1. This order shall dispose of revenue's appeal and assessee's cross objection, both directed against the appellate order of the CIT(A) dated 17-11-87, confirming part penalty levied under Section 271(1)(a) of the Income-tax Act, 1961 (the Act).
2. The assessee, an individual, was required to file her return of income for A.Y. 1982-83 on or before 30-6-1992 but she filed the same on 29-10-1983. In answer to the notice issued by the ITO under Section 274 read with Section 271(1)(a) of the Act, the assessee replied that she had moved an application in Form No. 6 for extension of the date for furnishing return of income wherein she had stated that her shares of profit from the firms wherein she was a partner had not been received in time and, therefore, there was a sufficient cause for her to file the return late. The ITO rejected this explanation with the observations that the assessee had not produced copy of the application in Form No. 6. He further observed that the return had been filed late by 10 months even after filing the return of income in the case of firm of M/s Texbro Corporation, wherein the assessee was a partner. He, therefore, held that the assessee had committed a default punishable under Section 271(1 )(a) of the Act and accordingly levied a penalty of Rs. 13,410.
3. In appeal, the learned CIT(A) felt satisfied that the assessee had submitted application in form No. 6 to the ITO seeking extension up to 30th September, 1982 but the ITO had not replied to the said application. Relying upon the Gujarat High Court decision in the case of CIT v. Gordhanbhai Jethabhai [1983] 142 ITR 84, he condoned the delay up to 30th September, 1982. He further accepted assessee's contention that delay caused due to non-completion of firm's accounts constituted a reasonable cause to the assessee for not filing her return in time. In this behalf he relied upon the M.P. High Court decisions in the cases of CIT v. Dwarkadas Moolchand [1982] 134 ITR 392 and Kishandas Agarwal, 141 ITR (sic). However, he noted that the return of income in the case of firm of M/s Arcoy Services was filed on 3-8-1983 and that was the latest date that could be counted by the assessee towards sufficient and reasonable cause to her for filing the return late. Since the assessee had filed the return on 29-10-1983 there was a delay of 2 complete months viz. August and September 1983 for which the assessee had no valid reasons. The CIT(A), therefore, directed the ITO to levy penalty for 2 months only instead of 10 months' default as had been done by the ITO.4. In its appeal, the revenue is aggrieved against CIT(A)'s reducing the quantum of penalty on the ground that delay for 8 months had been explained by the assessee while the assessee is aggrieved against CIT(A)'s directing the ITO to levy penalty for 2 months. The case of the assessee in her cross-objection is that at the most penalty for only one month could be levied upon her in view of the well established position of law on the point. In this behalf she has, in her written submissions, relied upon the Madras High Court decision in the case of CIT v. Kadri Mills Coimbatore Ltd. [1977] 106 ITR 846, Calcutta High Court decision in the case of CIT v. Brijlal Lohia & Mahabir Prosad Khemka [1980] 124 ITR 486 and Karnataka High Court decision in the case of B.V. Aswathaiah & Bros. v. ITO [1985] 155 ITR 422.
5. We have heard the learned D.R. and have also considered the written submissions filed on behalf of the assessee. The learned D.R. has mainly argued that the assessee should have filed another extension application for seeking time to file the return if the accounts of the firms were not complete within the period of first extension. It was solely on this ground that the D.R. tried to make a point that non-completion of the accounts by the firms, wherein the assessee was a partner should not be considered as a reasonable cause for the assessee for filing the return late. We, however, fail to look at the things from that angle.
6. In the case of Madan Lamba v. CIT [1983] 139 ITR 849, the Delhi High Court had examined the question whether a partner of a firm could be said to be having a reasonable cause for not filing his return of income within the time prescribed because there was a delay in the firm's case. After examining a number of authorities on the point the Delhi High Court had held that a number of circumstances including the aspect that imposition of penalty in effect would amount to a double penalty were required to be considered in a given case. The High Court pointed out that impossibility of penalty on a partner should depend upon a consideration of the following circumstances, namely :- (a) whether he is a partner of a registered firm or unregistered firm; (b) whether he has income other than share income or not and, if so, the nature and extent of such income; (c) whether he is one of several partners to whom any contumacious conduct on the part of the firm could not be attributed or whether he is for all practical purposes the brain behind the firm or able to control its affairs and was responsible for its delays and defaults: (d) whether any penalty has been or can be imposed on the firm and if so the extent and nature thereof; and (e) whether the partner has any independent reason for the delay in the filing of the return apart from that urged in the case of the firm.
