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CASE NO.:

Appeal (crl.) 1260-1261 of 1997

PETITIONER:

Prakash Nath Khanna & Anr.

RESPONDENT:

Commissioner of Income Tax and Anr.

DATE OF JUDGMENT: 16/02/2004

BENCH:

DORAISWAMY RAJU & ARIJIT PASAYAT.

JUDGMENT:

JUDGMENT

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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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".

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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.