Prakash
Nath Khanna & Anr Vs. Commissioner of Income Tax and Anr [2004] Insc 105 (16 February 2004)
Doraiswamy
Raju & Arijit Pasayat. Arijit Pasayat,J.
These
appeals revolve round the scope and ambit of Section 276-CC of the Income Tax
Act, 1961 (in short the 'Act'), and are directed against a common judgment
rendered by a Division Bench of the Himachal Pradesh High Court which rejected
the three writ petitions filed by the appellants in these two appeals. The
Assistant Commissioner of Income tax, Circle I, Shimla filed a complaint in
terms of Section 276-CC of the Act in the Court of the CJM who had issued
process of taking cognizance of the offence. In each of the writ applications,
challenge was made to legality of the proceedings pending in the Court of Chief
Judicial Magistrate, Shimla (in short the 'CJM').
The
factual position is almost undisputed and needs to be noted in brief.
The
three appellants were partners of a firm carrying on business under the name
and style of M/s Kailash Nath and Associates. Apart from the three appellants,
two other persons were partners and one of them Shri Kailash Nath was the
Managing partner in terms of the Partnership Deed dated 1.4.1983. For the
assessment year 1988-89 return of income was to be filed on or before 31.7.1988,
but was in fact filed on 20.3.1991. Assessment under Section 143(3) of the Act
was completed on 26.8.1991. Proceedings for late submission of return were
initiated against the appellants under Section 271(1)(a) of the Act and penalty
was imposed. Proceedings in terms of Section 276-CC of the Act were also
initiated and complaint was filed before the concerned Court. As noted above,
cognizance was taken and process was issued. The writ applications were filed
challenging legality of the proceedings. By the impugned judgment the High
Court dismissed the writ petitions. The points which were mooted before the
High Court were re-iterated in the present appeals.
Mr.
G.C. Sharma, learned senior counsel appearing for the appellants urged the
following points for consideration:
1. The
expression "to furnish in due time" occurring in Section 276CC means
to furnish within the time permissible under the Act.
The
return furnished under Section 139(4) at any time before the assessment is made
has to be regarded as a return furnished under Section 139(1). This was so held
by this Court in Commissioner of Income Tax Punjab v. Kullu Valley Transport
Co. Pvt.Ltd. (1970 (77) ITR 518) in the context of Sections 22(1) and 22(3) of
the Indian Income Tax Act, 1922 (in short the 'Old Act') which are in pari-materia
of Section 139(1) and Section 139(4) of the Act. It follows that return was
furnished in "the due time" and consequently Section 276CC is not
attracted.
2. The
provisions of Section 276CC(i) are not intended to apply to the cases of assessees
who have been regularly assessed to income tax and have voluntarily submitted
their returns of income without issue of any notice to do so by the Assessing
Officer in that behalf, within the time permissible to furnish the return under
the Act.
This
interpretation gets support from the marginal heading and explanatory memo laid
before Parliament when the Section was introduced.
3(i)
The provision only applies where the amount of tax which would have been evaded
if the failure had not been discovered exceeds Rs,1,00,000/-. There has been no
discovery of the failure in this case from the point of view of evasion of tax.
The assessee has submitted return voluntarily, paid advance tax and self
assessment tax.
3(ii) There
has been no concealment of income in this case, and no penalty has been or can
be imposed. The allegation made in the complaint that there has been evasion of
tax to the extent of Rs.5,68,039/- is based on no evidence and is contrary to
the materials on record.
4. The
petitioners in reply to show cause notice issued pleaded that the delay in
submission of returns was unavoidable, because their share of profit from the
firm in which they were partners had not been communicated by the Managing
Partner of the firm who was responsible for the accounts.
They
had no guilty mind.
5.
Mere delay in filing a return without contumacious conduct and mens rea being
established could not make the petitioner liable for prosecution.
6.
Petitioner having been subjected to levy of interest under Section 139(1) and
also to penalty proceedings under Section 271(1)(a) of the Act, could not
further be prosecuted for the same defaults.
Per
contra, learned counsel appearing for the respondents submitted that the High
Court was justified in its conclusions in dismissing the writ petitions. The
decision in Kullu Valley's case (supra) has no application to the facts of the
present case and in fact it was rendered in a different set up. Sub-sections
(1) and (4) of Section 139 deal with different situations and it cannot be said
that a return filed in terms of Section 139(4) would mean compliance with the
requirements indicated in sub-section (1) of Section 139. It is further
submitted that Section 278-E raises a presumption which is a rebutable one and
the factual aspects raised by the appellants can be placed for consideration in
the proceedings before the learned CJM.
