1. The Revenue has come up in appeal against the cancellation of penalty imposed for late filing of the return of the trust by invoking the provisions of Section 271(1)(i).
2. The brief facts of the case are that the return which was due on June 30, 1980, was filed on May 26, 1981, indicating therein that it is a provisional return subject to audit. A revised return was filed on November 23, 1982, showing a deficit of Rs. 32,480. The Income-tax Officer had concluded that the return that was filed on November 23, 1982, was the first return meaning thereby that the return was delayed by 29 months. In response to the explanation sought for delay, the assessee had submitted before the Income-tax Officer that it had sought for approval under Section 35CCA, which was received only on October 18, 1979, and, as per the order, it was allowed from October 18, 1979, up to March 31, 1982. This, therefore, required the assessee to prepare two separate accounts --one up to October 11, 1978, and the second from October 12, 1978, to March 31, 1980. Such preparation of accounts took a long time and that compilation was ready some time in February, 1982.
This, combined with the delay in audit and getting the auditor's certificate was the reason for revising the return on November 23, 1982. It was also explained that the provisional return was prepared on the basis of books of account which were not subjected to audit. The explanation so provided by the assessee was found to be unsatisfactory and since the assessee did not file any explanation in Form No. 6, it was concluded that there was no reasonable cause and, accordingly, penalty came to be imposed for the delay of 29 months.
3. Aggrieved, the assessee preferred an appeal to the Appellate Assistant Commissioner, who deleted the penalty on the ground that as per the assessment, the assessee-trust was not liable for any tax and since the limit of penalty was in relation to the tax sought to be avoided or evaded, there being no tax at all, penalty could not have been levied.
4. Aggrieved by this finding of the Appellate Assistant Commissioner, the Revenue has come up in appeal. The argument of the learned Departmental Representative was that since the Act requires consideration of the trust to be not a charitable trust, meaning thereby that the incomes which are normally treated as applied for charitable purposes, are not to be treated as so applied and thereby there would be income on which tax needs to be calculated. It is on this basis that the Income-tax Officer had levied the penalty and, therefore, the penalty so imposed was proper. The plea of the assessee, on the other hand, was that since the tax avoided being zero, relating penalty to such zero factor, tax has to be zero.
5. We have heard the parties and considered the submissions very carefully. Section 271(3) reads as under : "Section 271(3). Notwithstanding anything contained in this Section, -- (a) no penalty for failure to furnish the return of his total income under Sub-section (1) of Section 139 shall be imposed under Sub-section (1) on an assessee whose total income does not exceed the maximum amount not chargeable to tax in his case by one thousand five hundred rupees ; (b) where a person has failed to comply with a notice under Sub-section (2) of Section 139 or Section 148 and proves that he has no income" liable to tax, the penalty imposable under Sub-section (1) shall not exceed twenty-five rupees ; (c) no penalty shall be imposed under Sub-section (1) upon any person assessable under Clause (i) of sub Section (1) of Section 160, read with Section 161, as the agent of a non-resident for failure to furnish the return under Sub-section (1) of Section 139 ; (d) the penalty imposed under Clause (i) of Sub-section (1) and the penalty imposed under Clause (iii) of that Sub-section, read with Explanation 3 thereto, shall not exceed in the aggregate twice the amount of the tax sought to be evaded ; Provided that nothing contained in Clause (a) or Clause (b) shall apply to a case referred to in Sub-Clause (a) of Clause (i) of Sub-section (1). " 6. A reading of the above indicates that, in the case of a return which is to be filed under Section 139(1) by assessee whose total income does not exceed the maximum amount not chargeable to tax by Rs. 1,500, no penalty shall be imposed on him for failure to furnish his return.
"Section 139 (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 to 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)." 8. The return of the trust which is to be filed by virtue of Section 139(4A) is treated as the return under Section 139(1), Further, the proviso to Sub-section (3) of Section 271 clearly provides that the provision as contained in Clause (a) or Clause (b) does not apply to cases referred to in Sub-Clause (a) of Clause (i) of Section 271(1).
