MUKTADAR J. - The Income Tax Officer, J-Ward, Hyderabad, has preferred this appeal against the order dated April 8, 1975, passed by our learned brother, Gangadhara Rao J., allowing the Writ Petition No. 1464/73 filed by the respondent.

The facts relevant for purposes of this appeal are these The respondent was a firm originally constituted in 1961. It was registered under the Income Tax Act, hereinafter referred to as "the Act". On March 31, 1966, one of the partners by name G.S. Naidu retired and a new partner, A.S.Nandagopal, was brought into the partnership. For the assessment year 1968-69, the return was filed on January 20, 1971. The respondent-firm paid a sum of Rs. 4,720 on February 11, 1971, on self-assessment basis u/s 140A of the Income Tax Act, 1961. The assessment was completed on May 20, 1971, and the Income Tax Officer levied besides the tax a sum of Rs. 1,056 as interest u/s 217 of the Act for failure to voluntarily file the provisional estimate. The Income Tax Officer also levied an interest of Rs. 7,750 u/s 139(1)(iii) of the Act for belated submission of the return of the income. The petitioner having exhausted all the remedies under the Act eventually filed the writ petition. Before Gangadhara Rao J., three contentions were advanced by the respondent which are as follows :

"1. That the firm was assessed to Income Tax for the assessment year 1967-68; as such, there was no obligation on the part of the firm to file a voluntary estimate of its income for the assessment year 1968-69, without a notice in writing calling upon the firm to file the provisional estimate. As such, the Income Tax Officer was incorrect in levying a fine of Rs. 1,056 for not filing the voluntary estimate.

2. That the Income Tax Officer erred in levying an interest of Rs. 7,750 u/s 139(1)(iii) of the Income Tax Act although no extension of time was prayed for and granted as envisaged in section 139(1)(a) and (b) of the Act.

3. That the respondent-assessee had paid a sum of Rs. 4,720 on 11-2-1971 as tax and, therefore, in levying the interest the amount of tax already paid ought to have been deducted from the tax which was levied by the Income Tax Officer and on that amount interest ought to have been levied."

These three contentions found favour with our learned brother. So far as the first contention is concerned the learned judge was of the opinion that the assessee-firm was already assessed for the assessment year 1967-68. If during the relevant period one of the partners retired and a new partner was introduced in the firm, it did not amount to a new entity, but only change in the constitution of the firm and, therefore, the assessee-firm need not file a voluntary provisional estimate for the assessment year 1968-69 without the receipt of notice. For this proposition the learned judge relied upon a judgment of a Full Bench of this court in Addition Commissioner of Income Tax v. Visakha Flour Mills [1977] 108 ITR 466 wherein it was held that the death of the partners in the middle of the accounting year would only amount to a change in the constitution of the firm within the meaning of section 187 of the Income Tax Act and section 188 has no application. Relying upon this ruling the learned judge held that since there was only a change in the constitution of the partnership, the firm was not liable to file its provisional estimate without receipt of any notice from the Income Tax authority and, therefore, in these circumstances, since admittedly no notice was issued by the Income Tax authorities calling upon the assessee-firm for filing the provisional estimate, interest levied by the Income Tax Officer was incorrect.

So far as the second contention is concerned, the learned judge relying upon the ruling of a Bench decision of this court in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward came to the conclusion that having regard to the provisions of section 139(1)(iii), only when time was extended by the Income Tax Officer on an application put forward by the assessee for the filing of the return, then only could the Income Tax Officer levy penalty u/s 139(1)(iii).

So far as the third contention is concerned, the learned judge, relying upon a judgment of the Supreme Court in The Commissioner of Income Tax, West Bengal 1, Calcutta Vs. Vegetables Products Ltd., held that the Income Tax Officer was incorrect in levying an interest of Rs. 4,720 on the total tax assessed by him. The Income Tax Officer ought to have deducted the amount of tax already paid by the assessee and ought to have levied interest only on the balance.

In this appeal, Mr. Rama Rao, the learned advocate appearing for the revenue, contends that the induction of a partner on the retirement of the existing partner would amount to a change of the firm and coming into existence of a new firm, and, therefore, he submits that the learned judge was incorrect in holding that the induction of a partner was only a change in the constitution of the firm. We regret, we cannot accede to this contention because, to our mind, the retirement of a partner during the relevant assessment year and the introduction of a new partner only amounts to a change in the constitution of the the firm, and that is exactly what the Full Bench has decided in Additional Commissioner of Income Tax v. Visakha Flour Mills [1977] 108 ITR 466.

