TEAM CODE: CATHERINE

1ST AAZHI INTRA UNIVERSITY LAW FEST

BEFORE THE HON’BLE HIGH COURT OF JUDICATURE AT XYZ

In the Matter of

Deputy Commissioner of Income tax

Versus

M/s Shriprasad Pvt. Ltd.

UPON SUBMISSION TO THE HON'BLE CHIEF JUSTICES AND

COMPANION JUSTICES OF THE HON'BLE HIGH COURT OF XYZ

MEMORIAL ON BEHALF OF THE APPELLANT

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TABLE OF CONTENTS

LIST OF ABBREVATIONS………………………………………………………………………2
INDEX OF AUTHORITIES ............................................................................................................3
STATEMENT OF JURISDICTION.................................................................................................4
STATEMENT OF FACTS................................................................................................................5
ISSUES RAISED...............................................................................................................................6
SUMMARY OF ARGUMENTS.......................................................................................................6
ARGUMENTS ADVANCED............................................................................................................7
1. Whether on the facts and in the circumstances of the case, the
Tribunal was right in law in holding that the provisions of section
80AC of the Act are only directory in nature and not mandatory?”……………………...7
1.1 Analysis of Section 80AC………………………………………………………….8
1.2 Legislative Intent…………………………………………………………………...9
1.3 Can it be interpreted Equitably and Liberally………………………………………9
1.4 Are filing form 3CB/CD & 10CCB sufficient to ascertain
claim for deduction under Section 80AC ………………………………………….10
1.5 Is inability to pay self-assessment tax a valid ground to allow deduction…………11
1.6 Precedents Analysis………………………………………………………………...11

2. “Whether on the facts and in the circumstances of the case, the due date for
furnishing return of income as per section 139(1) is subject to the extended period
provided u/s 139(4)?”……………………………………………………………………..14

2.1 Comparative Analysis of Section 39(1) & Section 39(4) ………………………...14

2.2 Legislative Intent…………………………………………………………………. 16
2.3 Clear Language of Section 139(1) – Interpretation………………………………..16
2.4 Uncertainty & ambiguity…………………………………………………………..17
2.5 Precedent Analysis…………………………………………………………………18
PRAYER……………………………………………………………………………………………...20

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LIST OF ABBREVATIONS

AIR All India Reporter

IT Income Tax

SC Supreme Court

CIT Commissioner of Income Tax

Hon’ble Honourable

SCC Supreme Court Cases

Ors. Others

Supp Supplementary

UOI Union of India

Sec. Section

Trib Tribunal

ITR Income Tax Return

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INDEX OF AUTHORITIES

Statutes
Income Tax Act, 1961
Finance Act, 2015
Constitution of India

Cases referred:

1. Commnr. Of Customs (Import), Mumbai vs M/S. Dilip Kumar & Company 2018 (5) ABR 802
2. Saffire Garments v. ITO 20 ITR (Trib) 623
3. Checkmate Services (P.) Ltd. v. Commissioner of Income-tax, [2022] 143 taxmann.com 178 (SC)
4. Eagle Flask Industries Ltd. v. CCE, 2004 Supp. (4) SCR 35
5. Commissioner of Customs v. Dilip Kumar & Co. [2018] 9 SCC 1
6. M/s. Syndicate Bank Staff Co-operative Society Ltd., Vs. DCIT,No.1062/Bang/2022, A.Y 2018-19
7. CIT v. Ace Multi Axes Systems Ltd[2018] 2 SCC 158
8. CIT v. Kasturi & Sons Ltd., (1999) 3 SCC 346
9. CIT v. A.N. Arunachalam [1994] 208 ITR 481
10. CIT v.Jayant Patel, [2001] 248 ITR 199
11. Shiv Kumar Sushil Kumar Vs ACIT,74 ITR Trib 420
12. Bal Kishan Dhawan HUF v. ITO (2012) 18 Taxmann.com 234 (Asr.)
13. ACIT (OSD) v. M/s. Anoli Holding Pvt. Ltd. ITA No: 1042/AHD/2012 A.Y 2008-09
14. CIT Vs. Shelcon Properties (P.) Ltd., [2015] 370 ITR 305 (Cal)
15. Umesh Chandra Dalakoti v. Assistant Commissioner of Income Tax ITA No. 297/Del/2017
16. ACIT v. Shri V.N, Devadoss, 1219-1223/MDS/2012
17. Lakshmi Energy and Foods Ltd. v. ACIT, 250-2511 CHD/2003
18. Dwarkadas Panchmatiya v. ACIT, ITA No. 4727/Mum/2012
19. Saffire Garments v. Income-tax Officer, I.T.A. No. 397/ RJT/2009
20. Prem Nath Khanna vs Narinder Nath Kapoor (D) Thr. Lr. (2016), Civil Appeal No.2151 of 2016
21. Saffire Garments v. ITO, (2013) 151 TTJ (Rajkot) (SB)
22. IPCA Laboratory Ltd. vs. DCIT, 2004 (12) SCC 742
23. Commissioner of Customs v. Dilip Kumar & Co, 2018 (5) ABR 802

