Law:

Section:

Section 271(1)(a) of the income-tax act, 1961-Penalty-For late filing of return-Whether, where ito has charged interest under clause (iii ) of proviso to section 139(1) [as it stood prior to 1-4-1971], it would mean that he has extended time for filing return and, therefore, in such case no penalty would be imposable under section 271(1)(a)-Held, yes. Words and phrases-'The time allowed' occurring in section 271(1)(a ) of the income-tax act, 1961 Facts The assessee filed his income-tax returns for the relevant assessment years belatedly and the ITO levied interest under clause (iii) of the proviso to section 139(1). The ITO also treated the assessee as being in default and imposed penalty under section 271(1)(a). The assessee contended that as interest had been levied under the said clause (iii) , no penalty could be levied. The Tribunal upheld the assessee's contention on the ground that as the ITO had levied interest, it had to be presumed that he had extended the time for filing the returns after satisfying himself that it was a case for extension of time. On reference, the High Court upheld the order of the Tribunal. On appeal: Held It is clear from a reading of the proviso to section 139(1) that it is only where the ITO extends the time for furnishing the return beyond September 30 or December 31, as the case may be, that interest becomes payable. It is apparent also from the language of clause (iii ) of the proviso to section 139(1) that interest becomes payable only upon the ITO acting on an application made by the assessee for the purpose and extending the date for furnishing the return. In the ordinary course of things, the ITO could have extended the date only upon being satisfied that there was good reason for doing so, and that would have been on grounds pleaded by the assessee. However, in the instant case, as the ITO had levied interest, it had to be presumed that he had extended the time limit for filing the returns after satisfying himself that it was a case for extension of time. No attempt was made by the revenue to show that the ITO acted arbitrarily and contrary to the procedure envisaged by the statute. The Tribunal had considered the…

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