This Sub-Clause reads as under : " Section 271(1)(iii). In the cases referred to in Clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income : Provided, that, if in a case falling under Clause (c), the amount of income (as determined by the Income-tax Officer on assessment) in respect of which the particulars have been concealed or inaccurate particulars have been furnished exceeds a sum of twenty-five thousand rupees, the Income-tax Officer shall not issue any direction for payment by way of penalty without the previous approval of the Inspecting Assistant Commissioner.
Explanation J. --Where in respect of any facts material to the computation of the total income of any person under this Act, - (A) such person fails to offer an explanation or offers an explanation which is found by the Income-tax Officer or the Appellate Assistant Commissioner or the Commissioner (Appeals) to be false, or (B) such person offers an explanation which he is not able to substantiate, then the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of Clause (c) of this Sub-section, be deemed to represent the income in respect of which particulars have been concealed : Provided that nothing contained in this Explanation shall apply to a case referred to in Clause (B) in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation is bona fide and all the facts relating to the same and material to the computation of his total income have been disclosed by him." 9. A reading of the above indicates that the penalty has to be related to a sum not exceeding 1 per cent, of the total income computed under this Act without giving effect to the provisions of Sub-sections 11 and 10. The term "the amount of tax sought to be evaded" has to be necessarily Worked out in relation to the provision contained in Section 271(1)(i), i.e., 1 per cent, of the total income without giving effect to the provisions of Sections 11 and 12.
11. The learned Appellate Assistant Commissioner has wrongly interpreted the proviso to Sub-section (3) of Section 271 and had come to the conclusion that there being no tax evaded, relating penalty to such zero tax would be equal to zero penalty. On this issue, we are, therefore, of the view that penalty is imposable as per the provisions contained in Section 271(1)(i).
12. As regards the factual aspect of reasonable cause, the matter not having been decided by the Appellate Assistant Commissioner, we are remanding the issue to his files for considering the same and dispose of it in accordance with law.
14. I have had the benefit of going through the detailed order prepared by my learned brother, Shri A. Kalyanasundaram. However I regret my inability to agree with the conclusion arrived at by him. According to the learned Accountant Member, penalty for default under Section 271(1)(a) of the Income-tax Act, 1961, was imposable and observing thus, he referred the matter back to the file of the learned Appellate Assistant Commissioner for deciding the factual aspect as to whether the assessee had a reasonable cause for not filing the return in time.
As, according to him, this aspect was not gone into by the learned first appellate authority, I am unable to agree on both the points. No doubt the facts in detail have been narrated by the learned Accountant Member, in para 2 of his draft order, but just to recapitulate the same, I may mention here in brief, i.e., the status of the assessee in this case is mentioned in the assessment order as "association of persons" and the accounting period is the year ending March 30, 1980.
Return was originally filed on May 26, 1981, subject to audit, showing income at nil. Revised return was subsequently filed showing the deficit at Rs. 5,82,480. Exemption under Section 11 of the Act was also claimed. The assessment order framed on November 30, 1982, was on nil income as there was said to be full application of income. In the said assessment order, it is also seen to have been observed that penalty notice under Section 271(1)(a) of the Act had been issued for late filing of the return.
15. Subsequently, penalty notice was issued by the learned Income-tax Officer and, in response thereto, a written reply was filed. Return in this case was required to be filed on or before June 30, 1980, whereas the same was filed only on May 26, 1981. A revised return was also filed on November 23, 1982. According to the learned Income-tax Officer, the return was late by 29 months ; however, taking into consideration the status of the assessee, the delay was counted at 10 months, i.e., up to the date of filing of the provisional return, i.e., May 26, 1981. Penalty of Rs. 35,180 was thus imposed with the following observation : " Another opportunity was given to the assessee, vide this office letter No. ITO/T.C./84-85/dt. February 4, 1985, fixing the case for hearing on 26-2-1985. On this date none attended. Again an opportunity letter was issued to the assessee on March 4, 1985, fixing the case for hearing on March 12, 1985. In response to this, the assessee filed a written reply which is placed on the record.
After considering the explanation given by the assessee in his letter dated March 11, 1985, I find that no solid reason for not filing the Form No. 6 is given and as such it is presumed that the assessee has committed the said default without any cogent reason.