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24. M/s Vanshree Builders & Developers (P) Ltd v. CIT, ITA No. 878/Bang/2019
25. S.Rushi Sanskruti Vividoddeshagal vs The Dcit, Cpc, Bangalore, ITA No.1043/Bang/2022
26. Suolificio Linea Italia (India) (P.) Ltd. v. Joint Commissioner of IT, [2018] 93 taxmann.com 462
(Calcutta)
27. CIT Vs. Shelcon Properties (P.) Ltd., [2015] 370 ITR 305 (Cal)
28. Brij Mohan v. CIT, New Delhi 1980 SCR (1) 199
29. Saffire Garments v. ITO, (2013) 151 TTJ (Rajkot) (SB)
30. Prakash Nath Khanna vs. CIT 2004 (9) SCC 686

Articles, Books, Commentaries, Dictionaries & Journals

• Chaturvedi & Pithisaria's Income Tax Law
• Handbook On Income Tax (A.Y. 2024-2025) by Raj K Agrawal
• M.P.Jain, Indian Constitutional Law (Lexis Nexis, Gurgaon (Haryana), 8th edn..2018).
• Practical Approach to Income Tax (A.Y. 2024-25) by Girish Ahuja, Ravi Gupta

STATEMENT OF JURISDICTION

The Appellant has come before this court under Article 226 and Section 260A
of the Income Tax Act, 1961 read with Section 106 of the Code of Civil Procedure, 1908.
Section 260A reads:
(1)An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal ]
[before the date of establishment of the National Tax Tribunal] [ Inserted by Act 49 of 2005,
Section 30 and Schedule (w.e.f. 28.12.2005).][, if the High Court is satisfied that the case involves
a substantial question of law.] [Inserted by Act 21 of 1998, Section 58 (w.e.f. 1.10.1998).]
(2)[The Chief Commissioner or the Commissioner or an assessee aggrieved by any order passed
by the Appellate Tribunal may file an appeal to the High Court and such appeal under this
sub-section shall be-] [ Substituted by Act 27 of 1999, Section 87, for " An appeal under
this sub-Section shall be-" (w.e.f. 1.6.1999).](a)filed within one hundred and twenty days from the
date on which the order appealed against is [received by the assessee or the Chief Commissioner or
Commissioner] [ Substituted by Act 27 of 1999, Section 87, for " communicated to the appellant"
(w.e.f. 1.6.1999 [ Clause (b) omitted by Act 27 of 1999, Section 87 (w.e.f. 1.6.1999).](c)in the
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form of a memorandum of appeal precisely stating therein the substantial question of law involved.
(3)Where the High Court is satisfied that a substantial question of law is involved in any case,
it shall formulate that question……”

STATEMENT OF FACTS

• Shriprasad Private Limited filed its income tax return for 2015-16 on November 20, 2015,
claiming a deduction under section 80IA of the Income Tax Act.
• The tax department denied the deduction and assessed a higher income tax.
• Shriprasad appealed to the Commissioner of Income Tax (Appeals) (CIT(A)) arguing
that the audit reports (Form 10CCB and 3CB/CD) were filed well before the return deadline.
The delay in return filing was due to a shortage of funds for self-assessment tax.
• CIT(A) dismissed the appeal.
• Shriprasad appealed to the Income Tax Appellate Tribunal (ITAT) which allowed
the deduction, stating the audit reports were timely filed and the return delay was
justifiable. ITAT considered section 80AC to be directory, not mandatory.
• The Income Tax Department is appealing the ITAT decision to a higher court. They argue:
o ITAT's order is wrong on law and facts.
o Deduction under section 80IA should be claimed within the return filing
deadline as per section 139(1).
o Timely return filing is mandatory for claiming such deductions.
o ITAT wrongly considered section 80AC to be directory, not mandatory.

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STATEMENT OF ISSUES

THE FOLLOWING ISSUES ARE TO BE DECIDED:

1. “Whether on the facts and in the circumstances of the case, the Tribunal was right
in law in holding that the provisions of section 80AC of the Act are only directory
in nature and not mandatory?”