Since
the fate of the appeals revolves round the scope and ambit of Section 276-CC in
the background of sub-sections (1) and (4) of Section 139, it would be
appropriate to quote the aforesaid provisions, as they stood at the relevant
point of time:
"Section
276-CC: Failure to furnish returns of income: If a person wilfully fails to
furnish in due time the return of income which he is required to furnish under
sub-section (1) of Section 139 or by notice given under sub-section (2) of
Section 139 or Section 148, he shall be punishable,-
(i) in
a case where the amount of tax, which would have been evaded if the failure had
not been discovered, exceeds one hundred thousand rupees, with rigorous
imprisonment for a term which shall not be less than six months but which may
extend to seven years and with fine;
(ii) in
any other case, with imprisonment for a term which shall not be less than three
months but which may extend to three years and with fine:
Provided
that a person shall not be proceeded against under this section for failure to
furnish in due time the return of income under sub- section (1) of Section 139-
(i)for
any assessment year commencing prior to the Ist day of April, 1975; or
(ii)for
any assessment year commencing on or after the Ist day of April, 1975, if-
(a)the
return is furnished by him before the expiry of the assessment year; or
(b)the
tax payable by him on the total income determined on regular assessment, as
reduced by the advance tax, if any, paid, and any tax deducted at source, does
not exceed three thousand rupees".
Section
139: Return of income-
(1)
Every person, if his total income or the total income of any other person
exceeded the maximum amount which is not chargeable to income tax, shall
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.
(a) in
the case of every person whose total income, or the total income of any other
person in respect of which he is assessable under this Act, includes any income
from business or profession, before the expiry of four months from the end of
the previous year or where there is more than one previous year, from the end
of the previous year which expired last before the commencement of the
assessment year, or before the 30th day of June of the assessment year,
whichever is later;
(b) in
the case of every other person, before the 30th day of June of the assessment
year:
Provided
that, on an application made in the prescribed manner, the Assessing Officer
may, in his discretion, extend the date for furnishing the return, and,
notwithstanding that the date is so extended, interest shall be chargeable in
accordance with he provisions of sub-section (8).
(IA)
Notwithstanding anything contained in sub-section (1), no person need to
furnish under that sub-section a return of his income or the income of any
other person in respect of whose total income he is assessable under this Act,
if his income or, as the case may be, the income of such other person during
the previous year consisted only of income chargeable under the head
"Salaries" or of income chargeable under that head and also income of
the nature referred to in any one or more of clause (i) to (ix) of sub-section
(1) of Section 80L and the following conditions are fulfilled, namely:-
(a)
where he or such other person was employed during the previous year by a
company, he or such other person was at no time during the previous year a
director of the company or a beneficial owner of shares in the company (not
being shares entitled to a fixed rate of dividend whether with or without a
right to participate in profits) carrying not less than twenty per cent of the
voting power;
(b)
his income or the income of such other person under the head
"Salaries", exclusive of the value of all benefits or amenities not
provided for by way of monetary payment, does not exceed twenty four thousand
rupees;
(c)
the amount of income of the nature referred to in clause (i) to (ix) of
sub-section (1) of Section 80L, if any does not, in the aggregate, exceed the
maximum amount allowable as deduction in his case under that section; and
(d) the
tax deductible at source under section 192 from the income chargeable under the
head "Salaries" has been deducted from that income.
(2) In
the case of any person who, in the Assessing Officer's opinion, is assessable
under this Act, whether on his own total income or on the total income of any
other person during the previous year, the Assessing Officer may, before the
end of the relevant assessment year, issue a notice to him and serve the same
upon him requiring him to furnish, within 30 days from the date of service of
the notice, 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:
Provided
that, on an application made in the prescribed manner, the Assessing Officer
may, in his discretion, extend the date for furnishing the return, and,
notwithstanding that the date is so extended, interest shall be chargeable in
accordance with the provisions of sub-section (8).
(3) If
any person who has not been served with a notice under sub- section (2), has
sustained a loss in any previous year under the head "Profits and gains of
business or profession" or under the head "Capital gains" and
claims that the loss or any part thereof should be carried forward under
sub-section (1) of Section 72, or sub-section (2) of Section 73, or sub-section
(1) or sub- section (3) of Section 74, or sub- section (3) of Section 74A, he
may furnish within the time allowed under sub-section (1) or by the thirty
first day of July of the assessment year relevant to the previous year during
which the loss was sustained, a return of loss in the prescribed form and
verified in the prescribed manner and containing such other particulars as may
be prescribed, and all the provisions of this Act shall apply as if it were a
return under sub-section (1).