Keeping in view the above facts and circumstances, I hold the assessee in default under Section 271(1)(a) and impose a penalty of Rs. 35,180, i.e., at 1 per cent, per annum of the total receipts without giving benefit of Sections 11 and 12 of the Act." 16. The issue was contested by the assessee and the learned Appellate Assistant Commissioner mentioning that the learned Income-tax Officer was not justified in imposing the penalty and making mention of Section 271 of the Act, cancelled the penalty, observing that no penalty for late filing of the return could be imposed in such a case.
17. The issue was brought before us by the Revenue and the following ground has been raised : " On the facts and in the circumstances of the case, the learned Appellate Assistant Commissioner has erred in deleting the penalty under Section 271(1)(a) of the Act amounting to Rs. 35,180 which was imposed by the Income-tax Officer." 18. It is seen from para 3 of the penalty order that the learned Income-tax Officer imposed penalty observing that tie saw no solid reasons for not filing Form No. 6 and that the assessee committed the said "default" without any cogent reason. The para nearly gives the impression that the penalty was imposed for not showing good reasons for not filing Form No. 6 and perhaps not for delay in filing the return. This assumption is clear from the above paragraphs. Penalty under Section 271(1)(a) is contemplated for late filing of the return and not for late filing of Form No. 6. The penalty order, therefore, requires to be quashed on this ground itself. The learned Income-tax Officer imposed the penalty keeping in view the provisions of Section 271(1)(a)(i)(a) of the Act on the ground that income was required to be computed without giving effect to the provisions of Sections 11 and 12 of the Act for the period during which the default continued. This approach is confirmed by the learned Accountant Member. As mentioned earlier, in the present case the income assessed being " nil", the tax was also nil.
19. Sub-section (3) of the Act starts with "Notwithstanding anything contained in this Section. Thus, whatever is discussed in Section 271(1)(i)(a) of the Act is subject to what is contained in Sub-section (2) of that Section. Under Clause (d) of Sub-section (3) of the Section, the penalty imposed under Clause (i) of Sub-section (1) could not exceed in the aggregate twice the amount of tax sought to be evaded. As mentioned earlier in the present case, the tax sought to be evaded is nil and thus twice of that nil amount will again be nil only and penalty was not required to be imposed on account of this provision also. For such conclusion, support is available from the ratio of the decision in the case of Builders Engineers Co. [1989] 175 ITR 317, wherein it has been observed by their Lordships of the Hon' ble Rajasthan High Court that no penalty could be levied where the assessed tax is zero. This very same view was subsequently followed by the same Hon'ble High Court in the case of CIT v. Adu Ram reported at page 324 of the same volume. Thus, according to me, the penalty order is required to be cancelled both on account of the reason mentioned by the learned Income-tax Officer for imposing such penalty and also by keeping in view the provision of Sub-section (3)(a) of Section 271 of the Act. Since the facts did not admit of any further interpretation or conclusion, the setting aside of the issue to the learned Appellate Assistant Commissioner for going into the reasonable cause for delay would, in my view, serve no purpose, as the proceedings are seen to be misconceived which were rightly quashed by the learned Appellate Assistant Commissioner. The impugned order thus requires confirmation and I do the same.
20. Since difference has occurred between us, the matter is being placed before the Hon'ble President, Income-tax Apppllate Tribunal, for proceeding in accordance with law.
" Whether, on the facts and in the circumstances of the case, the penalty under Section 271(1)(c) of the Act is exigible?" 22. This appeal has come before me as a third Member to express my opinion on the question" Whether, on the facts and in the circumstances of the case, the penalty under Section 271(1)(a) of the Act is exigible ?" This difference of opinion is forwarded to me by my learned brothers who have heard the appeal originally.
23. The relevant facts are : the assessee, a trust, whose income was exempt under Sections 11 and 12 of the Income-tax Act, had to file its return of income by June 30, 1980. It filed on May 26, 1981, a provisional return subject to audit. Subsequently, this return was revised on November 23, 1982, disclosing excess of expenditure over income of Rs. 5,82,408. The Income-tax Officer, treating the second return as the original return filed, called upon the assessee to explain as to why there was a delay in the furnishing of the return by 29 months and why a penalty should not be imposed for the late submission of the return under Section 271 of the Income-tax Act. In response thereto, the assessee submitted that it applied for and obtained the approval under Section 35CCA of the Income-tax Act on October 18, 1979, and this permission was to expire by March 31, 1982, and that this required the assessee to prepare two separate returns, one up to October 11, 1979, and the other from October 12, 1979, to March 31, 1980, and this exercise of separation of accounts for the two periods had consumed a lot of time and the accounts were ready only in February, 1982, and, thereafter, the accounts were to be got audited.