2. “Whether on the facts and in the circumstances of the case, the due date for
furnishing return of income as per section 139(1) is subject to the extended period
provided u/s 139(4)?”

SUMMARY OF ARGUMENTS

1. “Whether on the facts and in the circumstances of the case, the Tribunal was
right in law in holding that the provisions of section 80AC of the Act are only
directory in nature and not mandatory?”

It is humbly submitted before the Hon’ble High Court that as per the facts
and circumstances of the case, the Tribunal defaulted in holding that the provisions of section
80AC of the Act are only directory in nature and not mandatory as (i) the language of section
80AC is certain & unambiguous on its mandatory nature, (ii) tax provisions have to be construed
strictly, (iii) the filing of Form 3CB/CD & 10CCB is not sufficient to ascertain claim for deduction
under Section 80AC, (iv) Insufficiency of funds to pay self-assessment tax is not a sufficient &
justifiable ground.

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2. “Whether on the facts and in the circumstances of the case, the due date for
furnishing return of income as per section 139(1) is subject to the extended period
provided u/s 139(4)

It is humbly submitted before this Hon’ble High Court that based on consideration of the facts and
circumstances of the case, the Appellant submits that the due date for furnishing return of income
as per Section 139(1) is not subject to the extended period provided u/s 139(4) since (i) Section
139(4) provides relief for late filing but does not explicitly change the original due date established
under Section 139(1), (ii) Section 139(1) and section 139(4) of the Income Tax Act serve distinct
purposes and operate independently, (iii) A literal interpretation of both the provision reveals the
legislative intent of independent application of those provisions, (iv) Interpreting the due date
under section 139(1) to include the extended period provided under section 139(4) would create
uncertainty and ambiguity.

ARGUMENTS ADVANCED

1. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in
holding that the provisions of section 80AC of the Act are only directory in nature and not
mandatory?

It is humbly submitted before the Hon’ble High Court that as per the facts
and circumstances of the case, the Tribunal defaulted in holding that the provisions of section
80AC of the Act are only directory in nature and not mandatory as (i) the language of section
80AC is certain & unambiguous on its mandatory nature, (ii) tax provisions have to be construed
strictly, (iii) the filing of Form 3CB/CD & 10CCB is not sufficient to ascertain claim for deduction
under Section 80AC, (iv) Insufficiency of funds to pay self-assessment tax is not a sufficient &
justifiable ground.

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Section 80AC of the Income Tax Act, 1961, serves as a pivotal nexus bridging
tax deductions and timely filing of income tax returns. It underscores that to access specific
deductions, taxpayers must strictly adhere to the stipulated deadlines for filing returns. In the
present case, the issue is whether Section 80AC of the IT Act is directory or mandatory. The
Appellant argue that it is mandatory and thus in order to ascertain or prove the contention, grasping
the intricacies of this section is imperative.

1.1 Analysis of Section 80AC

Provisions of Section 80AC of the Act is to be squarely applied on the facts of the case
in hand, and Section 80AC reads as under:-
"80AC. Where in computing the total income of an assessee of the previous year relevant to
the assessment year commencing on the 1st day of April, 2006 or any subsequent assessment year,
any deduction is admissible under section 80IA or section 80-IAB or section 80-IB or section 80-
IC [or section 80-ID or section 80- IE],... "C.—Deductions in respect of certain incomes", no such
deduction shall be allowed to him unless he furnishes a return of his income for such assessment
year on or before the due date specified under subsection (1) of section 139].

A bare perusal of section 80AC of the Act conveys that the language used in the
provision is plain and simple and leaves no room for any doubt or ambiguity. Therefore, the
aforesaid provision has to be interpreted in the touchstone of the ratio laid down in the Constitution
Bench decision of the Hon'ble Supreme Court in case of Commnr. Of Customs (Import),
Mumbai vs M/S. Dilip Kumar And Co.1 The Hon'ble Supreme Court, after taking judicial note
of a catena of decisions of the Hon'ble Supreme Court as well as different High Courts on the issue
of interpretation of taxing statute held that when the words in a statute are clear, plain and
unambiguous and only one meaning can be inferred, the Courts are bound to give effect to the said
meaning irrespective of consequences. The words have to be expounded in their natural and
ordinary sense.

In the present case too, it is clear that the deduction cannot be allowed since Section

1
Commnr. Of Customs (Import), Mumbai vs M/S. Dilip Kumar And Company, 2018 (5) ABR 802

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80AC was not complied with and it cannot be interpreted equitably as there is no room for
differential interpretation as only one meaning can be inferred and the Courts are bound to give
effect to the said meaning irrespective of consequences.