So far as the third contention is concerned, Mr. Rama Rao contends that the learned judge was incorrect in coming to the conclusion as he did on the basis of section 139(1)(iii) of the Act. What Mr. Rama Rao contends is that the respondent-assessee had not paid the tax along with the estimate which he had filed on January 20, 1971, and admittedly had paid the tax on the basis of his estimate much afterwards, i.e., on February 11, 1971. The interest levied by the Income Tax Officer was only up to the date which the estimate was filed and since the assessee had not paid the tax on the day when the estimate was filed by him, the Income Tax Officer was justified in levying interest on the whole amount of tax u/s 139(1)(iii)(b) of the Act. We are of the opinion that this contention has to be acceded to having regards to the provisions of section 139(1)(iii)(b) of Act. According to section 139(1)(a) or (b) the assessee has to furnish a return of his income generally before June 30 of the assessment year. The proviso to that section empowers the Income Tax Officer to extend the date for furnishing the return on an application filed by the assessee. According to proviso (iii), if the Income Tax Officer extends the date beyond the dates mentioned in provisos (i) and (ii), he is empowered to levy interest at 6% per annum from the October 1, or the January 1, as the case might be, of the assessment year to the date of the furnishing of the return. According to section 139(1), proviso (iii)(b), interest at 6% would be levied on the amount of tax payable on the total income, reduced by the advance tax, if any, paid or by any tax deducted at source, as the case might be. From a reading of section 139(1)(iii)(b), it becomes evident that if along with the estimate the assessee has paid the advance tax, then the Income Tax Officer could levy interest u/s 139(1)(iii)(b) after deducting the advance tax paid by the assessee at the time of the filing of the provisional estimate.

In the instant case, if the respondent had paid the tax along with the estimate which he filed, then in that case, the ruling relied upon both by the learned judge and by the respondent, namely, The Commissioner of Income Tax, West Bengal 1, Calcutta Vs. Vegetables Products Ltd., would have been made applicable. But, as pointed out earlier, no tax was paid by the respondent on the date when he filed the estimate, nor at any time earlier, but much later, on February 11, 1971. What the Income Tax Officer has done is that he levied interest only up to the date of filing of the estimate, and since no tax was paid by the respondent on that date, he was fully justified in levying interest as he did. Hence, with respect, the order of the learned judge to this extent is set aside.

So far as the second contention is concerned, Mr. Rama Rao contends that the learned judge was incorrect in relying upon the judgment of a Bench of this court in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward What Mr. Rama Rao contends is that, in the judgment of the Bench, section 139(4) was not taken into consideration and Obul Reddy J., as he then was in Progressive Engineering Co. Vs. Income Tax Officer, had taken sub-section (4) of section 139 into consideration and had held that even in a case where the assessee does not file an application for extension of time, even then interest could be levied by the Income Tax Officer. We have examined the provisions of section 139(1) and (4) in detail and have gone through the judgment of the Bench as well as the judgment of Obul Reddy J., and we are of the opinion that a point arises in this case which requires a decision by a Full Bench. We, therefore, formulate the following point for the decision of the Full Bench, which is in the following terms :

"Is interest not leviable u/s 139(1)(iii) where the assessee has committed delay in filing the return of his income without seeking extension of time to file the return from the concerned Income Tax Officer "

The papers may be placed before the Honble the Chief Justice for the formation of the Bench. The office will post the writ appeal for further orders after the decision of the Full Bench.

JUDGMENT OF THE FULL BENCH

B.J. DIVAN C.J. - This appeal has been referred to a Full Bench by a Division Bench consisting of one of us (Sambasiva Rao J.) and Muktadar J. The point which is referred to us for our decision is "Is interest not leviable u/s 139(1)(iii) where the assessee has committed delay in filing the return of his income without seeking extension of time to file the return from the concerned Income Tax Officer "

The question came to be referred because of a conflict of decision between a Division Bench and a single judge of this court. The first is the decision of the Division Bench consisting of Chinnappa Reddy and Madhava Reddy JJ. in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward The other is the decision of Obul Reddy J. (as he then was), sitting singly, in Progressive Engineering Co. Vs. Income Tax Officer, Several other High Courts also have taken a different view. As the Division Bench felt that the decision in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward required re-con-sideration by a larger Bench, this point has been referred to us.

The facts leading to this writ appeal are as follows : The respondent in this writ appeal is a firm registered under the Indian Income Tax Act. The assessment year under consideration is 1968-69. Under the law, the return for that particular assessment year should have been filed by the respondent-firm on or before September 30, 1968. The respondent-firm did not apply for extension of time and ultimately filed the return on January 20, 1971. The Income Tax required to be paid on self-assessment basis u/s 140A of the Income Tax Act was paid on February 11, 1971. The Income Tax Officer finalised the assessment on May 20, 1971, and, at the same time, he levied interest under the provisions of section 139. The penal interest amounted to Rs. 7,750. This interest was charged for belated submission of the return of the income. The respondent-firm, having exhausted all the remedies under the Act filed Writ Petition No. 1464 of 1973, out of which this writ appeal arises. The writ petition was heard in the first instance by our learned brother, Gangadhara Rao J., sitting singly, and one of the points which was urged before him was that the Income Tax Officer erred in levying interest in the sum of Rs. 7,750 u/s 139(1), proviso (iii), of the Income Tax Act although no extension of time was prayed for or granted. This argument about interest was accepted by Gangadhara Rao J. in view of the decision in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward Against that decision of Gangadhara Rao J., this writ appeal has been filed. When the matter came up before the Division Bench consisting of one of us (Sambasiva Rao J.) and Muktadar J., the other contentions arising in the writ appeal were dealt with by the Division Bench and the point, which we have set out hereinabove, was referred to a larger Bench.