(4)(a)
Any person who has not furnished a return within the time allowed to him under
sub-section (1) or sub-section (2) may, before the assessment is made, furnish
the return for any previous year at any time before the end of the period
specified in clause (b), and the provisions of sub-section (8) shall apply in every
such case.
(b)The
period referred to in clause (a) shall be-
(i)where
the return relates to a previous year relevant to any assessment year
commencing on or before the Ist day of April, 1967 four years from the end of
such assessment year;
(ii)where
the return relates to a previous year relevant to the assessment year
commencing on the Ist day of April, 1968 three years from the end of the
assessment year;
(iii)where
the return relates to a previous year relevant to any other assessment year,
two years from the end of such assessment year.
(4A)
Every person in receipt of income derived from property held under trust or
other legal obligation wholly for charitable or religious purposes or in part
only for such purposes, or of income being voluntary contributions referred to
in sub-clause (iia) of clause (24) of section 2 shall, if the total income in
respect of which he is assessable as a representative assessee(the total income
for this purpose being computed under this Act without giving effect to the
provisions of sections 11 and 12) exceeds the maximum amount which is not
chargeable of income tax furnish a return of such income of the previous year
in the prescribed form and verified in the prescribed manner and setting forth
such other particulars as may be prescribed and all the provisions of this Act
shall, so far as may be, apply as if it were a return required to be furnished
under sub-section (1).
(4B)
The Chief Executive Officer (whether such Chief Executive Officer) is known as
Secretary or by any other designation) of every political party shall, if the
total income in respect of which the political party is assessable (the total
income for this purpose being computed without giving effect to the provisions
of section 13A) exceeds the maximum amount which is not chargeable of income
tax furnish a return of such income of the previous year in the prescribed form
and verified in the prescribed manner and setting forth such other particulars
as may be prescribed and all the provisions of this Act shall, so far as may
be, apply as if it were a return required to be furnished under sub-section
(1).
(5)If
any person having furnished a return under sub-section (1) or sub- section (2),
discovers any omission or any wrong statement therein, he may furnish a revised
return at any time before the assessment is made.
Kullu Valley's case (supra ) was rendered in the background of Section
22 of the Old Act.
Great
emphasis is laid on the observation by this Court that sub-section (3) of
Section 22 of the Old Act was in the nature of a proviso to sub- section (1)
thereof. It is to be noted that the decision was rendered in a totally
different context. The question related to the treatment of a return of loss
filed beyond the time provided under sub-section (1) of Section 22. The
observation on which reliance is placed cannot be read out of context.
In Kullu
valley's case (supra) the majority view was that Section 22(3) of the Old Act
(corresponding to Section 139(4) of the Act) is merely a proviso to Section
22(1) (Section 139(1)) respectively, and if Section 22(3) is complied with,
Section 22(1) must be held to have been complied with and that if compliance
has been made with Section 22(3), the requirement of Section 22(2A)
(corresponding to Section 139(3) of the Act) would stand satisfied.
It was
thus, held that the ascertained losses could be carried forward to the
subsequent years and set off, even though suo motu return is not filed within
time prescribed under Section 22(1) of the Old Act.
The
decision was rendered in a conceptually different situation, and has no
relevance so far as the present dispute is concerned.
The
basic issue in Kullu Valley's case (supra) was determination of loss on the basis of
return filed under Section 22(1) or 22(3) of the Old Act. In the Act, Section
80 deals specifically with the situation.
The
original Section 80 in the Act reads as under:
"Notwithstanding
anything contained in this Chapter, no loss which has not been determined in
pursuance of a return filed under Section 139, shall be carried forward and set
off under sub-section (1) of Section 72 or sub- section (2) of Section 73 or
sub- section (1) of Section 74".
By the
Taxation Laws (Amendment) Act, 1984 with effect from Ist April, 1985, the words
"under Section 139" (underlined for emphasis) were substituted by the
words "within the time allowed under sub-section (1) of Section 139 or
within such further time as may be allowed by the Income Tax Officer". (underlined
for emphasis) As a result of the amendment of Section 139(3) by the Taxation
Laws (Amendment and Miscellaneous Provisions) Act, 1986 the power of the Income
tax Officer to extend time for furnishing return was taken away w.e.f. Ist
April, 1987.