1.2 Legislative Intent

The legislative intent should also be examined to ascertain beyond any doubt that
Section 80AC is mandatory. The ITAT Special Bench in Saffire Garments v. ITO 2 stated that “In
order to decide the issue, the whole scheme of the Act needs to be considered.” Clearly the
intention of legislation to propagate timely filing of returns is conveyed through inclusion of
conditions explicitly. With regard to Section 80AC it explicitly mentions filing of income returns
as a prerequisite for availing deduction under the provision. As held by the Dilip Kumar case
(supra) “ The words used in a provision declare the intention of the legislature. However, if the
plain language results in absurdity, the Court is entitled to determine the meaning of the word in
the context.” So, it is clear that Section 80AC is to be construed as mandatory as it has explicit
prerequisite conditions and is in consonance with the object of the act.

1.3 Can it be interpreted Equitably and Liberally?

Section 80AC cannot be interpreted equitably as there is no room for interpretation

since the section is clear and unambiguous. The Hon'ble Apex Court in the recent decision, settled
the law in case of an exemption/deduction clause in a tax statute in the case of Checkmate
Services (P.) Ltd. v. Commissioner of Income-tax3 in which it has been held as under “One of
the rules of interpretation of a tax statute is that if a deduction or exemption is available in
compliance with certain conditions, the conditions are to be strictly complied with. This rule is
in line with the general principle that taxing statutes are to be construed strictly, and that there is
no room for equitable considerations.” This is also in consonance with the Eagle Flask
Industries Ltd. v. CCE4 judgment.

It is the cardinal rule of interpretation that where a statute provides that a particular
thing should be done, it should be done in the manner prescribed and not in any other way. It is

2
Saffire Garments v. ITO 20 ITR (Trib) 623
3
Checkmate Services (P.) Ltd. v. Commissioner of Income-tax, [2022] 143 taxmann.com 178 (SC)
4
Eagle Flask Industries Ltd. v. CCE, 2004 Supp. (4) SCR 35

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also settled rule of interpretation that where a statute is penal or taxing in character, it must be
strictly construed and followed5. In the case M/s. Syndicate Bank Staff Co-operative Society
Ltd., Vs. DCIT6 It was held that “ obtaining prior permission is mandatory as per the provision,
therefore, non-compliance with the same must result in cancelling the concession made in favor
of the grantee, the respondent herein." This was also reaffirmed in a number of judgments, such as
CIT v. Ace Multi Axes Systems Ltd.7

The reason behind strict interpretation is Article 265 of the Constitution prohibits the
State from extracting tax from the citizens without authority of law. It is axiomatic that taxation
statute has to be interpreted strictly because the State cannot at their whims and fancies burden the
citizens without authority of law8. In other words, when the competent legislature mandates taxing
certain persons/certain objects in certain circumstances, it cannot be expanded/interpreted to include
those, which were not intended by the legislature. Thus, it is clear that Section 80AC cannot be
considered as a directory but is undisputedly mandatory in accordance with the provision.

1.4 Are filing Form 3CB/CD & 10CCB sufficient to ascertain claim for deduction under
Section 80AC?

Form 3CB/CD & 10CCB are clearly not sufficient to ascertain claim for deduction
under Section 80AC as they are just ancillary to filing income tax return . It has been held in several
cases that filing audit reports are only directory such as CIT v. A.N. Arunachalam9 and CIT
v.Jayant Patel10 that, “the filing of audit report along with the return was not mandatory but
directory and that if the audit report was filed at any time before the framing of the assessment,
the requirement of the provisions of the Act should be held to have been met.”

The respondents in the present case have failed to file income tax returns which is
mandatory but have filed Form 3CB/CD & 10CCB which is not mandatory till the end of
assessment process. This cannot be considered as a valid ground for allowing deduction as it has

5
Commissioner of Customs v. Dilip Kumar & Co. [2018] 9 SCC 1
6
M/s. Syndicate Bank Staff Co-operative Society Ltd., Vs. DCIT,No.1062/Bang/2022, A.Y 2018-19
7
CIT v. Ace Multi Axes Systems Ltd[2018] 2 SCC 158
8
CIT v. Kasturi & Sons Ltd., (1999) 3 SCC 346
9
CIT v. A.N. Arunachalam [1994] 208 ITR 481
10
CIT v.Jayant Patel, [2001] 248 ITR 199

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no precedent and is against law.