The CIT(A) appears to have examined the case of the assessee in the light of the above guidelines. Since the ITO had ignored the very extension application wherein the assessee had mentioned the relevant facts regarding the non-completion of the accounts of the firms wherein the assessee was a partner, he could not address himself to the various points mentioned above. In his turn the CIT(A) seems to have found nothing on the record of the case which can go to disentitle the assessee from getting the benefit of the above factors. Along with her written submissions, the assessee has produced the copies of Form No.6, form of acknowledgement of documents and statements of total incomes of M/s. Texbro Corporation, M/s Aar Insulation and M/s Arcoy Services along with the receipts issued by the ITO in token of his having received the returns of income of those firms. It is gathered that returns of income in the cases of M/s Texbro Corporation and M/s Aar Insulation were filed on 23rd December, 1982 whereas the return of income in the case of M/s Arcoy Services was filed on 3rd August, 1983.
There is nothing on record to show that the assessee was actively managing the affairs of those firms or that she was having incomes from other sources as well. Thus looking to the facts and circumstances of this case we feel inclined to take the view that the order of the CIT(A) condoning the delay up to 3rd August, 1983 when the return in the case of M/s Arcoy Services was filed, is quite reasonable. We thus find no good grounds to interfere with the order of the CIT(A) on this point.
7. We appreciate the anxiety of the D.R. that the assessee should have moved an extension application once the accounts of the firms could not be completed within the time prayed for by the assessee through her first extension application. But the conduct of the assessee in not moving a second extension application would not become contumacious or fraudulent so as to levy a penalty under Section 271(1)(a) of the Act when it has been found in this case that the latest accounts of the firms could be completed only on 3rd August, 1983. Once we subscribe to the view that in a given case, and the present one is such a case, non-completion of accounts and delay caused in filing the return of income in the case of the firm does make a reasonable and sufficient cause for the partner in such a firm to file his return late, the omission of the partner in moving a second extension application would not go to make his conduct contumacious or fraudulent so as to attract penalty under Section 271(1)(a) of the Act. This, to our mind, answers the argument advanced on behalf of the revenue. In the result, the appeal by revenue should fail.
8. Now coming to assessee's cross objection, the relevant facts have been mentioned above. Without dispute delay up to 3rd August, 1983 when the latest return in the case of M/s Arcoy Services had been filed stood satisfactorily explained. That means that the assessee had reasonable cause for not filing her return up to 3rd August, 1983.
Admittedly the return was filed on 29-10-1983. The question arises as to whether the period between 3rd August, 1983 and 29th October, 1983 should make default for "one month" or "two months".
9. It seems to us that the word "month" occurring in the language of Section 271(1)(a) of the Act has been construed differently by different High Courts. The Allahabad High Court, in the case of CIT v.Laxmi Rattan Cotton Mills Co. Ltd. [1974] 97 ITR 285 has taken the view that the word "month" occurring in Section 27 l(1)(a) must be taken to mean a period of "30 days". The basis for this view is that Section 27 l(1)(a) was enacted for the purpose of imposing a penalty on an assessee who has not filed his return within the prescribed time and its object was to serve as a deterrent for such lapses. In the opinion of the Allahabad High Court penalty is imposable for every month during which the default continues. In its view the Allahabad High Court does not adopt the meaning ascribed to the word "month" in Clause (35) of Section 3 of the General Clauses Act, 1897 which defines the said word "month" in the following terms :- In this Act and in all Central Acts and Regulations made after the commencement of this Act, unless there is anything repugnant in the subject or context... "month" shall mean a month reckoned according to British calendar.
According to the view of the Allahabad High Court, the definition as given in Section 3 of the General Clauses Act can be read into a statute provided there is nothing repugnant in the subject or context of the statute. The High Court found the definition of the word "month" given in the General Clauses Act as being repugnant to the purpose and object of the I.T. Act, 1961 inasmuch as that the word "month" is normally understood to mean "a lunar month", i.e., a period of 30 days.