All this has delayed the process of filing the return of income.
Although a provisional return was filed in order to save the time for the purpose of Section 271, yet a revised return had to be filed on November 23, 1982, after completing the above exercise and formalities and, in these circumstances, the provisional return filed, though subject to audit, should be taken as the return filed and the short delay should have been condoned. Failing that, the delay in filing of the revised return should be taken as occasioned by a reasonable cause.
This explanation did not satisfy the Income-tax Officer as the assessee had failed to file Form No. 6 explaining the reasons for the delay. The Income tax Officer, therefore, levied a penalty of Rs. 35,180 under Section 271(1)(a) of the Income-tax Act computed at the rate of 1 per cent, per annum of the total receipts without giving the benefit of Sections 11 and 12 of the Income-tax Act.
24. Dissatisfied with the imposition of this penalty, the assessee appealed to the Appellate Assistant Commissioner. It was pointed out before him that, under Section 271(3)(d), the penalty imposed under Section 271(1)(i) should not exceed in the aggregate twice the amount sought to be evaded and since the assessee was not liable to pay any tax for the assessment year under appeal, no tax was sought to be evaded and consequently no penalty should be levied. The Appellate Assistant Commissioner agreed with this submission and cancelled the penalty in toto, aggrieved by which the department has filed the second appeal before the Tribunal contending that the view taken by the Appellate Assistant Commissioner was erroneous in law and should be reversed.
25. The learned Accountant Member who proposed the leading order in this case, after adverting to the facts and circumstances of the case and to the arguments addressed on behalf of the Department, came to the view that the Appellate Assistant Commissioner was not justified in cancelling the penalty in view of the provisions contained in Section 271(1)(i) and since the factual aspect of the reasonable cause was not gone into by the Appellate Assistant Commissioner, he remanded the appeal to the file of the Appellate Assistant Commissioner for considering the case on merits and then dispose of the appeal. The learned Judicial Member, however, was of a different view. Laying stress upon the provisions of Section 271(3)(d) of the Income-tax Act, he held that when the tax evaded was nil, there was no question of levying any penalty because the penalty in such an event would be contravening the provisions of that Section. He took support for this view from a decision of the Rajasthan High Court in the case of Builders Engineers Co. [1989] 175 ITR 317, where the Rajasthan High Court held that no penalty could be levied where the assessed tax was zero. Since the penalty was not leviable at all, he observed that the question of remitting the matter to the Appellate Assistant Commissioner for consideration on merits did not arise. He thus confirmed the order of the Appellate Assistant Commissioner and preferred to dismiss the departmental appeal. Thus, the difference of opinion arose.
26. I have heard the arguments addressed to me by the learned Departmental Representative, Shri Sandeep Tandon, and the arguments on behalf of the assessee of Shri J. H. Parekh, and perused the records.
27. This matter presented some difficulty to me in coming to a definite conclusion because of the unhappily worded Section 271(1)(i), under which the penalty is now imposed read with Section 271(3)(d) of the Income-tax Act. Section 271 provides for the imposition of penalty for failure to furnish returns without reasonable cause. Section 271(1)(a) states that, if the Income-tax Officer is satisfied that any person has, without reasonable cause, failed to furnish the return of total income which he was required to furnish under Sub-section (i) of Section 139 or by notice given under Sub-section (2) of Section 139 or Section 148 or, has without reasonable cause, failed to furnish it within the time allowed and in the manner required by Sub-section (1) of Section 139, penalty can be imposed, which is to be computed in the manner provided in Clause (i) added to subSection (1) of Section 271.