In order to appreciate the controversy which has arisen on this point, it is necessary to refer to the provisions of section 139 as they stood at the relevant time, i.e., in connection with the assessment year 1968-69. Sub-section (1) of section 139 provides :

"Every person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year 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 particular as may be prescribed."

Clauses (a) and (b) of sub-section (1) of section 139 lay down the allowable periods for filing the return and, under clause (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 the Act, includes any income from business or profession, before the expiry of six 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 June 30, of the assessment year, which-ever is later; and, under clause (b), in the case of every other person, the return has to be filed before the June 30, of the assessment year Proviso to section 139(1), so far as is material for the purpose of this judgment read :

"Provided that, on an application made in the prescribed manner the Income Tax Officer may, in his discretion, extend the date for furnishing the return -

(i) in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired on or before the December 31, of the year immediately preceding the assessment year, and in the case of any person referred to is clause (b), up to a period not extending beyond the September 30, of the assessment year without charging any interest;

(ii) in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired after the December 31, of the year immediately preceding the assessment year, up to the December 31, of the assessment year without charging any interest; and

(iii) up to any period falling beyond the dates mentioned in clause (i) and (ii), in which case, interest at nine percent. per annum shall be payable from the October 1, or the January 1, as the case may be, of the assessment year to the date of the furnishing of the return -

(a) in the case of a registered firm or an unregistered firm which has been assessed under clause (b) of section 183, on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm; and

(b) in any other case, on the amount of tax payable on the total income, reduced by the advance tax, if any, paid or by any tax deducted at source, as the case may be."

Under sub-section (2), a provision is made for service of individual notice by the Income Tax Officer and that sub-section reads :

"...... the Income Tax Officer may, before the end of the relevant assessment year, serve a notice upon him (the assessee) requiring him to furnish, within thirty 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 manner and setting forth such other particulars as may be prescribed :

Provided that on an application made in the prescribed manner the Income Tax Officer may, in this discretion, extend the date for the furnishing of the return, and when the date for furnishing the return, whether fixed originally or on extension, falls beyond the September 30, or, as the case may be, the December 31, of the assessment year, the provisions of sub-clause (iii) of the proviso to sub-section (1) shall apply."

Under clause (a) of sub-section (4) of section 139, any person who has not 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 clause (iii) of the provision to sub-section (1) shall apply in every such case. Under clause (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 April 1, 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 April 1, 1968, three years from the end of the assessment year; and

(iii) where the return relates to a previous year relevant to any other assessment year, two year from the end on such assessment year.

Thus, the scheme of section 139 makes it clear that the return has to be filed without waiting for any individual notice before the June 30, or the September 30, as the case may be, under the provisions of clause (a) or (b) of sub-section (1) of section 139. However, a provision is made under clause (i) of the proviso to sub-section (1) of section 139 that, on an application made by the assessee in the prescribed manner, the Income Tax Officer may, in his discretion, extend the date for furnishing the return up to September 30 or December 31, as the case may be. If such date is extended on an application made by the assessee, no interest is to be charged up to the date of September 30, or December 31, as the case may be. The Income Tax Officer, on an application made in the prescribed manner, may also extend the date for furnishing the return beyond September 30, or December 31; but if the date, which is thus extended, falls beyond September 30, or December 31, as the case may be, from October 1 or January 1, interest at 9% per annum has to be paid. Clauses (i) and (ii) of the proviso deal with cases where no interest is chargeable. The only benefit which an assessee gets is that, by virtue of the application made by him, he avoids the payment of penalty and gets the convenience of extensions of time without payment of interest, but if the date, which is thus extended falls beyond september 30, or December 31, as the case may be, interest to be paid at 9% per annum from October 1 or January 1 of the assessment year in question up to the date of the furnishing of the return. Sub-section (2) of section 139 contemplates a situation wherein an individual notice is served by the Income Tax Officer on the assessee calling upon him to furnish the return within thirty days from the date of service of the notice. If, after service of the notice, the assessee asks for extension of time for furnishing the return the Income Tax Officer may, in his discretion, extend the date for furnishing the return. The proviso to sub-section (2) makes it clear that, when the date for furnishing the return, whether fixed originally or an on extension falls beyond the day of September 30, or the day of December 31, of the assessment year, as the case may be, the provisions of sub-clause (iii) of the proviso to sub-section (1) shall apply, i.e., interest at 9% per annum has to be paid from October 1, or January 1, as the case may be, up to the date of the filing of the return. Under sub-section (4)(a) of section 139, any person who has not 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, in such a case, the provisions of clause (iii) of the proviso to sub-section (1) shall apply to that case, i.e., it is open to the assessee to file the return which a period of four years, three years or two years, as the case may be, as provided in sub-section (4)(b) of section 139. But in every such case, from the day of October 1, or the day of January 1 of the assessment year under consideration, he has to pay interest at 9% per annum up to the date of the filing of the return. Sub-section (4), as it now stands, was substituted with effect from April 1, 1968, by the Finance Act, 1968. In the instant case, we are concerned with the above provisions of section 139 as they stood at the commencement of the assessment year 1968-69. It is clear from a perusal of section 139(4)(a) that the "time allowed" is to be distinguished from the "time extended". Time allowed is up to the date of September 30 or December 31, as the case may be, when the case falls under sub-section (1) and thirty days from the date of service of notice when the case falls under sub-section (2) but when the return is not furnished within the time allowed under sub-section (1) or sub-section (2), it is open to the assessee to furnish the return within two years or three years or four years, as the case may be, as provided in sub-section (4)(b) but he has to pay interest as provided in clause (iii) of the proviso to sub-section (1) from the day of October 1, or the day of December 31, of the assessment year under consideration up to the date of the filing of the return. Thus, it is clear that, by the use of the words "any person who has not furnished a return within the time allowed" occurring in clause (a) of sub-section (4), all persons, who did not file the returns within the time allowed, i.e., before September 30, or December 31, as the case may be, of the assessment year under consideration, have to pay interest in accordance with the scheme laid down in clause (iii) of the proviso to sub-section (1) irrespective of whether the return comes to be filed in the ordinary course under sub-section (1) or in pursuance of a notice under sub-section (2). The question of extension of time either on application or on extension of time, because extension of time is not sought by the assessee, is totally out of consideration in the light of the provisions of section 139(4)(a).

