1973 (2) TMI 19 - HC - Income Tax

Court upholds Income-tax Officer's interest charge authority under section 139 proviso (iii) without extension.

The court upheld the Income-tax Officer's authority to charge interest under proviso (iii) to section 139 without an extension application. The ... Whether the provision for treating the registered firm as unregistered one for the purpose of levying interest for belated returns would be in violation of article 14 of the Constitution -Whether advance tax paid can be reduced for the purpose of levying interest from the tax payable - the application is partly allowed. While the order of the Income-tax Officer charging interest holds good, he is directed to determine the actual interest payable by the assessee by making appropriate allowance of the advance tax paid by the assessee Issues Involved:1. Jurisdiction of Income-tax Officer to charge interest under proviso (iii) to section 139 without an application for extension of time.2. Constitutionality of clause (a) of proviso (iii) to section 139 under Article 14 of the Constitution.3. Obligation of the Income-tax Officer to allow credit for advance tax paid while computing interest under proviso (iii).Issue-wise Detailed Analysis:1. Jurisdiction of Income-tax Officer to charge interest under proviso (iii) to section 139 without an application for extension of time:The petitioner argued that the Income-tax Officer could charge interest under proviso (iii) to section 139 only if an extension of time for filing the return was granted upon an application made by the assessee. Since the petitioner did not apply for an extension, charging interest for the delayed return was claimed to be without jurisdiction. The court examined section 139, particularly sub-sections (1), (2), and (4). It was noted that the petitioner submitted the return under section 139(4) after the due date and without seeking an extension. The court concluded that sub-section (4) of section 139 applies to cases where returns are filed late without an application for an extension. Therefore, the Income-tax Officer was justified in charging interest under clause (iii) of the proviso to section 139(1). The court disagreed with the Andhra Pradesh High Court's decision in Kishanlal Haricharan v. Income-tax Officer, which did not consider section 139(4). Thus, the first submission of the petitioner was rejected.2. Constitutionality of clause (a) of proviso (iii) to section 139 under Article 14 of the Constitution:The petitioner contended that clause (a) of proviso (iii) to section 139 violated Article 14 of the Constitution because it imposed a more onerous interest liability on registered firms compared to other assessees. The court reasoned that registered firms enjoy certain privileges under the Income-tax Act, and it is reasonable to subject them to specific liabilities in case of defaults. The classification of registered firms for the purpose of interest liability was found to be based on an intelligible differentia, which had a rational relation to the object of the provision. The court held that the classification did not amount to discrimination and was not void under Article 14. The interest charged under section 139 was considered to have a penal character, aligning with the Supreme Court's decision in Jain Brothers v. Union of India, which upheld similar provisions. Consequently, the second submission of the petitioner was rejected.3. Obligation of the Income-tax Officer to allow credit for advance tax paid while computing interest under proviso (iii):The petitioner argued that the Income-tax Officer should have allowed credit for advance tax paid while computing the interest under proviso (iii) to section 139(1). The court agreed with this submission, interpreting clause (iii) of the proviso to mean that interest should be calculated on the tax payable, reduced by the advance tax paid. The court found no ambiguity in the sub-clauses and confirmed that the advance tax paid should be considered in both sub-clauses (a) and (b) of clause (iii). Therefore, the Income-tax Officer was directed to determine the actual interest payable by the petitioner after making appropriate allowances for the advance tax paid.Conclusion:The application was partly allowed. The order of the Income-tax Officer charging interest was upheld, but he was directed to recompute the interest by allowing credit for the advance tax paid by the petitioner. Both parties were directed to bear their own costs.