Thus, a penalty under Section 271(1)(a) can be imposed either when a return was not furnished at all without reasonable cause or within the time allowed again without reasonable cause and in the manner required again without reasonable cause. In this case, since a return was filed and it was conceded that it was in the manner required by Sub-section (1) of Section 139, the only charge under which the penalty could be imposed and was imposed was that it was filed without the time allowed under the Act. Whether the assessee had a reasonable cause for the late submission of the return was not gone into either by the Appellate Assistant Commissioner or by the learned Member who had heard the appeal. I do not wish to go into that question and leave it open to the Bench to decide it when the matter goes before it for the disposal of this appeal in accordance with the opinion of the majority.
28. The difference of opinion is therefore, confined to the quantification of the penalty. While the learned Accountant Member says that the penalty should be computed in the manner provided in Section 271(1)(i)(a) of the Income-tax Act, the learned Judicial Member says that, in view of Sub-section (3) of Section 271, which is a non obstante Clause, the application of the provisions of Section 271(1)(i)(a) was totally eliminated from operation and was made inapplicable inasmuch as unless there is some tax sought to be evaded, no penalty is ever imposable as such a penalty is not possible to compute.
" 271. (1) If the Income-tax Officer or the Appellate Assistant Commissioner or the Commissioner (Appeals) in the course of any proceedings under this Act, is satisfied that any person .
(a) in the case of a person referred to in Sub-section (4A) of Section 139, where the total income in respect of which he is assessable as a representative assessee does not exceed the maximum amount which is not chargeable to income-tax, a sum not exceeding one per cent, of the total income computed under this Act without giving effect to the provisions of Sections 11 and 12, for each year or part thereof during which the default continued." 30. Under this Sub-Clause, if an assessee happens to be a person referred to in Sub-section (4A) of Section 139, and in case that assessee delays the filing of a return, he is not to totally escape from the levy of penalty on the ground that the income was exempt from tax but even that assessee is to pay a penalty computed in the manner provided in Sub-Clause (a), i.e., a sum not exceeding 1 per cent, of the total income computed under the Act without giving effect to the provisions of Sections 11 and 12 for each year or part thereof during which the default continued. When the Section provided for penalty of a sum not exceeding 1 per cent, of the total income computed under the Act, it ,only means that the 1 per cent, of the total income computed is only a ceiling of the quantum of penalty and the penalty can be even less than 1 per cent. also. As to what percentage of 1 per cent, of the total income should be levied as penalty is a matter of discretion for the Income-tax Officer to decide while levying the penalty and that discretion will be open to adjudication in an appropriate appellate forum. But, for that penalty to be levied, the assessee must be a person referred to in sub Section (4A) of Section 139 and, secondly, the total income in respect of which he is assessable as a representative assessee shall not exceed the maximum amount which is not chargeable to income-tax. It is this phrase that has presented some difficulty to me in understanding the meaning of it. The maximum amount which is not chargeable to income-tax in the case of a representative assessee is no different from the maximum amount which is not chargeable to income-tax in the case of any other assessee like an individual, or an association of persons, etc. A person in receipt of income derived from property held under trust or other legal obligation only for charitable or religious purposes is required to file the return of income under Section 139(4A) of the Income tax Act, if the total income in respect of which he is assessable as a representative assessee (the total income for that purpose to be computed under the Act without giving effect to the provisions of Sections 11 and 12) exceeds the maximum amount not chargeable to income-tax. That is to say that, in the case of a person in receipt of income derived from property held under trust or other legal obligation for charitable or religious purposes, he or it has nothing to do with the status determinable for the purpose of income-tax. Whether he is an individual or a firm or an association of persons, or a Hindu undivided family, or a company, if. that income is held under trust or other legal obligation wholly for charitable or religious purposes, that income will be exempt from tax if the conditions laid down in Sections 11 and 12 are satisfied. Once the income is exempt from tax under Sections 11 and 12, the question of status becomes immaterial. But since Sub-section (4A) of Section 139 indicated that the total income for this purpose is to be computed under the Act without giving effect to the provisions of Sections 11 and 12, it means that the status becomes relevant only for this purpose. If the total income of a person, depending upon its status, exceeds the maximum amount not chargeable to tax, then that person has to file the return of income notwithstanding the fact that the income was exempt from tax under Sections 11 and 12 of the Act. But, in Section 271(1)(i){a), the expression used is "where the total income in