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High Court Of Calcutta
B. C. Basak
MONOHAR GIDWANY AND ORS.AND SMT.BHAGWANTI GIDWANY - Appellant
Versus
COMMISSIONER OF INCOME-TAX - Respondent
C. R. 10690 Of 1975
Decided On : 02/20/1980
B. C. Basak - [INCOME TAX ACT, 1961] - Section 139(1), 139(4), 217 - [INTEREST] - Whether the assessee is liable to pay interest under Section 139(1) and 217 of the Income Tax Act, 1961.
Fact of the Case:
The petitioners are challenging an order passed on January 28, 1975, by the Commissioner under Section 264 of the Income Tax Act, 1961, confirming the order of the Income Tax Officer charging interest under Section 139(1) and 217 of the Act.
Finding of the Court:
The Court held that: - No penal interest can be imposed under Section 139(1) of the Act in the facts and circumstances of this case. - No interest could be imposed under Section 217 of the Act also. - The impugned order passed by the Commissioner under Section 264 of the Income Tax Act, 1961, confirming the order of the Income Tax Officer charging interest under Section 139(1) and 217 of the Act is bad in law.
Issues: 1. Whether the assessee is liable to pay interest under Section 139(1) of the Income Tax Act, 1961? 2. Whether the assessee is liable to pay interest under Section 217 of the Income Tax Act, 1961?
Ratio Decidendi: 1. Section 139(4) of the Income Tax Act, 1961, makes it clear that the assessee has an independent statutory right, without applying for extension of time for furnishing his return or, without filing the return within the time extended by the Income Tax Officer either under the proviso to Sub-section (1) or under the proviso to Sub-section (2) to file his return at any time before the end of four years from the end of the relevant assessment year. 2. In such cases, the assessee is liable to pay interest at the statutory rate as provided in proviso (iii) to Sub-section (1) of Section 139. 3. The provisions of Section 217 of the Income Tax Act, 1961, can be invoked only when the Income Tax Officer makes a regular assessment under Section 148 read with Section 147 of the Act.
Final Decision: The Court allowed the petition and made the rule absolute. It issued a writ of certiorari quashing the order passed by the Commissioner confirming the decision of the Income Tax Officer in charging the penal interest under Section 139 and Section 217 of the Act. It also issued a writ of prohibition commanding the respondents to forbear from giving any effect to or taking any steps whatsoever in pursuance of the said orders or any demand notice so far as the charging of the penal interest under Section 139 and Section 217 of the Acts concerned.
( 1 ) IN this application under Article 226 of the Constitution of India, the petitioner is challenging an order passed on January 28, 1975, by respondent No. 1 under Section 264 of the I. T. Act.
( 2 ) THE petitioner's case as made out in the petition is as follows : the petitioners are the partners of M/s. Gidwany Brothers of 73, Netaji Subhas Road, Calcutta. The petitioners have l/5th share each in the said business. The petitioners have no other income. This writ petition relates to the assessment year 1962-63, and the relevant accounting year is the year ending March 31, 1962. In the assessment year 1962-63, M/s. Gidwany Brothers (hereinafter referred to as "the said firm"), filed its return showing an income of Rs. 9,763 and also filed an application for registration on March 27, 1962. According to the petitioners, the share-income of the petitioners on the basis of the said return was within the exempted limit, so the petitioners had no statutory obligation to file any return. At the time of making an assessment for the said assessment year 1962-63, the ITO treated a sum of Rs. 1,46,000 as income from undislosed sources and the business income was determined at Rs; 14,330 and thereby the total income of the said firm was computed at Rs. 1,60,398. The ITO made the said assessment in the status of an unregistered firm after refusing registration under Section 185 of the I. T. Act, 1961 (hereinafter referred to as "the said Act" ). The petitioners state that as the said firm has been treated as an unregistered firm, the petitioners had no statutory obligation to file any return in respect of the share income from the said firm. Being aggrieved and dissatisfied with the said order of assessment and also the order refusing registration to the said firm, the petitioners preferred appeals before the AAC. The AAC, by his order dated May 28, 1968, disposed of the quantum appeal and granted relief of Rs. 42,500 to the said firm. In respect of the appeal against the order of refusal of registration, the AAC, by his order dated May 28, 1968, confirmed the order of the ITO. Being aggrieved and dissatisfied with the said orders of the AAC, the said firm preferred two appeals before the Appellate Tribunal. The Tribunal, by its order dated November 27, 1971, gave a relief of Rs. 26,000 in respect of the quantum appeal and thereby the total income of the said firm was reduced to Rs. 90,568. In respect of the other appeal, the Tribunal by its order dated November 26, 1971, held that the firm was not a bogus one and the firm, as constituted by the instrument of partnership dated August 15, 1959, had a legal existence and, therefore, the orders of the authorities below were cancelled. By the said order, the Tribunal directed the ITO to grant registration to the said firm for the said assessment year 1962-63. Thereafter, the ITO, 'i' Ward, Dist. IV (2), respondent No. 2, passed an order under Section 254 of the said Act on January 15, 1972, to give effect to the said orders of the Tribunal. By the said order, the respondent No. 2 granted registration to the said firm and determined the status of the said firm as a registered firm and allocated the total income of the said firm according to the profit-sharing ratio in the hands of the partners. The said order of the ITO was received on January 18, 1972. The petitioners state that in view of the said order of the ITO dated January 15, 1972, treating the said firm as a registered firm, a statutory obligation came upon the petitioners for the first time to file returns in respect of the said assessment year 1962-63. The petitioners stated that on or about February 17, 1972, the petitioners filed returns of income for the said assessment year 1962-63 before the ITO, Dist. IV (2), Calcutta, showing total incomes of Rs. 18,410, Rs. 17,210, Rs. 18,710 and Rs. 19,010, respectively, as allocated by respondent No. 2, and obtained necessary receipts therefor. Thereafter, on or about Novemb
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