Before we proceed further, we may point out that the scheme of section 139(1) and the proviso has been recast by the legislature. The proviso to sub-section (1) of section 139 which was substituted with effect from April 1, 1971, by the Taxation Laws (Amendment) Act, 1970, merely provides that, on an application made in the prescribed manner, the Income Tax 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). The proviso to sub-section (2) has also been recast so as to refer to sub-section (8) and similarly clause (a) of sub-section (4) has also been recast so as to refer to sub-section (8) instead of clause (iii) of the proviso to sub-section (1). Clauses (i) to (iii) of the proviso to sub-section (1) were deleted with effect from April 1, 1971, and sub-section (8), which was substituted by the Taxation Laws (Amendment) Act, 1970, with effect from April 1, 1971, and subsequently amended by the Finance Act, 1972, with effect from April 1, 1972, reads :

"Where the return under sub-section (1) or sub-section (2) or sub-section (4) for an assessment year is furnished after the specified date, or is not furnished, then (whether or not the Income Tax Officer has extended the date for furnishing the return under sub-section (1) or sub-section (2), the assessee shall be liable to pay simple interest at twelve per cent. per annum, reckoned from the day immediately following the specified date to the date of the furnishing of the return or, where no return has been furnished, the date of completion of the assessment u/s 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source :

Provided that the Income Tax Officer, may, in such cases and under such circumstances as may be prescribed, reduced or waive the interest payable by any assessee under this sub-section."

Explanation 1 to sub-section 8(a) defines "specified date" as was being defined originally, to be June 30, of the assessment year or the date of 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, as the case may be."

Thus, it is clear that, after the amendment which came into effect from April 1, 1972, there is no scope for any controversy now of the type which has arisen between the different High Courts for assessment years prior to 1971-72. Not much light is thrown regarding the intention of the legislature in inserting new sub-section (8) in section 139 and the notes on clauses which was circulated along with the Bill, which ultimately was enacted as the Amendment Act, does not throw much light on the reasons why the legislature enacted this provision of sub-section (8).

In Kishanlal Haricharan Vs. Income Tax Officer, A-Ward the assessee failed to submit a return of his income in spite of notices issue to him u/s 139(2) and 142(1) of the Income Tax Act, 1961. The Income Tax Officer made a best judgment assessment u/s 144 levying, in addition to the tax, penal interest u/s 139(1)(b), proviso, clause (iii). On appeal, the Appellate Assistant Commissioner granted some slight relief to the assessee regarding the quantum of tax, but otherwise dismissed the appeal. Thereafter, the assessee preferred an application to the High Court for issue of a writ challenging the levy of penal interest. On these facts, after referring to the proviso to section 139(1), Chinnappa Reddy J., speaking for the Division Bench consisting of himself and Madhava Reddy J., observed (page 662) :

"A perusal of the proviso makes it clear that it is only when an assessee requests for time under the third clause, he can be directed to pay penal interest as provided in the clause. Where the assessee does not request for time for submitting a return, the third clause has no application. Other consequences may follow. For example, the petitioner may subject himself to the penalty provided in section 271 of the Act. The petitioner may also subject himself to a best judgment assessment by the Income Tax Office. Those consequences may follow when the assessee fails to submit a return, but the consequences of paying penal interest does not follow. An assessee is liable to pay penal interest under the third clause of proviso to section 139(1)(b) only if he asks for extension of time under that clause."

With great respect to the learned judges, who constituted the Division Bench, we are unable to agree with their reasoning. As we have pointed out above, the provisions of section 139(4)(a) have also to borne in mid when considering the late filing of the return and in view of those provisions, as we have noticed above, it is not possible to agree with the Division Bench that penal interest under clause (iii) of the proviso to sub-section (1) of section 139 can be levied only if the assessee asks for extension of time from the Income Tax Officer.