respect of which he is assessable as a representative assessee does not exceed the maximum amount which is not chargeable to income-tax". What exactly is sought to be conveyed by this expression particularly by the insertion of the word " not " before the word " exceed " is not very clear. If the expression "does not exceed the maximum amount which is not chargeable to income-tax" is taken to mean as the total income below the maximum amount not chargeable to income-tax, i.e., below taxable limit only then a penalty at the rate not exceeding 1 per cent, of the total income computed under the Act without giving effect to the provisions of Sections 11 and 12 can be levied. But, if the total income exceeds the maximum amount not chargeable to income-tax, then Clause (b) will take over and, under that Clause, the penalty leviable is in addition to the amount of the tax, if any, a sum equal to 2 per cent, of the assessed tax for every month during which the default continued. Thus, if a penalty is to be imposed in cases where incomes exceed the maximum amount'not chargeable to income-tax, i.e., taxable limit of income, the penalty leviable is apparently under sub Clause (b) and that is 2 per cent, of the assessed tax. If we apply Sub-Clause (b), the direction " without giving effect to the provisions of Sections 11 and 12 for each year or part thereof during which the default continued " which is present in Sub-Clause (a) is absent in Sub-Clause (b). This means that, where the income of a person referred to in Sub-section (4A) of Section 139 exceeds the maximum amount not chargeable to income-tax, no penalty is ever leviable for, in such a case, in the absence of a direction to take away the effect of the provisions of Sections 11 and 12, the entire income would earn exemption and consequently there would be no assessed tax, and since there is no assessed tax, the question of computing the penalty at 2 per cent, of the assessed tax does not arise as it is not possible to compute it. But, is this the intention of the Legislature that a penalty is leviable only if the income of the trust in question is below the maximum amount not chargeable to income-tax and no penalty is leviable on such trusts if their income is above that limit? This cannot be. Therefore, the words "where the total income in respect of which he is assessable as a representative assessee does not exceed the maximum amount which is not chargeable to income-tax" have to be interpreted in a manner so as to advance the object and purpose of the legislative intent rather than to defeat it. Compelling the filing of returns even by those trusts, even though their income is exempt from tax is the intention of the Legislature as embodied in Section 139(4A) of the Act and such compulsion under Section 139(4A) does not become really effective unless it is supported by a penal provision for levy of penalty in case of failure to comply with those provisions. But the expression used earlier does not effectively convey the meaning. It is now settled law that courts should interpret the provisions of a statute in such a way as not to render any part of the statute redundant, unworkable and an interpretation which would lead to anomaly should be avoided. (S. Shahzada Nand and Sons v. CBR [1962] 45 ITR 233 ; AIR 1962 Punj 74 [KB] and Ghanshyamdas v. Regional Asst. CST [1964] 51 ITR 557 ; AIR 1964 SC 766) ; also CIT v. Elphinstone Spinning and Weaving Mills Co. Ltd. [1960] 40 ITR 142 (SC) and CIT v. Prayaglal Agarwala and Co. [1986] 162 ITR 570 (Patna) [FB]. Therefore, the expression "does not exceed the maximum amount which is not chargeable to income tax" must mean nil amount of income also. If the income of a trust is nil, by reason of the exemption granted under Sections 11 and 12, none the less, for failure to comply with the provisions of Section 139(4A), penalty is leviable under Section 271{l)(i) of the Act computed at a sum not exceeding 1 per cent, of the total income which is to be computed under the Act withdrawing the benefit of exemptions provided in Sections 11 and 12. If this is so, penalty is definitely imposa-ble even in the case of a trust in case there is failure to file the return of income within the meaning of Section 139{4A) without reasonable cause. Once it is held that penalty is leviable, then it is to be seen as to what will be the effect of the non obstante Clause enacted in Sub-section (3) of Section 271. This Sub-section reads as follows : (a) no penalty for failure to furnish the return of his total income under Sub-section (1) of Section 139 shall be imposed under sub Section (1) on an assessee whose total income does not exceed the maximum amount not chargeable to tax in his case by one thousand five hundred rupees; (b) where a person has failed to comply with a notice under Sub-section (2) of Section 139 or Section 148 and proves that he has no income liable to tax, the penalty imposable under Sub-section (1) shall not exceed twenty-five rupees ; (c) no penalty shall be imposed under Sub-section (1) upon any person assessable under Clause (i) of Sub-section (1) of Section 160, read with Section 161, as the agent of a non-resident for failure to furnish the return under Sub-section (1) of Section 139 ; (d) the penalty imposed under Clause (i) of Sub-section (1) and the penalty imposed under Clause (iii) of that Sub-section, read with Explanation 3 thereto, shall not exceed in the aggregate twice the amount of the tax sought to be evaded : Provided that nothing contained in Clause (a) or Clause (b) shall apply to a case inferred to in Sub-Clause (a) of Clause (i) of Sub-section (1) ".
