The provisions of ss. 234A, 234B and 234C of The IT Act, 1961 were compensatory in nature, not penal, and were enacted to compel defaulting assessees to compensate the Revenue.

R.P. SETHI, C.J.

1. CONSTITUTIONAL validity of ss. 234A, 234B and 234C of The IT Act, 1961 (hereinafter referred to as "the Act"), inserted by The Direct Tax Laws (Amendment) Act, 1987, was challenged by The appellants-assessee in various writ petitions filed by them, which were dismissed by The learned single Judge, vide The judgment impugned in these appeals.

2. It was submitted on behalf of The appellants that The offending sections were penal in nature, without providing for any safeguards or even an opportunity of being heard, which violated The constitutional guarantees of The assessees. It was submitted that as The offending provisions were penal in character, it required that The assessee were entitled to be heard before they could be punished under The said provisions and as The opportunity of being heard has been denied, The offending sections were liable to be struck down as ultra vires. It was argued in The alternative that in case The sections are not declared unconstitutional, The Court may give such an interpretation, which may require The authorities under The Act to afford an opportunity of being heard, before any order is passed under The aforesaid provisions.

The case of The respondents was that The impugned provisions were only compensatory in nature and not penal, as urged by The appellants. The applicability of The principles of natural justice in favour of The appellants was vehemently denied. It was submitted that The provisions were constitutionally valid and did not suffer from any vice of unconstitutionality, requiring interference by this Court.

3. In order to appreciate The rival contentions of The parties, it is necessary to have a glimpse of The offending provisions of The Act. Sec. 234A provides:

"Interest for defaults in furnishing return of income –

(1) Where The return of income for any assessment year under sub-s. (1) or sub-s. (4) of s. 139, or in response to a notice under sub-s. (1) of s. 142, is furnished after The due date, or is not furnished, The assessee shall be liable to pay simple Interest at The rate of two per cent for every month or part of a month comprised in The period commencing on The date immediately following The due date, and, -- (a) where The return is furnished after The due date, ending on The date of furnishing of The return; or (b) where no return has been furnished, ending on The date of completion of The assessment under s. 144, on The amount of The tax on The total income as determined under sub-s. (1) of s. 143 or on regular assessment as reduced by The advance-tax, if any, paid and any tax deducted or collected at source...

(2) The Interest payable under sub-s. (1) shall be reduced by The interest, if any, paid under s. 140A towards The Interest chargeable under this section.

(3) Where The return of income for any assessment year, required by a notice under s. 148 issued after The determination of income under sub-s. (1) of s. 143 or after The completion of an assessment under sub-s. (3) of s. 143 or s. 144 or s. 147, is furnished after The expiry of The time allowed under such notice, or is not furnished, The assessee shall be liable to pay simple Interest at The rate of two per cent for every month or part of a month comprised in The period commencing on The day immediately following The expiry of The time allowed as aforesaid, and,-- (a) where The return is furnished after The expiry of The time aforesaid, ending on The date of furnishing The return; or (b) where no return has been furnished, ending on The date of completion of The reassessment or re-computation under s. 147, on The amount by which The tax on The total income determined on The basis of such reassessment or re-computation exceeds The tax on The total income determined under sub-s. (1) of s. 143 or on The basis of The earlier assessment aforesaid.

(4) Where, as a result of an order under s. 154 or s. 155 or s. 150 or s. 254 or s. 260 or s. 262 or s. 263 or s. 264 or an order of The Settl