return has been filed under Section 139(4) of the Act, it does not exonerate the assessee from the liability to penalty under Section 271 (1)(a) which is applicable for violation of the requirements of Section 139(1) of the Act. In particular, the Calcutta High Court held that exemption under Section 271(3)(a) is not available if the income assessed is more than the maximum amount not chargeable to tax.
Secondly, in the case of Essorde Industrial (supra), the Madras High Court had considered the scope of application of Section 271(3)(a) and held that provision would be applicable only to a case where there has been a failure to submit a return in accordance with Section 139(1) and has no application to a case of filing a delayed return. The High Court also held the penalty levied in the instant case have upheld furnishing the return of income by a firm which was treated as registered firm under Section 183(b) was held to be valid. Thus, the ratio of the Madras High Court is that the exemption contemplated under Section 271(3) (a) comes into force or application only in a case where there is failure to submit a return in accordance with Section 139(1) and no application to a case of delayed return. In other words, any return filed under Section 139(4) would attract levy of penalty under Section 271(1)(a) because it is not a case of failure to furnish the return in accordance with Section 139(1). The logic behind the provision of Section 271 (3)(a) appears to be notwithstanding the failure of the assessee to furnish the return in accordance with Section 139(1) no penalty shall be imposed if the income determined does not exceed the maximum amount not taxable, income applicable to the assessee by not more than Rs. 1,500. Within this ceiling limit, any failure to furnish the return in accordance with Section 139(1) would be immune from levy of penalty under Section 271(1)(a) and it is not applicable to a case where there is delayed filing of return of income.
Thirdly, there is no ambiguity in the provision of Section 271(3)(a) which would call for more than one interpretation. Section 271(3)(a) as it existed during the relevant period reads as under:
Section 271
(3) Notwithstanding anything contained in this section–
(a) no penalty for failure to furnish the return of his total income under Sub-section (1) of Section 139 shall be imposed under Sub-section (1) on an assessee whose total income does not exceed the maximum amount not chargeable to tax in a case by Rs. 1,500.
The aforesaid provision which is relevant for our consideration speaks of failure to furnish the return of total income and it specifies Sub-section (1) of Section 139.
Section 139(1) enjoins every person, if his total income during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall on or before the due date, furnish a return of his income or the income of such other person during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed.
Section 139(4) is only an enabling provision for filing the return belatedly before the expiry of two years from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.
9. In view of the authorities and reasons given, we have no hesitation in upholding the penalty levied by the Assessing Officer and confirmed by the DC (A).
10. In the result, the appeal is dismissed.