We may point out that, inasmuch as, in that particular case, the assessee had not filed any return whatsoever and the assessment was made u/s 144 on the basis of best judgment assessment, no penal interest could be charged, because under the scheme of section 139(2) and (4), as it stood prior to April 1, 1971, interest could only be calculated from the date of October 1, or January 1, of the assessment year, as the case may be, up to the date filing of return and since no return at all was filed, as the law then stood, it was impossible to calculate interest because the date up to which interest could be charged was not mentioned in the Act at all. It is to fill up this lacuna that special provision has been made in section 139(8) as it now stands with effect from April 1, 1972. Though the final conclusion of the learned judges, who decided Kishanlal Haricharan Vs. Income Tax Officer, A-Ward can be justified, the reasoning which appealed to them cannot be sustained. In our opinion, therefore, the reasoning in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward must be held to be contrary to the scheme of the provisions of section 139 as it stood prior to April 1, 1971.

In Indian Telephone Industries Co-operative Society Ltd. Vs. Income Tax Officer, Special Survey Circle, Banglore and Another, a Division Bench of the Karnataka High Court consisting of Govinda Bhat J. (as he then was) and Jagannatha Shetty J. was dealing with the following facts : The assessee failed to submit returns for the assessment years 1963-64 to 1969-70 and notice under sections 139(2) was served on the assessee for the assessment year 1969-70 and a notice u/s 148 was served with regard to the other assessment years. The assessee filed the returns within the dates specified in the notices under sections 139(2) and 148. The Income Tax Officer levied interest under sections 139 and 217 and issued notice for penalty for late submission of returns and non-filing of estimates of advance tax. On these facts, the assessee filed writ petitions challenging the levy of interest and it was held dismissing the writ petitions, that the levy of interest was legal. The learned counsel for the assessee before the Karnataka High Court relied on the decision of this High Court in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward and contended that the liability to pay interest arose only if extension of time was sought for from the Kishanlal Haricharan Vs. Income Tax Officer, A-Ward Govinda Bhat J. (as he then was), speaking for the Division Bench, observed at page 569 of the report :

"In the said case, the assessee did not at any time furnish a return of his income. Section 139 as it stood before its amendment by the Taxation Laws (Amendment) Act, 1970, did not empower the levy of interest where the assessment is completed without the assessee furnishing a return of his income. Such an assessee may be subject to other liabilities under the Act but was not chargeable to interest. Therefore, the decision of the Andhra Pradesh High Court holding that no interest could be levied on the petitioner was right on the merits of the case. But, the observation made therein that sub-clause (iii) of the proviso to sub-section (1) of section 139 has no application where the assessee does not request for time for submitting his return is too wide a statement from which we respectfully dissent. If the provisions of the proviso to sub-section (2) and the provision of sub-section (4)(a) of section 139 are perused, it is clear that sub-clause (iii) of the proviso to sub-section (1) of section 139 applies not only where the assessee requests for extension of time for furnishing his return of income but also where the date fixed originally u/s 139(2) falls beyond the date specified in the proviso to sub-section (2) of section 139."

Thus, the Karnataka High Court, in terms differed from the reasoning of the Division Bench in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward

This point was dealt with by the Gauhati High Court in Ganesh Das Sreeram Vs. Income Tax Officer, "A" Ward and Others, In that case, the petitioner who had filed the writ petition before the High Court, was a registered firm and for the assessment year 1965-66, the return of income was furnished on April 11, 1966. The petitioner had not applied for extension of time. The learned counsel for the petitioner before the Gauhati High Court relied on the decision of this court in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward and urged the Division Bench of the Gauhati High Court consisting of Goswami C.J. and B. N. Sharma J., to take the same view as expressed in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward of the report, Goswami C.J., dealing with this contention, observed :

"With respect, we are unable to agree with the above decision which has taken no note of section 139(4) of the Act. For the reasons given by us and in view of the provisions of sub-section (4) of section 139, there is no escape from the conclusion that clause (iii) of the proviso is attracted to the case of the present assessee and the Income Tax Officer is fully justified in charging interest in the case."

Thus, like the Karnataka High Court, the Gauhati High Court also did not accept the reasoning of the Division Bench in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward

In Biswanath Ghosh Vs. Income Tax Officer, Ward B and Another, a Division Bench of the Orissa High Court consisting of Misra and Panda JJ. held that, where the return had not been filed within the time specified under sub-section (1) of section 139 of the Income Tax Act, 1961, but was filed late and no extension of time had been obtained, the provisions of sub-section (4)(a) of section 139 would be attracted and interest would become exigible. At page 373 of the report, Misra J., delivering the judgment of the Division Bench, has pointed out that the levy of interest was challenged on the ground that the assessee having not applied for extension of time as provided under sub-section (1) of section 139 of the Act, no interest was leviable. In support of this contention, reliance was placed on the decision of this court in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward Dealing with this point, at page 373, Misra J. observed :

