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High Court Of Calcutta
Pradyot Kumar Banerjee
MOHANLAL SONI - Appellant
Versus
UNION OF INDIA (UOI) - Respondent
C. R. 11941 (W) Of 1973
Decided On : 06/11/1982
INCOME TAX - INTEREST UNDER SECTION 139 (1) - APPEALABILITY - CONSTITUTIONALITY OF SECTION 139 (1) - DISCRIMINATION - ARTICLE 14 - INTEREST LEVIED ONLY IN CASES WHERE RETURNS WITHHELD WITHOUT SUFFICIENT CAUSE.
Fact of the Case:
The petitioner, a registered firm, challenged the appellate order upholding the charging of interest under Section 139 (1) of the Income Tax Act, 1961, for assessment years 1967-68, 1968-69, and 1969-70. The petitioner argued that the charging of interest under Section 139 (1) was not appealable and that Section 139 (1) was ultra vires Article 14 of the Constitution.
Finding of the Court:
The court held that the charging of interest under Section 139 (1) was appealable under Section 246 of the Income Tax Act, 1961. The court also held that Section 139 (1) was not ultra vires Article 14 of the Constitution, as the distinction made between registered and unregistered firms for the purpose of imposing penalty was reasonable and did not result in discrimination.
Issues: 1. Whether the charging of interest under Section 139 (1) of the Income Tax Act, 1961, was appealable? 2. Whether Section 139 (1) of the Income Tax Act, 1961, was ultra vires Article 14 of the Constitution?
Ratio Decidendi: 1. The court held that the charging of interest under Section 139 (1) was appealable under Section 246 of the Income Tax Act, 1961, as the said provision did not specifically exclude such appeals. 2. The court held that Section 139 (1) of the Income Tax Act, 1961, was not ultra vires Article 14 of the Constitution, as the distinction made between registered and unregistered firms for the purpose of imposing penalty was reasonable and did not result in discrimination. The court relied on the Supreme Court decision in Jain Brothers v. Union of India, where it was held that a registered firm, once it committed a default attracting penalty, could be deemed to be an unregistered firm for the purpose of imposition of penalty.
Final Decision: The court made the rule absolute to the extent that the Appellate Assistant Commissioner of Income Tax (AAC) was directed to re-hear the appeal in so far as the interest charged under Section 139 (1) was concerned and dispose of the same in accordance with law. The court affirmed the other portion of the appellate order.
( 1 ) IN this rule the petitioner challenges the appellate order passed by the AAC, The appellate order is in the following terms;" IN THE OFFICE OF THE APPELLATE ASSISTANT commissioner OF INCOME-TAX: range : 'af': CALCUTTA date of order : 30-12-72 Appeal No. 59. AF/hc/cal. 71-72. Instituted on the 17th March, 1972, from the order of the Income-tax Officer of E-Ward/hc/cal. (Sri P. N. Ghosh): (1) Year of assessment 1967-68 (2) Name of appellant M/s. Mohanlal Soni (3) Income assessed Rs. 73,970 (4) Tax demanded -- Income-tax/ Super-tax Rs. 11,366 (5) Section under which assessment was made 143 (3)Date of hearing : 28-12-1972 present for appellant: Sri I. C. Sancheti, Advocate. APPELLATE order AND GROUND OF DECISION. The present appeal is against the I. T. assessment order for the assessment year 1967-68 passed by the ITO, E-Ward/hc/cal. on 31-1-72. 2. At the time of appeal hearing, the objection was taken to the disallowance of general expenses to the tune of Rs. 2,000. Before me it was stated that for the earlier years also there was a disallowance of Rs. 2,500 made by the ITO and the AAC allowed a relief of Rs. 1,000. Keeping the circumstance in view, I reduce the disallowance to Rs. 1,000. The appellant gets a relief of Rs. 1,000 in this regard. 3. The next ground regarding bad debt was not pressed by the representative. Therefore, the disallowance regarding bad debt is confirmed. 4. The next ground that was pressed by the representative is regarding the charging of interest under Section 139 (1 ). However, it is observed that the charging of interest under Section 139 (1) is not appealable under Section 246 and, as such, I decline to interfere in this regard. 5. In sum the appellant gets a relief of Rs. 1,000. 6. The ITO is directed to give effect to this order both in the hands of the firm and consequential effect in the hands of the partners. The appeal is partly allowed. (Sd.) S. Narasimhan Appellate Asst. Commissioner of Income-tax, Range-AF, Calcutta. "
( 2 ) THE fact leading to the order is that the petitioner is a firm registered under the Indian Partnership Act as well as under the I. T. Act, having at the material period three partners, namely, (1) Shri Mohanlal Soni, (2) Shri Ramgopal Soni, and (3) Shri Radhakissen Soni, each having 1/3rd share in the partnership business. The petitioner was assessed as such as a registered firm within the meaning of Section 2 (7) of the said Act and it is alleged that the method of accounting maintained by the petitioner is "mercantile system" and the accounting period is Dewali year. In compliance with the notice under Section 210 of the I. T. Act for payment of advance income-tax for the assessment year 1967-68 the petitioner paid the advance tax of Rs. 1,316 on 20th August, 1966, and Rs. 1,711 on 4th February, 1967, amounting to Rs. 3,027. In respect of the period 1968-69, the payment of advance income-tax was made on 5th March, 1968, the payment being Rs. 1,254. For the period 1969-70, the advance tax of Rs. 3,564 was paid in two instalments, first on 7th December, 1968, and the last one on 13th March, 1969. For the assessment year 1967-68 the petitioner furnished its income-tax return on 10th July, 1967, showing its income at Rs. 69,751. 47. Thereafter, the petitioner found certain discrepancies in the computation of its income and the petitioner furnished a "duplicate revised return" on 5th January, 1970, under Section 139 (5) of the said Act and on the basis of the said revised return the petitioner paid further tax of Rs. 1,100 on 19th January, 1972, under Section 140a of the Act. For the assessment year 1969-70, the petitioner furnished the return on 2nd January, 1970, showing the enhanced total income, and on the basis thereof the petitioner paid a further tax of Rs. 1,600 under Section 140a of the I. T. Act. The assessment for the assessment year 1967-68 was completed on 31st January, 1972, under Section 143 (3) of the said Act by which the
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