Interest under section 139 extends filing time and defeats penalty for late return filing under section 271(1)(a).

Interest charged under the proviso to section 139(1) means the time for filing the return is treated as extended, so the return cannot be regarded as late for penalty under section 271(1)(a). On that reasoning, the Tribunal erred in saying that levy of interest under section 139 had no relevance to the penalty question. The principle applied was that charging interest under section 139 affects the timeliness of the return for penalty purposes, and the answer was in favour of the assessee.

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Issues: Whether levy of interest under section 139 had a bearing on the validity of penalty under section 271(1)(a) for failure to file the return within time.

Analysis: The return was filed beyond the extended date, and interest had been charged under section 139. Following the Supreme Court ruling relied upon by the Court, once interest is charged under proviso (iii) to section 139(1), the time for filing the return is treated as having been extended. In such a situation, the return cannot be treated as having been filed out of time for the purpose of penalty under section 271(1)(a).

Conclusion: The Tribunal was wrong in holding that levy of interest under section 139 had nothing to do with levy of penalty under section 271(1)(a), and the answer was in favour of the assessee.

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