1.5 Is inability to pay self-assessment tax a valid ground to allow deduction?

The reason that the respondents were unable to pay the self-assessment tax on
account of shortage of funds cannot be considered as a valid ground for allowing deduction under
Section 80AC. If the appellant had e-filed the return within the prescribed time limit also, it could
have at best become defective in the absence of non-payment of entire self-amounted tax for which
later remedy would be available, so this could not fall as a bonafide reason for non-filing of the
return within the due date prescribed u/s 139(1) of the I.T. Act. This exact ground was raised in
the case Shiv Kumar Sushil Kumar Vs ACIT11 and the court disallowed the deduction under
Section 80AC.

1.6 Precedents Analysis :

Apart from the provisions, the observances of various courts on Section 80AC have to
be examined in order to ascertain the mandatory nature of Section 80AC.
The Amritsar Bench of the IT Tribunal in the case of Bal Kishan Dhawan HUF v.
ITO12 held as under: “Bare perusal of section 80AC reveals that it had not only contained the time
limit for preferring the claim of deduction under section 80-IB, but it also provides for the
consequences that would follow if the return of income containing claim for deduction under
section 80IB is not furnished before the due date specified in section 139(1) (para 13) It is quite
apparent on bare perusal of section 80AC that the provisions contained therein are mandatory.
If the assessee wants to avail deduction under section 80-IB, he has to necessarily furnish his return
of income containing such claim before the due date specified in section 139(1). The language of
section 80AC is negatively worded in as much as it provides in clear terms that deduction under
section 80-IB shall not be allowed if the return of income containing such claim is not furnished
by the due date specified in section 139(1).

11
Shiv Kumar Sushil Kumar Vs ACIT,74 ITR Trib 420
12
Bal Kishan Dhawan HUF v. ITO (2012) 18 Taxmann.com 234 (Asr.)

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In the face of such clear language of section 80AC, it is evident that the
provisions of section 80AC are mandatory in nature13. Therefore, failure to furnish the return of
income before the due date specified in section 139(1) would disentitle the assessee for the claim
of deduction as per section 80IA too.

Hon'ble Calcutta High Court in the case of CIT Vs Shelcon Properties P. Ltd.14
held on this very issue that “ benefit in the present case can only be claimed in case of fulfillment
of the preconditions laid down under section 80AC of the I.T. Act. When the preconditions have
not been fulfilled, the benefit cannot be claimed. There is, as such, no reason to find out whether
the direction is directory or mandatory. In any event, when the provision is that the benefit
cannot be claimed if the return has not been filed on or before the prescribed day, in our view, it
is a mandatory direction…”

Even in the Uttarakhand High Court in Umesh Chandra Dalakoti v. Assistant

Commissioner of Income Tax15 held the provision under Section 80AC of the Act to be mandatory.
This has been unanimously accepted in several judgements such as ITAT Special Bench in Saffire
Garments v. ITO, ITAT Madras Bench in ACIT v. Shri V.N, Devadoss16, the ITAT Chandigarh
Bench in Lakshmi Energy and Foods Ltd. v. ACIT17, the ITAT Mumbai Bench in Dwarkadas
Panchmatiya v. ACIT18 and in several others.

The issue was examined at length and settled in special Bench Judgment in the case
Saffire Garments v. Income-tax Officer19 as “ Whether provisions of proviso to sub-section (1A)
of section 10A, which provides that no deduction under section 10A shall be allowed to an assessee
who does not furnish a return of its income on or before due date specified under section 139(1),
is mandatory and not directory. Tribunal could not have by its own interpretation held such proviso

13
ACIT (OSD) v. M/s. Anoli Holding Pvt. Ltd. ITA No: 1042/AHD/2012 A.Y 2008-09
14
CIT Vs. Shelcon Properties (P.) Ltd., [2015] 370 ITR 305 (Cal)
15
Umesh Chandra Dalakoti v. Assistant Commissioner of Income TaxITA No. 297/Del/2017
16
ACIT v. Shri V.N, Devadoss, 1219-1223/MDS/2012
17
Lakshmi Energy and Foods Ltd. v. ACIT, 250-2511 CHD/2003
18
Dwarkadas Panchmatiya v. ACIT, ITA No. 4727/Mum/2012
19
Saffire Garments v. Income-tax Officer, I.T.A. No. 397/ RJT/2009

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to be mere directory and allow assessee deduction under section 1OA when said assessee had filed
its return of income after the due date of filing returns.

