1. This appeal filed by the department and the cross-objection filed by the assessee are heard together and disposed of by this common order for the sake of convenience.
2. The assessee is a private limited company. The assessment year involved in this appeal is 1978-79. The return for this year was due on 31-7-1978. The assessee filed the return on 31-7-1980. The assessee did not pay the 'self-assessment tax' under Section 140A of the Income-tax Act, 1961 ('the Act') before filing the return. That tax was paid on 22-8-1980. The ITO asked the assessee to show cause as to why it should not be penalised under Section 140A(3). The assessee replied that it could not pay the tax earlier due to lack of funds. The ITO did not find the above explanation to be statisfactory. He imposed penalty under Section 140A(3). The quantum of penalty was calculated by him at 2 per cent of the tax payable. However, he took the period of default to be 24 months, i.e., from 31-7-1978 to 22-8-1980. It is to be noted that the ITO proceeded on the basis that the default under Section 140A(3) started from the date on which the filing of the return became due.
3. The asses see appealed to the Commissioner (Appeals) and contended that the penalty imposed was not justified. The Commissioner (Appeals) considered that the provisions of Section 140A(3) are vague and so the determination of the quantum of penalty prescribed therein was impossible. He observed that the section does not speak definitely as to what was the starting point of default and so it was a case of casus omissus. He was aware of the fact that the section has to be read as a whole in order to understand the intention of the Legislature. He says that he looked through the whole statute but could not find any light.
Hence, he was forced to come to the conclusion that this is a case of casus omissus which means that Section 140A(3) is unworkable and has to be ignored. He has also referred to the fact that if two interpretations are possible then the one in favour of the assessee is to be preferred. But he thought that such a preference in this case will discriminate against those who filed the returns earlier as, according to him, those who file the return later will pay the penalty under Section 140A(3) for a smaller period (assuming that the tax was ultimately paid on the same date by both the type of the assessees). In this view of the matter, he held the Section 140A(3) to be unworkable and cancelled the penalty on that ground alone. Consequently, he did not consider the explanation of the assessee on merits.
4. Shri G.P. Nanda, the learned representative for the department, urged before us that the Commissioner (Appeals) erred in his decision.
According to him the Commissioner (Appeals) cancelled the penalty on a wrong view of the meaning of the section. In this connection, he referred to the decision in the case of CIT v. National Taj Traders [1980] 121 ITR 535 (SC) wherein it has been held that a casus omissus should not be readily inferred and for that purpose all the parts of a statute must be considered together.
5. Shri R.N. Bajoria, the learned representative for the assessee, drew our attention to the cross-objection filed by the assessee wherein a ground has been taken to the effect that the Commissioner (Appeals) should have cancelled the penalty on the ground that the explanation given by the assessee for not paying the tax earlier should have been accepted as satisfactory. He stated that the filing of the cross-objection was delayed by about eight days. He prayed for the condonation of the delay on the ground that there were disturbances in the city during that period.
6. We have carefully considered the issue raised in this appeal.
According to the assessee, the default under Section 140A(3) starts from the day the return was filed. According to the ITO that default starts from the date on which the filing of the return becomes due. The Commissioner (Appeals) has opined that the said liability arises on the last day of the previous year itself. However, he has cancelled the penalty on the ground that Section 140A(3) is unworkable. The issue that arises in this appeal is as to whether Section 140A(3) as introduced by the Taxation Laws (Amendment) Act, 1975, with effect from 1-4-1976 is workable or is a case of casus omissus.
7. Before we consider the basic question raised in this appeal, we feel it expedient to keep in mind certain well known principles of construction of statutes as laid down by the Supreme Court from time to time. The rules relevant for our purpose may be briefly stated. In the case of CIT v. S. Teja Singh [1959] 35 ITR 408 (SC), it has been said that a construction which defeats the very objects sought to be achieved by the Legislature must be avoided. In the case of S. V.Kondaskar, Official Liquidator & Liquidator of the Colaba Land & Mills Co. Ltd. v. M. Deshpande, ITO [1972] 83 ITR 685 (SC) it is observed that the provision of a statute should not be interpreted in a way to produce startling results not intended by the Legislature. In the case of National Taj Traders (supra) it has been held that the Court can supply an omission in order to avoid a manifestly absurd result that could never have been intended by the Legislature. In the case of K.L.
Varadarajan v. CIT [1975]98 ITR 182 (SC), it has been observed that the Legislature cannot be taken to have intended to create an anomaly which, in our opinion, includes an omission. In other words, the Legislature would not create an omission in the provision of a statute.
