1972 (8) TMI 40 - HC - Income Tax

Interpretation of penalty for failure to furnish return: extended filing window does not prevent penalty for missing original filing deadline

Interpretation of the interaction between the statutory time-limit for filing returns and the penalty provision: strict construction requires reading the ... Interpretation of section 271(1)(a) of the Income-tax Act, 1961 - assessee failed to furnish the return within the time allowed to it under section 139, sub-section (1), but furnished it thereafter, within four years from the end of the assessment year 1961-62, as contemplated under section 139, sub-section (4) - guilty of default so as to attract the penalty under section 271(1)(a) - Whether penalty under section 271(1)(a) - HELD THAT:- Section 271(1)(a) consists of two clauses : each clause sets out the ingredients which, if fulfilled, would immediately attract penalty. The first clause refers to a case where a person 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, while the second applies to a case where a person has without reasonable cause failed to furnish the return of income within the time allowed and in the manner required by sub-section (1) of section 139, or by notice given under sub-section (2) of section 139, or section 148. The statutory provision enacted in section 271(1)(a) is punitive in its effect and must, therefore, be strictly construed. But that does not mean that it should be narrowly or stintingly understood or that we should refuse to place upon it a construction which its words would reasonably seem to bear. The principle of strict construction requires no more than this that we must exclude from the ambit and operation of the statutory provision all that is not clearly covered by the words used. The coverage of the statutory provision must be confined to that which is clear and explicit and we must not be over-anxious to place a construction which would expand the scope and ambit of the statutory provision. Bearing in mind well-settled rules of interpretation, we will now proceed to examine the language of section 271(1)(a). There is no doubt that sub-section (4) of section 139 has to be read with sub-section (1) of section 139, so as to permit the filing of a valid return, whether of income, profits or gains or of loss, but it cannot be construed so as to wipe out the limit of time referred to in sub-section (1) of section 139 altogether and for all purposes. If such was the intention of the legislature, the legislature need not have prescribed the time limit in sub-section (1) of section 139. The prescription of the time limit in sub-section (1) of section 139 would be an exercise in futility. It would have no sanction behind it, because even if an assessee does not file a return of income within such time limit, the assessee would be free from harm, because the Income-tax Officer would not be able to impose any penalty on him nor would he be able to make a best judgment assessment without issuing notice under section 139, sub-section (2). That surely could not have been the intention of the legislature. Such a construction would emasculate sub-section (1) of section 139, and make a mockery of the time limit specified in sub-section (1) of section 139. The same argument must apply also in relation to the time limit specified in the notice given under section 139, sub-section (2). It may also be noted that the words of the second clause of section 271(1)(a) are almost identical with the opening words of section 139, sub-section (4), which admittedly refer to default in furnishing return within the time allowed under sub-section (1) or sub-section (2) of section 139, without reference to section 139, sub-section (4) and, therefore, it is reasonable to assume that when the legislature used almost the same words in the second clause of section 271 (1)(a), the legislature intended them to have the same meaning. The time within which return of income may be filed under section 139, sub-section (4), cannot, therefore, be projected in the second clause of section 271(1). It is well settled that a decision is an authority only for what it decides. It cannot be extended by analogy or inference to govern a totally different situation. An interpretation given by the Supreme Court in Kulu Valley Transport Company's [1970 (4) TMI 14 - SUPREME COURT], one section cannot be projected in another section, regardless of the context and purpose of that other section. The decision of the Supreme Court is undoubtedly law of the land and with great respect we are bound to follow it. It is farthest from our mind to disregard it or to attempt to distinguish it by indulging in any over-refined subtleties. But we cannot extend it to the interpretation of another section which is wholly different in its context, setting, purpose and intendment. That would be nothing short of refusal on our part to give effect to the intention of the legislature as expressed in the words used in the section. We must interpret the language employed by the legislature in its contextual setting having regard to the purpose which the legislature had in mind and, if we do so, it is clear that the second clause of section 271(1)(a) applies where a person fails to furnish a return of income within the time allowed strictly under sub-section (1) or sub-section (2) of section 139 and filing of return after the expiration of such time but before the expiration of four years from the end of the assessment year under section 139, sub-section (4), does not save him from penalty for the default contemplated under the second clause of section 271(1)(a). We, therefore, answer the question referred to us in the negative. Issues: Whether a return filed under section 139(4) of the Income-tax Act, 1961 (i.e., filed after the time allowed under section 139(1) but before the expiry of four years from the end of the assessment year) is to be treated as having been filed 'within the time allowed by sub-section (1) of section 139' for the purposes of avoiding penalty under section 271(1)(a).Analysis: Section 139 provides three temporal stages for valid returns: within the time under sub-section (1), in response to a notice under sub-section (2), or thereafter under sub-section (4) but before assessment and within four years from the end of the assessment year. Section 271(1)(a) contains two clauses distinguishing (i) failure to furnish any return and (ii) failure to furnish a return 'within the time allowed' by sub-section (1) of section 139. The language of the second clause'within the time allowed . . . by sub-section (1) of section 139'plainly refers to the period specified in sub-section (1) (including any extension granted under the proviso to sub-section (1)), and does not encompass the separate remedial filing period under sub-section (4). Reading the clauses together prevents redundancy and gives effect to the legislature's explicit choice of words. Sub-section (4) grants locus poenitentiae and renders a late return legally effective for assessment, but it does not obliterate the distinct temporal limit in sub-section (1) or erase other statutory consequences of default. The compensatory interest provision in the proviso to section 139(1) is distinct in nature from the punitive scheme under section 271(1)(a); treating interest as punishment would be incorrect. Reliance on observations in Kulu Valley Transport Co. (interpreting a different provision in a different context) cannot be extended to alter the plain meaning of section 271(1)(a) read with section 139.Conclusion: Filing a return under section 139(4) within four years does not amount to filing 'within the time allowed by sub-section (1) of section 139' for the purposes of section 271(1)(a); a person who files only under section 139(4) after the time allowed under section 139(1) remains liable to penalty under the second clause of section 271(1)(a).Ratio Decidendi: For the purpose of section 271(1)(a) the expression 'within the time allowed by sub-section (1) of section 139' refers exclusively to the period specified in section 139(1) (including any extensions under its proviso) and does not include the later remedial filing period under section 139(4); consequently late filing under section 139(4) does not preclude liability to penalty under section 271(1)(a).