Yet
again, by the Direct Tax Laws (Amendment Act), 1987 w.e.f. Ist April, 1989 the
words "within the time allowed under sub-section (1) of Section 139 or
within such further time as may be allowed by the Income tax Officer" were
substituted by the words "in accordance with the provisions of sub-section
(3) of Section 139".
It is
well settled principle in law that the Court cannot read anything into a
statutory provision which is plain and unambiguous. A statute is an edict of
the legislature. The language employed in a statute is the determinative factor
of legislative intent. The first and primary rule of construction is that the
intention of the legislation must be found in the words used by the legislature
itself. The question is not what may be supposed and has been intended but what
has been said. "Statutes should be construed, not as theorems of Euclid", Judge Learned Hand said,
"but words must be construed with some imagination of the purposes which
lie behind them". (See Lenigh Valley Coal Co. v. Yensavage (218 FR 547).
The view was re- iterated in Union of India v. Filip Tiago De Gama of Vedem
Vasco De Gama (AIR 1990 SC 981), and Padma Sundara Rao (dead) and Ors. V. State
of Tamil Nadu and Ors. (2002 (3) SCC 533).
In
D.R. Venkatchalam v Dy. Transport Commissioner (1977 (2) SCC 273) it was
observed that courts must avoid the danger of a priori determination of the
meaning of a provision based on their own preconceived notions of ideological
structure or scheme into which the provision to be interpreted is somewhat
fitted. They are not entitled to usurp legislative function under the disguise
of interpretation.
While
interpreting a provision the court only interprets the law and cannot legislate
it.
If a
provision of law is misused and subjected to the abuse of process of law, it is
for the legislature to amend, modify or repeal it, if deemed necessary. (See Rishabh
Agro Industries Ltd. V. P.N.B. Capital Services Ltd. (2000 (5) SCC 515). The
legislative casus omissus cannot be supplied by judicial interpretative
process.
Two
principles of construction- one relating to casus omissus and the other in
regard to reading the statute as a whole -appear to be well settled. Under the
first principle a casus omissus cannot be supplied by the court except in the
case of clear necessity and when reason for it is found in the four corners of
the statute itself but at the same time a casus omissus should not be readily
inferred and for that purpose all the parts of a statute or section must be
construed together and every clause of a section should be construed with reference
to the context and other clauses thereof so that the construction to be put on
a particular provision makes a consistent enactment of the whole statute. This
would be more so if literal construction of a particular clause leads to
manifestly absurd or anomalous results which could not have been intended by
the legislature.
"An
intention to produce an unreasonable result", said Danckwerts, L.J., in Artemiou
v. Procopiou (1966 (1) QB 878), "is not to be imputed to a statute if
there is some other construction available". Where to apply words
literally would "defeat the obvious intention of the legislation and
produce a wholly unreasonable result", we must "do some violence to
the words" and so achieve that obvious intention and produce a rational
construction. (Per Lord Reid in Luke v. IRC {1963 AC 557} where at AC p.577 he
also observed: "This is not a new problem, though our standard of drafting
is such that it rarely emerges".} The heading of the Section or the
marginal note may be relied upon to clear any doubt or ambiguity in the
interpretation of the provision and to discern the legislative intent.
In
C.I.T. v. Ahmedbhai Umarbhai and Co. (AIR 1950 SC 134) after referring to the
view expressed by Lord Machnaghten in Balraj Kunwar v. Jagatpal Singh (ILR 26
All. 393 (PC), it was held that marginal notes in an Indian Statute, as in an
Act of Parliament cannot be referred to for the purpose of construing the
statute. Similar view was expressed in Board of Muslim Wakfs, Rajasthan v. Radha
Kishan and Ors. (1979(2) SCC 468), and Kalawatibai v. Soiryabai and Ors. (AIR
1991 SC 1581). Marginal note certainly cannot control the meaning of the body
of the Section if the language employed there is clear. (See Smt. Nandini Satpathy
v. P.L. Dani and Anr. (AIR 1978 SC 1025) In the present case as noted above,
the provisions of Section 276-CC are in clear terms.
There
is no scope for trying to clear any doubt or ambiguity as urged by learned
counsel for the appellants. Interpretation sought to be put on Section 276-CC
to the effect that if a return is filed under sub-section (4) of section 139 it
means that the requirements of sub-section (1) of Section 139 cannot be
accepted for more reasons than one.
