1979 (10) TMI 75 - HC - Income Tax

Court rules against department's interest claim post return filing date, emphasizing validity of provisional assessments.

The Court ruled in favor of the assessee, rejecting the department's claim for additional interest beyond the initial return filing date. The Court ... Income Tax Act, Provisional Assessment Issues involved: Interpretation of provisions u/s 139(1) of the Income-tax Act, 1961 regarding validity of return filed by assessee, charging of interest, and jurisdiction of Commissioner u/s 263.Summary:Validity of Return and Charging of Interest:The case involved a firm filing a return in Form No. 3 on March 10, 1968, disclosing income for the assessment year 1967-68. The Income Tax Officer (ITO) made a provisional assessment and issued a demand for tax payment. Subsequently, the ITO requested a revised return in Form No. 2, which the firm submitted on October 15, 1970. The ITO completed the assessment and charged interest under s. 139(1) from January 1, 1968, to March 10, 1968. The issue arose when the revenue audit claimed the March 10, 1968, return was invalid, and interest should be charged until October 15, 1970. The Commissioner directed the ITO to charge additional interest from March 11, 1968, to October 15, 1970. The Tribunal held that charging interest beyond March 10, 1968, was unjustifiable after a provisional assessment based on the initial return.Jurisdiction of Commissioner u/s 263:The Commissioner initiated proceedings under s. 263, asserting that interest should have been charged until October 15, 1970. Despite the assessee's objection, the Commissioner directed the ITO to levy further interest for the period in question. The Tribunal's order rejecting the department's claim was referred for consideration.Legal Interpretation:The Court analyzed the requirement of filing returns in the prescribed form u/s 139(1) and cited precedents to establish that even an incomplete or incorrectly filed return could be considered valid. The Court emphasized that the ITO's acceptance of the initial return for provisional assessment indicated its validity, precluding subsequent claims of invalidity. Referring to a Calcutta High Court decision, the Court affirmed that an 'invalid' return could still be deemed proper for assessment purposes. Consequently, the Court ruled in favor of the assessee, rejecting the department's claim for additional interest beyond the initial return filing date.In conclusion, the Court answered the referred question in the negative, supporting the assessee's position, and awarded costs to the assessee.