If the respondents rely on the judgment given by the Hyderabad IT Bench on ITO Vs.
S.Venktaya, which held that if return was filed late then despite the provisions of section 80AC
the deduction was held to be allowable if such delay is beyond the control of the assessee. This
position also stands reversed after the decision of the Special Bench in case of Saffire Garments
Vs. ITO (supra) wherein it is clearly held that the provisions of section 8oAC are of mandatory
nature.

If the respondents rely on Chirakkal Services Coop Bank Vs. CIT 20 case it is
perverse as it is based entirely on a different context and provisions of law. That judgment was
given in the context of section 80P of the Act wherein no specific provision requiring the assesses
to file the return within the time allowed under section 139(1) of the Act to be eligible for deduction
under section 80P has been prescribed, unlike the provisions of section 80IA read with section
80AC which mandates filing of return within the prescribed time. This issue with regard to Section
80IB & 80AC was discussed in the case Commissioner Of Income Tax, Central vs Rama Medicare
Limited21

To top all of this in the Shiv Kumar Sushil Kumar Vs ACIT case (supra) the facts are
almost identical involving the same provisions and the judgment given was that the benefit U/s
80IA of the Act cannot be claimed without fulfilling the conditions laid down in Section 80AC of
the Act.

Thus, based on several judgements and a comprehensive analysis it is proved undisputedly

and beyond a shadow of doubt that provisions of Section 80AC of the Income Tax Act, 1961 is
mandatory.

20
Chirakkal Services Coop Bank Vs. CIT 384 ITR 90 (Ker)
21
Commissioner Of Income Tax, Central vs Rama Medicare Limited, ITA No.183/LKW/2019

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2. Whether on the facts and in the circumstances of the case, the due date for furnishing
return of income as per section 139(1) is subject to the extended period provided u/s
139(4)?”

It is humbly submitted before this Hon’ble High Court that based on

consideration of the facts and circumstances of the case, the due date for furnishing return of
income as per Section 139(1) is not subject to the extended period provided u/s 139(4) since
(i) Section 139(4) provides relief for late filing but does not explicitly change the original due date
established under Section 139(1), (ii) Section 139(1) and section 139(4) of the Income Tax Act
serve distinct purposes and operate independently, (iii) A literal interpretation of both the provision
reveals the legislative intent of independent application of those provisions, (iv) Interpreting the
due date under section 139(1) to include the extended period provided under section 139(4) would
create uncertainty and ambiguity.

Section 139 of the Income Tax Act, 1961 deals with the different kinds of returns
that can be filed in case the person or the entity in question has not filed tax returns before the
expiry of the prescribed deadline. The issue in the present case is whether the deadline for
submitting the income tax return under section 139(1) allows for an extension as outlined in section
139(4). The counsel for the Appellant argues that Sec.139(1) does not allow for an extension as
per Sec.139(4) and in order to substantiate our contention, firstly, the provisions have to be
statutorily interpreted and the legislative intent has to be ascertained.

2.1 COMPARATIVE ANALYSIS OF SECTION 39(1) & SECTION 39(4)

Section 139 (1) of the Income Tax Act acts as a framework that allows
taxpayers to file returns, rectify the non-submission of Income Tax Returns within the timeline,
mentions entities that are entitled to file their tax return, deals with the mandatory & voluntary
return policies while filing the Income Tax Return, etc. A relevant extraction of the provision is
given below:

“ …if his total income or the total income of any other person in respect of which he is

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assessable under this Act during the previous year, without giving effect to the provisions of
section 10A or section 10B or section 10BA or Chapter VI-A exceeded the maximum amount
which is not chargeable to income-tax, shall, on or before the due date, 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 particulars as may be prescribed.”

A plain perusal of the provision in itself proves that there is neither explicit nor
implicit mention of Sec. 139(4) in the provision and it is concerned with only income returns filed
within the due date. The term ‘due date’ is not common for the whole section and this has
undisputedly been held by the Supreme Court in the case Prem Nath Khanna vs Narinder Nath
Kapoor (D) Thr. Lr. (2016)22 that "due date" would mean due date as provided u/s 139(1).
While section 139(1) specifies the initial due date for filing returns, section 139(4) provides for
an extended period beyond the due date in certain circumstances thus serving distinct purposes
and operates independently of each other. Now Section 139(4) is to be examined. Section 139(4)
relevant extract reads as under:
"...139(4) Any person who has not furnished a return within the time allowed to him under sub-
section (1), or within the time allowed under a notice issued under sub-section (1) of section 142,
may furnish the return for any previous year at any time before the expiry of one year from the end
of the relevant assessment year or before the completion of the assessment, whichever is earlier.

