‘Month’ means a period of thirty days and not a calendar month.

The Allahabad High Court in the case of CIT vs. Laxmi Rattan Cotton Mills co Ltd has held that ‘Month’ in s. 271(1)(a)(i) means a period of thirty days and not a calendar month. It has further held that enalty under s. 271(1)(a) has to be computed by reducing advance tax paid from gross tax payable. It has followed CIT vs. Vegetable Products Ltd. 1973 CTR (SC) 177 : (1973) 88 ITR 192 (SC) TC 49R. 516

It noted that the Word “month” has not been defined in the IT Act. ITAT  took this word to mean “a calender month” by referring to s. 3(35) of the General Clauses Act, which defines “a month” as meaning a month reckoned according to the English calendar month. “Month” is normally understood to mean “a lunar month”, i.e., a period of thirty days.

On an examination of the scheme and purpose of section 271(1)(a)(i) the word “month” as occurring in sub-section must be taken to mean a period of thirty days. If the meaning ascribed to this word in the General Clauses Act is adopted, it may in some cases lead to a defaulting assessee escaping penalty altogether, in spite of default. Hence, it is not appropriate to import the meaning of the word “month” given in the General Clauses Act in the sub-section, for it does not fit in with the context and scheme of the section, and results in some cases in setting at naught the purpose of the enactment. Tribunal was not right in holding that the word “month” occurring in this sub-section refers to the English calendar month

Sec. 271(1)(a)(i) is a penal provision, and in the event of the default contemplated by this section, an assessee becomes liable to payment of penalty at the rate of 2 per cent of the tax for “every month during which the default continued”. The word “month” has not been defined in the Act. The Tribunal has, however, taken this word to mean “a calender month” by referring to s. 3(35) of the General Clauses Act, which defines “a month” as meaning a month reckoned according to the English calendar month. This definition, however, in view of the opening part of s. 3 of the General Clauses Act, can be read into a statute provided there is nothing repugnant in the subject or context of the statute. It as such has to be seen whether the meaning given in the General Clauses Act to the word “month” is repugnant to the context. It is settled that the word “month” is normally understood to mean “a lunar month”, i.e., a period of thirty days. On an examination of the scheme and purpose of this section the word “month” as occurring in this sub-section must be taken to mean a period of thirty days. This provision was enacted for the purpose of imposing a penalty on an assessee who had not filed his return during the prescribed time, and was enacted to serve as a deterrent for such lapses. The penalty is imposable for every month during which the default continues. If the meaning ascribed to this word in the General Clauses Act is adopted, it may in some cases lead to a defaulting assessee escaping penalty altogether, in spite of default.

To take an illustration : Let one assume that time is given to an assessee up to the 30th of January in a particular year for filing a return and he defaults. He thereafter, files his return on the 27th February. If the word “month” occurring in the section is taken to mean a full calendar month, the assessee in such a case would not be liable for any amount of penalty.

Such a result is not contemplated by the language of the sub-section, for the sub-section in clear and unambiguous terms makes every assessee liable for penalty during the period of default. In the circumstances, it is not appropriate to import the meaning of the word “month” given in the General Clauses Act in the sub- section, for it does not fit in with the context and scheme of the section, and results in some cases in setting at naught the purpose of the enactment. The Tribunal was not right in holding that the word “month” occurring in this sub-section refers to the English calendar month.

COMMISSIONER OF INCOME TAX vs. LAXMI RATTAN COTTON MILLS CO. LTD.

HIGH COURT OF ALLAHABAD

R.L. Gulati & C.S.P. Singh, JJ.

IT Ref. No. 722 of 1970

4th April, 1973

(1973) 41 CCH 0147 AllHC

(1974) 97 ITR 0285

Legislation Referred to

Section 271(1)(a)

Case pertains to

Asst. Year 1958-59

Decision in favour of:

Assessee Partly, Revenue Partly

Counsel appeared:

Kameshwar Prasad, for the Assessee : R.K. Gulati, for the Revenue

C.S.P. SINGH, J.:

The Tribunal, Allahabad, has under s. 256(1) of the IT Act, 1961, referred the following two questions, for our opinion :

“1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the word ‘ month ‘ occurring in s. 271(1)(a)(i) referred to English calendar month?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the penalty should be calculated with reference to the tax found due on the date of the completion of the assessment after deducting, inter alia, taxes paid by the assessee as advance tax and tax as per provisional assessment ? “

2. The assessee did not file his return for the asst. yr. 1958-59 by 15th Nov., 1958, up to which date the ITO had allowed time. The return was filed on 18th Feb., 1959, after about three months of the expiry of that date. After the assessment had been completed on 1st April, 1962, the ITO initiated penalty proceedings under s. 271(1)(a) of the IT Act, 1961, and after giving an opportunity to the assessee, imposed a penalty of Rs. 1,00,348.

3. The assessee, thereafter, filed an appeal before the AAC. The appellate authority rejected the contention of the assessee that the penalty under the new Act could not be imposed for a default committed under the old Act. On merits, the AAC concluded that there was no reasonable cause for the default, but it accepted the assessee’s contention that the period of default should be counted from the date up to which the assessee was allowed time to file its return. Thereafter, the AAC worked out the period of default to be of three months and three days, and held that the assessee was liable to penalty under s. 271(1)(a)(i) of the Act for a default of three months, at the rate of 6 per cent (3 X 2 of the total tax). Two appeals were thereafter filed, one by the Department and the other by the assessee. The appeal filed by the Department was dismissed inasmuch as the Tribunal took the view that the appeal had been filed by the Department in the penalty matter only as it has not accepted the decision of the AAC in the quantum appeal, and the Department’s appeal to the Tribunal in that quantum matter had already been dismissed.