"It is conceded that the assessee had never asked for extension of time for filing return in respect of any of these years. Sub-section (4)(a) of section 139 of the Income Tax Act makes provision in respect of cases where returns are filed beyond time even through extension has not been obtained. In respect of such returns the provision of clause (iii) of the proviso to sub-section (1) of that section has been made applicable. Under the third clause of the proviso interest is payable from the date of default till the date of furnishing of the return. On the admitted position that return had not been filed within the time specified sunder sub-section (1) of section 139, provisions of sub-section (4)(a) of section 139 would be attracted and interest becomes exigible. The Andhra Pradesh case referred to by the learned counsel for the petitioner has no application. That was not a case to which sub-section (4)(a) of section 139 of the Act applied. In fact no return had been filed at all and, therefore, the levy of interest was only under sub-section (1) of section 139."

Thus, like the Karnataka High Court and the Gauhati High Court, the Orissa High Court also differed from the view taken by the Division Bench of this court in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward

In Garg and Company Vs. Commissioner of Income Tax, a Division Bench of the Delhi High Court consisting of M.R.A. Ansari and P.N. Khanna JJ. dealt with the following facts : For the assessment year 1962-63, the assessee filed its return of income voluntarily u/s 139(4) of the Income Tax Act (prior to its amendment in 1968), in February, 1966, after a delay of 38 months. No application for extension of time was field and no extension had been granted by the Income Tax Officer. On these facts, the Division Bench, following the view taken in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward held that interest under clause (iii) of the proviso to section 139(1) could not be legally charged. It was held that the proviso to section 139(1) required an application to be made in the prescribed manner, which required to use of the prescribed form for getting the extension. At page 644 of the report, it has been pointed out that the Division Bench of the Delhi High Court was in agreement with the view of the Division Bench of this court in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward It appears that the attention of the learned judges of the Division Bench of the Delhi High Court was not draw n to the decision of the Karnataka High Court; but their attention was drawn to the decision of the Gauhati High Court in Ganesh Das Sreeram Vs. Income Tax Officer, "A" Ward and Others, and dealing with decision of the Gauhati High Court, Khanna J. observed :

"We must say with profound respect that we are unable to persuade ourselves to agree with this view."

Thus, the Delhi High Court has accepted the view taken by the learned judges of this High Court in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward

In Progressive Engineering Co. Vs. Income Tax Officer, Obul Reddi J. (as he then was) distinguished the decision of the Division Bench of this court in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward In that case, the facts were that the petitioner, who had filed the writ petitions, was a partnership firm. The firm did not file the returns for the assessment years 1968-69 and 1969-70 within the time allowed u/s 139(1) of the Act. The Income Tax Officer issued a notice u/s 148 stating that the income chargeable to tax has escaped assessment within the meaning of section 147 of the Act. The petitioner-firm was asked to submit returns for the said two years within 30 days from the dated of receipt of the notice. Thereupon, the petitioner-firm filed returns for both the assessment years on January 16, 1971. Penal interest for the two assessment years 1968-69 and 1669-70 was charged and it was in connection with these orders levying penal interest u/s 139(1), proviso, clause (iii), that the writ petitions were filed. The decision in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward was, in terms, relied upon and it was urged that since the assessee had not applied for extension of time for filing the returns u/s 139(1), no penal interest could be levied. Obul Reddi J. (as he then was) referred to the provisions of section 139(4) and observed at page 228 of the report :

"The case on hand is none where returns have been filed beyond the dates mentioned in clauses (i) and (ii) of the proviso to section 139(1) and therefore, sub-section (4) of section 139 is automatically attracted. The mere fact that the petitioner filed the returns pursuant to the notice issued to him u/s 148 threatening to assess him u/s 147 does not make any difference, for what has to be seen is whether he has filed the returns beyond the dates mentioned in clauses (i) and (ii) and not whether he applied for extension of time under clauses (i) and (ii) and failed to furnish the returns within the time allowed either under clause (i) or clause (ii) of the proviso. The Division Bench in the case cited above was not dealing with a case which falls under sub-section (4) of section 139. That was a case where no returns were at all filed even though the Income Tax Officer issued a notice to the petitioner therein u/s 139(2) calling upon him to submit a return before a particular date. Therefore, the case where returns where filed, pursuant to a notice issued by the Income Tax Officer u/s 148. There is nothing in the language of clause (ii) of the proviso to section 139(1) or in sub-section (4) of section 139 to indicate that where returns are filed beyond the time specified in clauses (i) and (ii) of the proviso pursuant to a notice issued by the Income Tax Officer, clause (iii) of the proviso is not applicable."

The learned judge held that the fact that no application was made by the petitioner for extension of time was not relevant at all in view of sub-section (4) of section 139 of the Act and that is how the learned judge distinguished the case before him from Kishanlal Haricharan Vs. Income Tax Officer, A-Ward

We are in agreement with the reasoning of Obul Reddi J. (as he then was) on the analysis of section 139(4) which we have set out hereinabove. Thus, the decision of Obul Reddi J. was on the same lines as the decisions of Karnataka, Orissa and Gauhati High Courts.