Provided that where the return relates to a previous year relevant to the assessment year
commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one
year aforesaid shall be construed as a reference to two years from the end of the relevant
assessment year."

A bare perusal of this section makes it clear that the legislature has intended
to allow belated return for any prior years any time until the expiry of one year that started from
the end of the applicable year of assessment or before conclusion of the assessment, whichever
happens earlier. However, the taxpayer might be charged with a penalty of ₹5,000, under Section
271F of IT Act 1961, in case the return is submitted after the pertinent assessment year. Again,

22
Prem Nath Khanna vs Narinder Nath Kapoor (D) Thr. Lr. (2016), Civil Appeal No.2151 of 2016

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there would be no penalty imposed in case the income did not require a mandatory filing as per
the provisions under Section 139(1), even though the return was filed after the expiration of the
assessment year. But as proved in the previous issue this is not applicable in the present case as
Sec 80AC is a mandatory provision.

2.2 LEGISLATIVE INTENT

After the analysis of both the provisions, the consideration of the legislative Intent
is crucial for determining the issue. With regard to the present issue, the availability of separate
penalties for late filing under Section 139(4) and for not filing at all under Section 234A clearly
suggests that Section 139(4) doesn't alter the original due date. The assessee is still liable for a
penalty for missing the initial deadline

In the case Saffire Garments v. ITO23 it was stated that “Whole scheme of the Act
needs to be considered. The assessee is required to file the return of income within the prescribed
time as per the provisions of section 139(1)... For a failure of the assessee to file his return of
income within the due date prescribed under section 139(1), this is not the only consequence. One
consequence of such failure is prescribed in section 234A also as per which, the assessee is liable
to pay interest on the tax payable by him after reducing advance tax and TDS/TCS if any paid by
him apart from some other reductions. Such interest is payable from the date immediately
following the due date for filing the return of income and is payable up to the date on which such
return of income was furnished by the assessee..” This clearly proves that the due date under
Section 139(1) does not extend to Section 139(4).

2.3 CLEAR LANGUAGE OF SECTION 139(1) - INTERPRETATION

The language of section 139(1) clearly specifies the due date for furnishing the
return of income without any reference to the extended period provided under section 139(4).
Therefore, interpreting the due date under section 139(1) to include the extended period would
amount to reading in words that are not explicitly stated in the provision, which goes against the
principles of statutory interpretation.

23
Saffire Garments v. ITO, (2013) 151 TTJ (Rajkot) (SB)

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The Hon’ble Supreme Court in the case of IPCA Laboratory Ltd. vs. DCIT24 While
discussing exemption u/s 54 have held that “where there is no ambiguity in the provisions of
statute, provisions cannot be interpreted to confer benefit on the Assessee and benefits which are
not available cannot be conferred by ignoring or misinterpreting clear words in the section.”

Further the Constitution Bench, in Commissioner of Customs v. Dilip Kumar &

Co.25endorsed as following: " In construing penal statutes and taxation statutes, the Court has to
apply strict rules of interpretation. Insofar as taxation statutes are concerned, Article 265 of the
Constitution [ "265. Taxes not to be imposed save by authority of law.--No tax shall be levied or
collected except by authority of law."] prohibits the State from extracting tax from the citizens
without authority of law. It is axiomatic that the taxation statute has to be interpreted strictly
because the State cannot at their whims and fancies burden the citizens without authority of law.
In other words, when the competent legislature mandates taxing certain persons/certain objects in
certain circumstances, it cannot be expanded/interpreted to include those, which were not intended
by the legislature.”

A literal & strict interpretation of Section 139(1) as mandated by the authorities cited
reveals without an iota of doubt that the due date for furnishing return of income as per section
139(1) is neither explicitly nor implicitly subject to the extended period provided u/s 139(4).

2.4 UNCERTAINTY & AMBIGUITY:

Interpreting the due date under section 139(1) to include the extended period
provided under section 139(4) would create uncertainty and ambiguity regarding the timelines for
filing returns. This could lead to confusion among taxpayers and undermine the objective of
promoting tax compliance and efficiency in the tax administration system.

In the case M/s Vanshree Builders & Developers (P) Ltd v. CIT26 it was discussed
that “we do not find any merit in these submissions of the assessee also because when
consequences of not filing the return of income within the due date prescribed u/s 139(1) of the

24
IPCA Laboratory Ltd. vs. DCIT, 2004 (12) SCC 742
25
Commissioner of Customs v. Dilip Kumar & Co, 2018 (5) ABR 802
26
M/s Vanshree Builders & Developers (P) Ltd v. CIT, ITA No. 878/Bang/2019

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Income-tax Act, 1961 are so grave i.e., charging of interest 234A, possibility of prosecution u/s
276CC and denial of various deductions u/s 10A, 10B, 10BA and various sections under Chapter
VIA, it cannot be said that this requirement of filing return of income is a procedural aspect.” Thus,
it is critical to maintain the certainty of due date.