31. Clause (d) was new and was inserted by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976. By Clause (d), a ceiling was imposed on the quantum of penalty leviable under Clauses (i) and (iii) of Sub-section (1). Clause (i) relates to the penalty imposable for the delay in the filing of the return without reasonable cause in the case of charitable and religious trusts as well as other assessees and also for penalty imposable for concealment of income or for furnishing of inaccurate particulars of income. The ceiling is that the penalty imposed under those two Sections shall not exceed in the aggregate twice the amount of tax sought to be evaded. Normally, the expression "the tax sought to be evaded", in income-tax parlance, is related to or attributable to the tax payable on income concealed or the tax payable on income that escapes assessment without furnishing the return of income. But, when a return of income is filed beyond time without reasonable cause, there is no tax sought to be evaded but only the tax the payment of which is sought to be postponed. But Clause (d) uses the phrase " the tax sought to be evaded " both to penalty leviable for the delay in the filing of the return as well as for concealment of income. In either case, first the tax sought to be postponed by the delay in the filing of the return and the tax sought to be evaded in the case of concealment of income is to be ascertained.
The amount of penalty to be so imposed on both the counts, if it exceeds twice the amount of the tax sought to be postponed and the tax sought to be evaded the imposition of such excess penalty shall become unauthorised. In the case of an assessee where the tax payable on assessment is nil, then there is no tax either sought to be postponed and much less sought to be evaded. In such a case, the penalty imposable with reference to the ceiling imposed by Clause (d) must also be nil. Therefore, in a case where a default is' committed in the filing of the return by a trust, whose total income earns complete exemption from the levy of tax even though a penalty not exceeding one per cent, of the total income computed under the Act, without giving effect to the provisions of Sections 11 and 12, can be imposed, but if Clause (d) is applied, that penalty cannot exceed twice the amount of tax sought to be postponed or evaded. Thus the penalty imposable under Clause (i) of Sub-section (1) is subject to the limit of the ceiling provided in Clause (d) introduced by the non obstante Clause (3) of Section 271.
32. It is now a well-settled rule of interpretation that, whenever a non obstante Clause is used by the Legislature, everything else is excluded except the provisions contained in the non obstante Clause.
Thus, the non obstante Clause will exclude the operation and applicability of every other provision in the Act or the Section, as the case may be, other than those that are provided for in the non obstante Clause because the purpose of a non obstante Clause is to exclude the operation of the other provisions of the Section. The non obstante Clause is always to be understood as operating to set aside as no longer valid anything contained in the provisions of the Section which are inconsistent with the provisions made in the non obstante Clause. In other words, anything inconsistent with what is provided for in the non obstante Clause shall have to give in and give way to the provisions contained in the non obstante Clause. This being the well-settled and well-understood meaning as well as purpose of a non obstante Clause, then, what is provided for in Sub-section (3) becomes relevant in so far as the determination of the quantum of penalty leviable under Section 271(1)(i)(a) and also Section 271(1)(iii) is concerned. It will also be very pertinent to note that this Clause added a provision stating that nothing contained in Clause (a) or Clause (b) of Sub-section (3) shall apply to a case referred to in Sub-Clause (a) of Clause (i) of subSection (1). This means that the limits provided for in Sub-Clause (a) or Clause (b) of Sub-section (3) shall not apply to the imposition of penalties in the case of trusts for failure to file returns of income but, advisedly, this proviso was made applicable only to the situations provided for in Clause (a) and Clause (b) of Sub-section (3) and not to situations stated in Clause (c) and Clause (d) of the Sub-section. Since we are now concerned with Clause (c) which imposes a ceiling on the penalties imposable under Clause (i) of Sub-section (1) and the penalties imposable under Clause (iii) of Sub-section (1), the application of the non obstante cfause is saved in so far as the situations provided for in Clause (d) are concerned. According to me, Clause (d) of Sub-section (3) therefore prevails over every other provision of Section 271, with the consequence that a penalty imposed under Clause (i) of Sub-section (1) is subject to the ceiling provided in Clause (d) and consequently, if there is no tax sought to be postponed or evaded, the question of levy of penalty cannot arise. It is also pertinent to note that Clause (d) will come into operation only after penalty is imposed either under Clause (i) or Clause (iii) of Sub-section (1) and not before. If, after the imposition of penalty, it turns out to be in conflict with the ceiling provided in Clause (d), then that penalty cannot be said to be a legally imposed penalty.
