1985 (7) TMI 90 - HC - Income Tax

High Court rules Income Tax Officer cannot levy interest for delay in filing return under section 139(8) of Income Tax Act, 1961.

The High Court held that the Income Tax Officer was not authorized to levy interest for a delay of less than a month in filing the income tax return, ... Definition of 'month' under the General Clauses Act - construction of 'month' as British calendar month - interpretation of 'not less than a month' in section 139(8) read with rule 119A - legality of interest levy for delay in filing returnDefinition of 'month' under the General Clauses Act - construction of 'month' as British calendar month - interpretation of 'not less than a month' in section 139(8) read with rule 119A - quashing of interest levy under s.139(8) - Whether the ITO was competent to levy interest under section 139(8) read with rule 119A for a delay of less than a calendar month in filing the return for assessment year 1976-77. - HELD THAT: - The Court applied the definition of 'month' in section 3(35) of the General Clauses Act, which denotes a month reckoned according to the British calendar. The context of the Income-tax Act and the Rules did not displace the General Clauses Act definition. On that construction, the phrase 'not less than a month' in section 139(8) read with rule 119A must be understood as a British calendar month and not as an arbitrary period of 30 days. The Court agreed with the views expressed by the High Courts of Madras and Calcutta and declined to follow the contrary construction of the Allahabad High Court treating a month as a 30-day period. Because the delay in filing the return was for a period shorter than a British calendar month, the levy of interest by the ITO was unauthorised. The impugned order was quashed on this short ground without adjudicating other contentions advanced by the parties.The construction of 'month' as a British calendar month was adopted and the interest levy for a period of less than a calendar month under section 139(8) read with rule 119A was held to be unauthorised; the ITO's order was quashed.Final Conclusion: Impugned order under section 139(8) read with rule 119A quashed for being unauthorised; rule made absolute and parties directed to bear their own costs. Issues involved: Interpretation of the term 'month' in relation to the levy of interest for delay in filing income tax return under section 139(8) of the Income Tax Act, 1961.Summary:The petitioner, a partnership firm, filed its income tax return for the assessment year 1976-77 after the due date, resulting in the Income Tax Officer (ITO) levying interest under section 139(8) of the Act. The petitioner challenged the validity of this interest levy under Article 226 of the Constitution. The petitioner argued that since the delay was for 'less than a month,' the ITO was not authorized to levy interest. The petitioner relied on Division Bench rulings from the Madras and Calcutta High Courts to support its contention.On the other hand, the senior standing counsel for the Income-tax Department argued that the term 'month' should be reckoned as a period of 30 days, making the interest levy legal and valid. This argument was supported by a Division Bench ruling of the High Court of Allahabad. The term 'month' was not defined in the Act or Rules, leading to the application of the definition from the General Clauses Act of 1897, which defines a month as per the British calendar.The High Court analyzed the conflicting interpretations of the term 'month' by different High Courts. It noted that the High Courts of Madras and Calcutta considered a month to be according to the British calendar, while the High Court of Allahabad interpreted it as a period of 30 days. The Court agreed with the former interpretation, stating that the term 'month' in the Act and Rules should align with the definition in the General Clauses Act.Ultimately, the Court held that the ITO was only empowered to levy interest for 'not less than a month,' and since the delay was less than a month based on the British calendar, the interest levy was unauthorized and illegal. Consequently, the Court quashed the impugned order and directed each party to bear their own costs.