2.5 PRECEDENT ANALYSIS:

In the case S. Rushi Sanskruti Vividoddeshagal vs The Dcit, Cpc, Bangalore 27 a
reference was made to the judgment of Hon'ble High Court of Calcutta in the case of Suolificio
Linea Italia (India) (P.) Ltd. v. Joint Commissioner of Income-tax28 in which it has been held
as under:-

When the governing provision expressly mandates that no such deductions shall be
allowed unless the assessee filed his returns of income "on or before the due dates specified under"
Section 139 (1) of the Act, there is no question of referring to the extended period permitted
under Section 139(4) of the Act to seek the benefit. Indeed, if the embargo were not as strict as is
evident from the relevant provision, the entirety of Section 139 would have been mentioned in the
relevant expression in Section 80AC of the Act which would have included within its sweep the
extended period under sub- section (4) thereof. But in such a provision referring only to sub-section
(1) of Section 139 of the Act, the reference to the other provisions of Section 139 must be
understood to have been excluded.

In the case CIT Vs Shelcon Properties P. Ltd.29 the appellant raised a legal question
upon claim for the benefit conferred under Section 80-IB of the Act being declined on the ground
that the appellant did not file its return for the relevant assessment year within the period prescribed
under Section 139 (1) of the Act and the deduction was denied for not following the mandatory
requirement of section 80AC of the Act. In the case on hand, the assessee was required to file
return within the due date i.e. on 31.08.2018 but he filed return belatedly and following the
judgment, the assessee is not eligible to claim deduction u/s 80P of the Act. When one of the
consequences for not filing return of income within the due date prescribed u/s 139(1) was

27
S.Rushi Sanskruti Vividoddeshagal vs The Dcit, Cpc, Bangalore, ITA No.1043/Bang/2022
28
Suolificio Linea Italia (India) (P.) Ltd. v. Joint Commissioner of IT, [2018] 93 taxmann.com 462 (Calcutta)
29
CIT Vs. Shelcon Properties (P.) Ltd., [2015] 370 ITR 305 (Cal)

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mandatory then, another consequence for the same failure of the assessee could not be directory
and the same was also mandatory. The provisions of the proviso to Section 10A(1A) was therefore
held to be mandatory and not directory.

To top all of this the Supreme Court in Brij Mohan v. Commissioner of Income Tax30
outrightly held that a belated return filed under Section 139(4) cannot be equated with a return
under Section 139(1) of the Income-tax Act, 1961.

The respondent’s argument put forth that Sec.139(4) is a proviso to Sec.139(1) of the
Act and therefore return filed before the time limit prescribed in Sec.139(4) should also be
considered as a return filed u/s.139(1) of the Act. This argument was also considered and rejected
by the Hon'ble Supreme Court in the case of Prakash Nath Khanna vs. CIT31 has held that filing
of return of income within the time allowed u/s 139(4) of the Income tax Act, 1961 cannot dilute
the infraction in not furnishing return in due time as prescribed u/s 139(1) of the Income tax Act,
1961.

Thus, the due date for furnishing return of income as per section 139(1) is not
subject to the extended period provided u/s 139(4).

30
Brij Mohan v. CIT, New Delhi 1980 SCR (1) 199
31
Prakash Nath Khanna vs. CIT 2004 (9) SCC 686

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PRAYER

Wherefore, in light of the facts stated, issues raised, arguments advanced

and authorities cited, the Appellant most humbly pray before the Hon’ble
High court of Bombay to adjudge, declare and hold the following:

1. To set aside the order of the case ITA No.1218/Mds/2020 of the ITAT and hold
that the provisions of section 80AC of the Act are mandatory in nature and not
directory

2. Hold that due date for furnishing return of income as per section 139(1) is
not subject to the extended period provided u/s 139(4)

And, pass any other order, direction, or relief that it may deem fit in the
interest of justice, equity and good conscience. For this act of kindness,
the Appellant as is duty bound shall ever pray.

The counsel pleads this Honourable court to bind: "Sacramentum habet in

se tres comites, veritatem, justitiam et judicium; veritas habenda est in
jurato, justitia et judicium in judice”

Respectfully submitted,
Counsels on behalf of the Appellant

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