4. In respect of two questions which have been referred to us, it was urged by the assessee that inasmuch as the word “month” had not been defined in the Act, the meaning given to that word in s. 3(35) of the General Clauses Act should be adopted, and the word “month” should be taken to be the English calendar month, and as such the period of default committed by the assessee would be of only two months, inasmuch as a part of November and a part of February in which default occurred was not for the whole calendar month, and had as such to be excluded. As regards the amount of penalty that could be imposed for the default, it was contended that while computing “the tax payable” on which the penalty had to be imposed, the advance tax and the taxes paid as per provisional assessment had to be deducted, and the penalty had to be worked out on the basis of this reduced amouut. The Tribunal held that the word month ” occurring in s. 271(1)(a)(i) of the Act meant a full calendar month, and inasmuch as the assessee was in default for only two full calendar months, i.e., December and January, the penalty could be levied only in respect of two months’ default. It also held that inasmuch is the penalty is imposable under s. 271(1)(a) of the Act, on the basis “of tax, if any, payable ” and not on the total amount of tax, the penalty that was imposable on the assessee was to be calculated with reference to tax found due on the date of the completion of the assessment, subject to its final computation by the appellate authorities.

5. Inasmuch as the answer to the question referred depends on the interpretation to be put on s. 271(1)(a)(i) of the Act, we are extracting that section :—

“In the cases referred to in cl. (a), in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent. of the tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent of the tax. “

6. We propose to answer the second question first. This question now stands concluded by the decision of the Supreme Court in Civil Appeal No. 497 of 1970 decided on 29th Jan., 1973 (CIT vs. Vegetable Products Ltd. Since reported in (1973) CTR (SC) 177 : (1973) 88 ITR 192 (SC)), wherein it has been held that the penalty leviable has to be calculated after deducting amounts of tax already paid, and not with reference to the gross tax assessed.

7.Coming now to the first question, s. 271(1)(a)(i) of the Act is a penal provision, and in the event of the default contemplated by this section, an assessee becomes liable to payment of penalty at the rate of 2 per cent of the tax for “every month during which the default continued”. The word “month” has not been defined in the Act. The Tribunal has, however, taken this word to mean ” a calendar month ” by referring to s. 3(35) of the General Clauses Act, which defines ” a month ” as meaning a month reckoned according to the English calendar month. This definition, however, in view of the opening part of s. 3 of the General Clauses Act, can be read into a statute provided there is nothing repugnant in the subject or context of the statute. It as such has to be seen whether the meaning given in the General Clauses Act to the word “month” is repugnant to the context. It is settled that the word “month” is normally understood to mean “a lunar month “, i.e., a period of thirty days. (See Simpson vs. Margitson (1847) 11 QB 23, Ryalls vs. R. (1848) 11 QB 781 Rogers vs. Kingston-upon-Hull Dock Co. (1864) 4 New Rep 494, Schiller vs. Peterson & Co. Ltd. (1924) 1 Ch 394 (CA), Phips (P.) & Co. (Northampton and Towcester Breweries) Ltd. vs. Rogers (1925) 1 KB 14 (CA) and South British Fire & Marine Insurance Co. vs. Brojo Nath Shaha (1909) ILR 36 Cal 516 (FB). Although these cases do not deal with the interpretation to be put on the word “month” as occurring in a statute, and relate to cases relating to contract, they throw light on the meaning of the word as commonly understood. This Court in the case of Misri Lal vs. Jwala Prasad (1962) ILR 1 All 761 has, however, taken the view that, in some cases, the word “month”, as occuring in a statute, may be taken to mean a period of thirty days. On an examination of the scheme and purpose of this section, we are of the view that the word “month” as occurring in this sub-section must be taken to mean a period of thirty days. This provision was enacted for the purpose of imposing a penalty on an assessee who had not filed his return during the prescribed time, and was enacted to serve as a deterrent for such lapses. The penalty is imposable for every month during which the default continues. If the meaning ascribed to this word in the General Clauses Act is adopted, it may in some cases lead to a defaulting assessee escaping penalty altogether, in spite of default. To take an illustration : Let us assume that time is given to an assessee up to the 30th of January in a particular year for filing a return and he defaults. He, thereafter, files his return on the 27th February. If the word “month” occurring in the section is taken to mean a full calendar month, the assessee in such a case would not be liable for any amount of penalty. Such a result is not contemplated by the language of the sub-section, for the sub-section in clear and unambiguous terms makes every assessee liable for penalty during the period of default. In the circumstances, it is not appropriate to import the meaning of the word “month” given in the General Clauses Act in the sub-section, for it does not fit in with the context and scheme of the section, and results in some cases in setting at naught the purpose of the enactment. We are thus of the view that the Tribunal was not right in holding that the word “month” occurring in this sub-section refers to the English calendar month.

8. We, therefore, answer the first question in the negative and in favour of the Commissioner, and the second question in the affirmative and in favour of the assessee. In view of the partial success and failure of the parties, they shall bear their own costs.