Delhi High Court: Interest levy under Income-tax Act not justified. Assessee wins appeal.

The High Court of Delhi ruled in favor of the assessee, holding that the levy of interest under section 139 of the Income-tax Act, 1961 was not justified. The Court allowed the plea challenging the levy of interest to be raised in appeal under section 246(c) of the Act, regardless of the outcome on the merits. The Department's appeals were dismissed, affirming the decision of the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal in favor of the assessee.

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Issues involved:
The judgment involves a common legal question regarding the appealability of Income-tax Officer's orders charging interest under section 139.

Summary:

The High Court of Delhi addressed three references under section 256(1) of the Income-tax Act, 1961, pertaining to the assessment years 1967-68, 1968-69, and 1969-70. The central issue was whether the Income-tax Officer's orders charging interest under sections 139 and 217 were appealable. The assessee contended that no interest should be payable under section 139(1) as the returns were filed after the specified time without an extension request. The Appellate Assistant Commissioner upheld the plea to delete interest under section 139 but rejected the plea regarding interest under section 217. The Department appealed to the Income-tax Appellate Tribunal, which also dismissed the plea. The Department then sought three references based on these events.

In a related case, the High Court held that there are two types of cases concerning interest payment: where liability to pay interest is denied, and where liability is acknowledged but a waiver or reduction is sought. The Court emphasized that if the levy of interest itself is challenged as unlawful, the plea can be raised in appeal under section 246(c) of the Act. In the present case, the assessee argued that the interest levy was legally invalid, a plea supported by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. The Court concluded that the plea challenging the levy of interest was admissible in appeal under section 246(c) regardless of the outcome on the merits.

Therefore, the High Court ruled in favor of the assessee and against the Department, affirming that the levy of interest under section 139 was not justified in this case.

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