33. Now, the question is whether a penalty could be imposed under Clause (d) for a situation like the one before me where there is only a delay in the filing of the return but not non-filing of the return. A careful reading of Clause (d) would show that the ceiling of the amount of penalty provided for in Clause (d) applies to the penalty imposed under Clause (i) of Sub-section (1) and the penalty imposed under Clause (iii) of that subSection read with Explanation 3 thereto. Under Explanation 3, if a person who has not previously been assessed fails without reasonable cause to furnish within the period specified in Section 153, the return of income showing taxable income, then such a person shall be deemed to have concealed the particulars of his income in respect of such assessment year notwithstanding that such person furnishes a return of his income at any time after the expiry of the period aforesaid in pursuance of a notice issued under Section 148.
Since non-furnishing of a return has been treated as, and equated to amounting to concealment of income, a penalty could be levied as if it is concealment of income under Clause (c) of Section 271(1) for concealment of income. Thus, two penalties can be imposed for the same offence of concealment of income when no return is filed. Since this is likely to create a hardship and prove very harsh, it is to mitigate the hardship that Clause (d) was introduced providing for a ceiling that the penalties to be imposed under those two situations cannot exceed the tax sought to be evaded. The expression "sought to be evaded" will, therefore, apply to both the situations, namely, where no return is filed which can be treated as concealment of income in which case also there is tax sought to be evaded and also to the situation where there is really concealment of income even if a return is filed, when also there is tax sought to be evaded. That was the reason why the expression "aggregate" was used so that the penalties imposable for those two situations can be aggregated to find out whether they exceed twice the amount of tax sought to be evaded. The Departmental Representative is, therefore, right in contending that Clause (d) would become applicable only when these two kinds of penalties are liable to be imposed and not only in one of them. This contention appears to be correct because the use of the word "and" in Clause (d) amply bears out this contention and joins these two situations like a conjunction and will not disjoint them to provide for different situations. If the view expressed by the learned Judicial Member is adopted, it would virtually amount to reading the word "and" as "or", which is not permissible and which also appears against the legislative intent. If a penalty is imposable for the delay in the filing of the return even by a charitable or religious trust and the mode of computation of penalty is also prescribed, such a levy of penalty cannot be nullified by interpreting Clause (d) in such a manner as to take away the effect of those two Sections, i.e., Section 139(4A) and Section 271(1)(i). I am, therefore, of the opinion that the view expressed by the learned Judicial Member is not the correct expression of the view of the Legislature. In this view of mine, I am fortified by the two decisions of the Tribunal reported in [1990] 33 ITD 465 (Delhi) (Aggarwal Dharmarth Hospital Society (Regd.) v. ITO) and [1990] 35 ITD 514 (Delhi) (Dr. Yudhvir Singh Homeopathic Charitable Trust).
34. I, therefore, agree with the view expressed by the learned Accountant Member and hold that since a penalty is leviable for late submission of the return and since the authorities below have not gone into the merits of the case, the matter may have to be remitted to the authorities below for finding out whether there is any reasonable cause.
35. The matter will now go before the regular Bench for a decision according to the majority opinion.