If the intention of the Legislature is otherwise clear, then an apparent omission can be modified and set right by the Court.
Similarly, in the case of K.P.Varghese v. ITO [1981] 131 ITR 597 (SC), it has been held that the Courts can modify the language used in order to give effect to the clear intention of the Legislature and to prevent the mischief for the eradication of which the provision has been enacted.
8. Keeping the above principles in mind, we now read Section 140A which runs as below: (1) Where any tax is payable on the basis of any return required to be furnished under Section 139 or Section 148, after taking into account the amount of tax, if any, already paid under any provision of this Act, the assessee shall be liable to pay such tax before furnishing the return and the return shall be accompanied by proof of payment of such tax.
(2) After a regular assessment under Section 143 or Section 144 has been made, any amount paid under Sub-section (1) shall be deemed to have been paid towards such regular assessment.
(3) If any assessee fails to pay the tax or any part thereof in accordance with the provisions of Sub-section (1), the Income-tax Officer may direct that a sum equal to two per cent of such tax or part thereof, as the case may be, shall be recovered from him by way of penalty for every month during which the default continues: Provided that before levying any such penalty, the assessee shall be given a reasonable opportunity of being heard, Sub-section (1) says that the assessee shall be liable to pay such tax before furnishing the return. Sub-section (3) says that the penalty is to be calculated for every month during which the default continues.
The question that is raised in this appeal is as to when the aforesaid default starts. For getting the answer to that question one should remember the history of Section 140A which first came into the statute book with effect from 1-4-1964. Before that there was a penalty for not filing the return within the prescribed time. This is the penalty under Section 271(1)(a) of the Act. The default under this section starts from the date from which the return becomes due and ends on the date on which the return is filed. Then Section 140A comes into play. Once the return is filed, the default under Section 140A(3) starts. It ends on the day when the tax under Section 140A(1) is paid. (It is true that the date on which the assessment is made terminates both the defaults and so it is not necessary for our present purpose to refer to that date.) The scheme of the Act is quite clear. An assessee can delay in making the payment of the tax due by him to the exchequer either by delaying the filing of the return or by delaying the payment of the admitted tax as per the return even after filing of the return. In either case the intention is to penalise the assessee for having wrongfully withheld the legitimate tax due to be paid. Section 271(1)(a) is intended to meet the former contingency. But, there was no provision in the statute to meet the second contingency. It was to avoid this mischief that Section 140A was enacted on 1-4-1964 and was later amended with effect from 1-4-1976. Thus, it is clear that the Legislature intended to prevent the second mischief stated above. In other words, Section 140A takes over when Section 271(1)(a) ceases to apply. The intention of both the Sections is to ensure the early realisation of the admitted tax due to the Government. In the case of CIT v. Sodra Devi [1957] 32 ITR 615, the Supreme Court has quoted with approval the Rule in Heydoris case [1584] 3 Co. Rep. la which says that a provision in a statute should be interpreted in order to further the remedy laid down by the Legislature to prevent a mischief that existed prior to the enactment. Hence, we find that the Commissioner (Appeals) was not correct in saying that the intention of the Legislature was not evident from the statute. As stated earlier the intention was clear, namely, to prevent the second mischief. All the rules of interpretation laid down by the Supreme Court in the aforesaid cases direct to interpret the provision under consideration in a way that it is workable ; in a way to prevent the mischief that was prevalent prior to the enactment ; in a way to give effect to the clear intention of the Legislature. We have no doubt in our mind as to that intention which we have already stated earlier. If both the Sections 271(1)(a) and 140A are taken together, there is no discrimination of the type apprehended by the learned Commissioner (Appeals). Thus, we hold that this is not a case of casus omissus as has been stated by the Commissioner (Appeals).
In our opinion, the default under Section 140A(3) starts from the day prior to the filing of the return and not before that. We find support for this conclusion of ours from the decisions of the Supreme Court cited earlier. Hence, we vacate the order of the Commissioner (Appeals). Since he has not considered the appeal of the assessee on merits, we restore the appeal to his file for deciding the same afresh in accordance with law and our observations made above after giving a reasonable opportunity of being heard both to the assessee as well as the ITO.9. Coming to the cross-objection filed by the assessee, we are not satisfied with the reason given for the delay in filing the same and so we reject the same as time barred.
10. In the result, the departmental appeal may be treated as allowed for statistical purposes while the cross-objection filed by the assessee is dismissed in limine.