In Commissioner of Income Tax Vs. Bahri Bros. (P.) Ltd., a Division Bench of the Patna High Court consisting of S.N.P. Singh C.J. and S. K. Jha J. dealt with this point. In that case, the assessee was a limited company and for the assessment year 1964-65, the assessment was required to file the return u/s 139(1) of the Act by September 30, 1964; but no such return was filed. Subsequently notice u/s 139(2) was served on the assessee on August 22, 1964 asking it to file the return within 35 days from the date of the service of the notice. The assessee failed to file the return within the period of 35 days. It filed the return on March 11, 1966, and the question arose whether penal interest u/s 139(1), proviso, clause (iii), could be charged for late filing of the return. On those facts, following the decision of the Division Bench of this court in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward it was held that where the return was not filed within the time specified in the notice u/s 139(2) of the Income Tax Act 1961, as it stood before April 1, 1972, but was filed later and no extension of time had been applied for, the assessee was not liable to pay interest under clause (iii) of the proviso to section 139(1). The decision of the Gauhati High Court in Ganesh Das Sreeram Vs. Income Tax Officer, "A" Ward and Others, was distinguished and the decision of the Orissa High Court in Biswanath Ghosh Vs. Income Tax Officer, Ward B and Another, was referred to. At page 446 Commissioner of Income Tax Vs. Bahri Bros. (P.) Ltd., of the report, the learned judges of the Patna High Court referred to the enactment of sub-section 139 and the clue to the interpretation to be found in the Finance Act of 1972 and the corresponding charges made in sub-section (1), (2) of section 139. With great respect, for the reasons stated above we are unable to agree with conclusion of the learned judges of the Patna High Court. The subsequent legislative changes cannot help the court in determining the meaning of the law as it stood prior to the amendment.

In Chhotalal and Co. Vs. Income Tax Officer, Morvi and Others, a Division Bench of the Gujarat High Court, of which one of us (Divan C.J.) was a member, considered all the case law available up to that point. The Division Bench dissented from the view taken in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward and accepted the principle laid down by the Karnataka High Court in Indian Telephone Industries Co-operative Society Ltd. Vs. Income Tax Officer, Special Survey Circle, Banglore and Another, and by the Gauhati High Court in Ganesh Das Sreeram Vs. Income Tax Officer, "A" Ward and Others, The Division Bench, after referring to the decision in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward observed at page 236 of the report :

"With respect, it may be pointed out that there was no provision in section 144 similar to the provision of section 139(4) making the provisions of the third clause of the proviso to section 139(1) applicable when an order of best judgment assessment is made u/s 144. The be made judgment assessment can be made, inter alia, if any person fails to make the return required by any notice given to him under sub-section (2) of section 139 and has not made a return or a revised return under sub-section (4) or sub-section (5) of section 139. But there was no provision in section 144 as is to be found in section 139(4) stating that the provisions of clause (iii) of the proviso to sub-section (1) of section 139 is to apply to every such case falling within section 144(a) of the Act. Under these circumstances the final decision of the Andhra Pradesh High Court can be supported on the ground that there was no provision in law making clause (iii) of the proviso to sub-section (1) of section 139 applicable when best judgment assessment was made u/s 144. With respect, we are unable to agree with the conclusions of the learned judge of the Andhra Pradesh High Court that an assessee is liable to pay penal interest under the third clause of the proviso to section 139(1)(b) only if he asks for extension of time under that clause. On a plain reading of the third clause of the proviso, when it is to be read in the context of section 139(4), it does not necessarily follow that first an application for extension of time must have been made by the assessee before the penal interest can be charged." At page 238 of the report, the Division Bench further observed :

"In our opinion the only way of constructing section 139(4) is to hold that those provisions of clause (iii) of the proviso to sub-section (1) of section 139 which provide that interest at nine per cent. per annum shall be payable from the day of October 1, or form the day January 1, as the case may be, of the assessment year to the date of furnishing of the return apply whenever the return is not filed within the time allowed to the assessee under sub-section (1) or sub-section (2) but is filed before the assessment is made within the period of four years from the end of the assessment year under consideration."

It may be pointed out incidentally that, in the course of the arguments before us, Mr.Swamy for the respondent urged the same argument as we sought to be urged by Mr. Patel, the learned advocate for the assessee, before the Gujarat High Court in Chhotalal and Co. Vs. Income Tax Officer, Morvi and Others, The argument was that the proviso to sub-section (1) was in the light of this argument that the judgment of the Division Bench of this court in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward was sought to be supported by Mr.Swamy. It may be pointed out that the opening words of the proviso to section 139(1) "provided that on an application made in the prescribed manner, the Income Tax Officer may, in his discretion, extend the date for furnishing the return" do not apply when considering the provisions of section 139(4)(a) because it is obvious that it is only the provisions of clause (iii) of the proviso to sub-section (1) of section 139 which are made applicable in cases arising u/s 139(4)(a). Since clause (iii) of the proviso to sub-section (1) of section 139 stands by itself, viz., where the extension of time is granted up to any period falling beyond the dates mentioned in clauses (i) and (ii) of the proviso, interest at 9% per annum is to be paid from the day of October 1, or the day of January 1, as the case may be, of the assessment year to the date of the furnishing of the return. It is obvious that the words "any person who has not furnished a return within the time allowed to him under sub-section (1) or sub-section (2) "occurring in section 139(4)(a) contemplate all cases of late filing of the returns irrespective of whether any extension of time has been applied for and granted or not. The words "any person" at the commencement of section 139(4)(a) are not capable of any modification whatsoever and the argument of dissection of clause (iii) of the proviso to section 139(1) cannot be sustained.