One of
the significant terms used in Section 276-CC is 'in due time'. The time within
which the return is to be furnished is indicated only in sub-section (1) of
Section 139 and not in sub- section (4) of Section 139. That being so, even if
a return is filed in terms of sub-section (4) of Section 139 that would not dilute
the infraction in not furnishing the return in due time as prescribed under
sub-section (1) of Section 139. Otherwise, the use of the expression "in
due time" would loose its relevance and it cannot be said that the said
expression was used without any purpose. Before substitution of the expression
"clause (i) of sub-section (1) of section 142" by Direct Tax Laws
(Amendment) Act, 1987 w.e.f. 1.4.1989 the expression used was "sub-section
(2) of section 139". At the relevant point of time the assessing officer
was empowered to issue a notice requiring furnishing of a return within the
time indicated therein.
That
means the infractions which are covered by Section 276-CC relate to
non-furnishing of return within the time in terms of sub-section (1) or indicated
in the notice given under sub-section (2) of Section 139. There is no condonation
of the said infraction, even if a return is filed in terms of sub-section (4).
Accepting such a plea would mean that a person who has not filed a return
within the due time as prescribed under sub-sections (1) or (2) of Section 139
would get benefit by filing the return under Section 139(4) much later. This
cannot certainly be the legislative intent.
Another
plea which was urged with some amount of vehemence was that the provisions of
Section 276-CC are applicable only when there is discovery of the failure
regarding evasion of tax. It was submitted that since the return under
sub-section (4) of Section 139 was filed before the discovery of any evasion,
the provision has no application. The case at hand cannot be covered by the
expression "in any other case".
This
argument though attractive has no substance.
The
provision consists of two parts. First relates to the infractions warranting
penal consequences and the second, measure of punishment. The second part in
turn envisages two situations. The first situation is where there is discovery
of the failure involving the evasion of tax of a particular amount. For the
said infraction stringent penal consequences have been provided. Second
situation covers all cases except the first situation elaborated above.
The
term of imprisonment is higher when the amount of tax which would have been
evaded but for the discovery of the failure to furnish the return exceeds one
hundred thousand rupees. If the plea of the appellants is accepted it would
mean that in a given case where there is infraction and where a return has not
been furnished in terms of sub-section (1) of Section 139 or even in response
to a notice issued in terms of sub-section (2), the consequences flowing from
non-furnishing of return would get obliterated. At the relevant point of time
Section 139(4)(a) permitted filing of return where return has not been filed
within sub- section (1) and sub-section (2). The time limit was provided in
clause (b). Section 276-CC refers to "due time" in relation to
sub-sections (1) and (2) of Section 139 and not to sub-section (4). Had the
Legislature intended to cover sub- section (4) also, use of expression
"Section 139" alone would have sufficed. It cannot be said that
Legislature without any purpose or intent specified only the sub-sections (1)
and (2) and the conspicuous omission of sub-section (4) has no meaning or
purpose behind it. Sub- section (4) of Section 139 cannot by any stretch of
imagination control operation of sub-section (1) wherein a fixed period for
furnishing the return is stipulated. The mere fact that for purposes of
assessment and carrying forward and to set off losses it is treated as one
filed within sub-sections (1) or (2) cannot be pressed into service to claim it
to be actually one such, though it is factually and really not by extending it
beyond its legitimate purpose.
Whether
there was wilful failure to furnish the return is a matter which is to be
adjudicated factually by the Court which deals with the prosecution case.
Section 278-E is relevant for this purpose and the same reads as follows:
"278-E:
Presumption as to culpable mental state-
(1) In
any prosecution for any offence under this Act which requires a culpable mental
state on the part of the accused, the court shall presume the existence of such
mental state but it shall be a defence for the accused to prove the fact that
he had no such mental state with respect to the act charged as an offence in
that prosecution.
Explanation: In this sub-section,
"culpable mental state" includes intention, motive or knowledge of a
fact or belief in, or reason to believe, a fact
(2)
For the purposes of this section, a fact is said to be proved only when the court
believes it to exist beyond reasonable doubt and not merely when its existence
is established by a preponderance of probability".
There
is a statutory presumption prescribed in Section 278-E. The Court has to
presume the existence of culpable mental state, and absence of such mental
state can be pleaded by an accused as a defence in respect to the act charged
as an offence in the prosecution. Therefore, the factual aspects highlighted by
the appellants were rightly not dealt with by the High Court.
This
is a matter for trial. It is certainly open to the appellants to plead absence
of culpable mental state when the matter is taken up for trial.
Looked
at from any angle the appeals are without merit and are dismissed.
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