2005 (1) TMI 46 - HC - Income Tax

Court interprets 'month' in tax law, upholds cancellation of penalty for delayed filing.

Commissioner of Income-Tax Versus S. LM Maneklal Industries Limited.

The High Court upheld the cancellation of a penalty imposed under section 271(1)(a) of the Income-tax Act due to a delay in filing the return. The court ... Penalty for delay in filing return - 'Whether, Tribunal is right in cancelling the penalty levied by the Assessing Officer under section 271(1)(a) observing that 'month' in section 271(1)(a) meant calendar month and not the lunar month of 28 or 30 days?' - the word 'month' occurring in section 271(1)(a) of the Act has to be reckoned according to the British calendar according to section 3(35) of the General Clauses Act, 1897. - The view taken by the Tribunal is correct - question referred to the court is, therefore, answered in the affirmative, i.e., in favour of the assessee Issues:Interpretation of the term 'month' in section 271(1)(a) of the Income-tax Act, 1961 for the purpose of levying penalty.Analysis:The High Court was tasked with deciding whether the Appellate Tribunal was correct in canceling the penalty imposed by the Assessing Officer under section 271(1)(a) of the Income-tax Act based on the interpretation of the term 'month.' The case involved the assessment year 1980-81, where the respondent-assessee company filed its return of income after delays. The Assessing Officer imposed a penalty for one month due to the delay in filing the return.The Commissioner of Income-tax (Appeals) canceled the penalty, citing judgments from the Calcutta and Madras High Courts, which interpreted that the term 'month' in section 271(1)(a) referred to a complete calendar month. The Tribunal upheld this decision, relying on the precedents set by the High Courts.The court examined the relevant provisions of section 271(1)(a) of the Act, which required a penalty of 2% of the assessed tax for every month of default. Referring to the judgments of the Madras and Calcutta High Courts, the court concluded that the term 'month' should be interpreted according to the British calendar as per the General Clauses Act, 1897. The court found no reason to deviate from the established interpretation by the High Courts and upheld the Tribunal's decision.In conclusion, the court answered the question in favor of the assessee and against the Revenue, affirming the cancellation of the penalty. The judgment emphasized the consistent application of the term 'month' in tax laws and the relevance of established legal interpretations in determining penalties under the Income-tax Act.