A Division Bench of the Jammu and Kashmir High court in Mulakh Raj Bimal Kumar Vs. Income Tax Officer and Others, has taken the same view as the Delhi High Court in Garg and Company Vs. Commissioner of Income Tax, and this court in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward . It held that, u/s 139 of the Income Tax Act 1961, as it stood in the assessment year 1967-68, unless an application seeking extension of time for making a return was made and the date was extended by an order of the Income Tax Officer, no interest u/s 139 could be charged. From the report, it does not appear that the attention of the learned judges of the Jammu and Kashmir High Court was drawn to section 139(4); but sub-section (8) of section 139, as amended by the Finance Act, 1972, was considered by the Division Bench and it was observed at page 386 of the report :

"All this lends support to the view that the position obtaining in the relevant assessment year was that unless an application seeking extension in the date was made and the date was extended by an order of the Income Tax Officer no interest u/s 139 could be charged."

In National Hotel and Dilkusha Cabin Vs. Income Tax Officer, "A" Ward and Another, Sabyasachi Mukharji J., of the Calcutta High Court, sitting singly, has held that, prior to amendment of section 139 of the Income Tax Act, 1961, by the Finance Act, 1972, with effect from April, 1, 1972, interest under sub-section (8)(a) thereof could not be charged in the case of an assessee who had not filed the return prior to the assessment and to whom an extension of time has not been granted by the Income Tax Officer on an application made. The facts of the case before the learned judge of the Calcutta High Court were that no return whatsoever had been filed and the question of best judgment assessment arose before the Income Tax authorities. As we have observed above, prior to the insertion of sub-section (8) in section 139 the position as regards the non-filing of the return was that there was no dated up to which the interest could be calculated and in the absence of any provision in section 144 similar to section 139(4)(a), it was not open to the Income Tax Officer to levy interest under clause (iii) of the proviso to sub-section (1) of section 139. In this decision of the Calcutta High Court, the attention of the learned single judge does not appear to have been drawn to the decision of the Gujarat High Court in Chhotalal and Co. Vs. Income Tax Officer, Morvi and Others, and the decision of the Karnataka High Court in Indian Telephone Industries Co-operative Society Ltd. Vs. Income Tax Officer, Special Survey Circle, Banglore and Another, However, on the provisions of law, as it stood for the relevant assessment year, it was not open to the Income Tax Officer to levy interest on the facts of the case before the Calcutta High Court.

These are all the decisions which have been brought to our notice and with respect, we are unable to accept the reasoning of the learned judges of the Division Bench of this court in Kishanlal Haricharan Vs. Income Tax Officer, A-Ward and of the learned judges of the Delhi, Patna and Jammu and Kashmir High Courts under the different decisions referred to above. We are in agreement with the views expressed by the learned judges of the Karnataka, Gauhati, Orissa and Gujarat High Courts under the different decisions referred to above.

If the conclusion, which we have reached, is not adopted, an anomalous situation is likely to arise, inasmuch as a person, who co-operates with the department by applying for extension of time, is put on a worse footing than a person who does not apply for extension of time and who files the return at his own sweet will. That is an additional factor, apart from the analysis of section 139(1) together with proviso thereto and the provisions of section 139(4) which we have set out hereinabove. With great respect to the learned judges of the different High Courts who held to the contrary, the process of legislative interpretation, viz., in the light of what the legislature subsequently enacts by way of amendment, cannot help the court in deciding the effect of the clear provisions of law as they stood before the amendment.

In the light of the above discussion, we hold that interest is leviable under clause (iii) of the proviso to sub-section (1) of section 139 where the assessee has committed delay in filing the return of his income without seeking extension of time to file the return from the concerned Income Tax Officer.

The matter will now go back before the Division Bench for disposing of the writ appeal in the light of our answer to the point referred to us.

JUDGMENT OF DIVISION BENCH AFTER REMAND FROM FULL BENCH

By our order dated October 20, 1976, we had formulated the following point for consideration of the Full Bench :

"Is interest not leviable u/s 139(1)(iii) where the assessee has committed delay in filing the return of his income without seeking extension of time to file the return from the concerned Income Tax Officer "

The Full Bench, by its judgment dated July 20, 1977, has held that interest is leviable under clause (iii) of the proviso to sub-section (1) of section 139 where the assessee has committed delay in filing the return of his income without seeking extension of time to file the return from the concerned Income Tax Officer. In the light of this judgment of the Full Bench, we partly allow the appeal. Having regard to the circumstances of the case, there will be no order as to costs.