The Court, therefore, following its full bench decision in the case of Misri Lal v. Jwala Prasad ILR 1 All. 761 held that the word "month" occurring in the language of Section 271(1)(a) should mean a period of 30 days.
10. On the other hand, the Madras High Court in the case of Kadri Mills Coimbatore Ltd. (supra) took the view that the word "month" occurring in Section 271 (1) (a) of the Act has to be reckoned according to the British Calendar as provided in Section 3(35) of the General Clauses Act, 1897. The basis of this view is that till 1850 the word "month" in a statute in England meant only "a lunar month" and after 1850 the word "month" meant "a calendar month", while the same word in a deed meant "a lunar month", till 1925 and only thereafter "a calendar month". The Madras High Court observed that it would not be correct to rely upon decisions construing the word "month" occurring in deeds for the purpose of construing the word "month" occurring in statutes. Referring to the full bench decision of the Calcutta High Court in the case of South British Fire and Marine Insurance Co v. Brojo Nath Shaha 36 ILR Cal. 516 which had also been relied upon by the Allahabad High Court in their decision referred to above, the Madras High Court observed that the distinction between "a lunar month" and "a calendar month" had been clearly pointed out by the Calcutta High Court. The Madras High Court further observed that even under the English Law, the lunar month meant only 28 days and not 30 days. Giving specific illustrations the Madras High Court pointed out that the word "month" occurring in the language of Section 27 l(1)(a) of the Act shall have to be assigned the meaning given to the said term by Section 3(35) of the General Clauses Act, 1897 and not that given to "a lunar month" as per English decisions.
11. The view expressed by the Madras High Court in the case of Kadri Mills Coimbatore Ltd. (supra) was followed by the Calcutta High Court in Brijlal Lohia's case (supra) and the Karnataka High Court in the case of B.V. Aswathiah & Bros. (supra). It may be mentioned that in all the three cases the view expressed by the Allahabad High Court in the case of Laxmi Rattan Cotton Mills Co. Ltd. (supra) was considered and was dissented from. With great respect to their Lordships of the Allahabad High Court we feel inclined to follow the view expressed by the Madras, Calcutta and Karnataka High Courts in the cases referred to above.
12. We are of the opinion that the word "month" occurring in Section 27l(1)(a) (as it stood at the relevant time) should be assigned the meaning of the word given in Section 3(35) of the General Clauses Act, 1897. The concept of lunar month, as pointed out by the Madras High Court, does not signify the duration of 30 days required to constitute a "month" which has been used in the language of Section 271(1)(a). If a month is necessarily required to be consisting of 30 days, then the month of February would not meet the said requirement. Similarly the months consisting of 31 days would not fall within the definition of the word "month" as interpreted by the Allahabad High Court. Therefore, as observed by the Madras High Court the test of escape or not escape from penalty, which seems to have found favour with the Allahabad High Court, cannot constitute a safe and sound basis for holding that there is something in the subject or context of Section 271 (1 )(a) of the I.T. Act, 1961 repugnant to the definition of the word "month" contained in Section 3(35) of the General Clauses Act, 1897 so as to exclude its application. We, therefore, hold that the word "month" used in Section 271 (1)(a) of the Act means a month reckoned according to the British calendar. The term certainly does not mean the duration of 30 days or the period covered by a lunar month.
13. In the instant case the CIT(A) himself seems to have been of the opinion that the word "month" is to be reckoned according to the British calendar. That is why he has considered the default of two months which according to him pertained to the months of August and September. Since the delay up to 3rd August, 1983 has to be condoned as having been reasonably and sufficiently explained, the month of August cannot be considered as the month of default. Similarly the month of October in which the assessee had filed its return on the 29th day, cannot be considered to be a complete month of default. That has also not been considered so by the CIT(A) himself. That leaves us with September 1983 as being the only month of default in this case. In that sense of the matter penalty is leviable only for one month in the instant case. The cross objection of the assessee thus needs to be accepted.
14. In the result the revenue's appeal is dismissed while assessee's cross objection is allowed.