The provisions of Section 234a, 234b, and 234c of the Income-tax Act, 1961 are compensatory in nature and the distinction between penalty and interest is crucial. The court also highlighted the application of the doctrine of purposive construction in determining the legislative intent behind the provisions.

( 1 ) INTERPRETATION of the provisions of Section 234a of the Income-tax Act, 1961 (hereinafter REFERRED TO to as the act ) is in question in this writ petition.

( 2 ) THE brief facts are as under :- the petitioners earned substantial capital gains for the assessment year 1995-96 for which the return was due to be filed on 31. 10. 1995. However, taxes due were paid on 25. 09. 1995, i. e. , before the due date of filing of the return, but the return was filed on 29. 09. 1996, i. e. , after a delay of about 11 months. Though returned income was accepted on 29. 01. 1998, yet interest has been charged under the provisions of section 234a on the ground that tax paid on 25. 09. 1995 cannot be reduced from the tax due on assessment. The assessee filed a revision petition under Section 264 of the Act on 09. 11. 1998 before the Administrative Commissioner requesting to delete interest charged under Section 234 of the Act. The Commissioner in his order dated 09. 03. 1999 upheld the action of the Assessing Officer stating that reduction of tax paid on 25. 09. 1995 is not provided in Section 234a of the Act, as it compensates for delay/default in filing of return of income and not the tax. Thus, against the said order of the Commissioner passed on 09. 03. 1999, the assessee filed a writ petition under Article 226/227 of the Constitution of India (in short, the constitution ) before this Court seeking for a writ of certiorised mandamus in respect of the said order passed under section 264 of the Act upholding levy of interest under Section 232a of the Act.

( 3 ) THE heading of Chapter XVII-F is interest Chargeable in Certain Cases . It comprises of Sections 234a, 234b, and 234c. The said provisions were inserted by direct Tax Laws (Amendment) Act, 1987 with effect from 01. 04. 1989.

( 4 ) SECTION 234a of the Act reads thus :-

"234a. INTEREST for defaults in furnishing return of income (1) Where the return of income for any assessment year under sub-sectioh (1) or sub-section (4) of section 139, or in response to a notice under sub-section (1) of section 142, is furnished after the due date, or is not furnished, the assessee shall be liable to pay simple interest at the rate of [one and one-half per cent. ] [w. e. f. 1-6-2001 one and one-fourth 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 section 144,

( 5 ) ON the amount of the tax on the total income as determined under sub-section (1) of section 143 or on regular assessment as reduced by the advance tax, if any, paid and any tax deducted or collected at source. Explanation I.- In this section, "due date" means the date specified in sub-section (1) of section 139 as applicable in the case of the assessee. Explanation 2.- In this sub-section, "tax on the total income as determined under sub-section (1) of section 143" shall not include the additional income-tax, if any, payable under section 143. Explanation 3.- Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this section. (2) The interest payable under sub-section (1) shall be reduced by the interest, if any, paid under section 140a towards the interest chargeable under this section. (3) Where the return of income for any assessment year, required by a notice under section 148 issued [after the determination of income under sub-section (1) of section 143 or] after the completion of an assessment under sub- section (3) of section 143 or section 144 or section 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