1996 (2) TMI 112 - HC - Income Tax

Summary

Issues Involved:
1. Liability to pay interest for late filing of returns.
2. Applicability of section 154 for rectification of interest charged.

Summary:

Re: Question No. 1:
The primary issue was whether the assessee was liable to pay interest for the late filing of returns for the assessment years 1968-69 and 1969-70. The assessee did not file returns within the time allowed u/s 139(1) and also failed to file within the extended period. Notices were issued u/s 148, and returns were eventually filed in response to these notices. The Income-tax Officer levied interest for late filing, which was contested by the assessee.

The Tribunal held that the returns filed in response to notices u/s 148 could not be deemed as returns filed u/s 139(2) and thus, interest was not leviable. The High Court agreed with this view, stating that the legal fiction in section 148 is limited to treating the notice as one issued u/s 139(2) for procedural purposes only. The return filed in response to a notice u/s 148 is not equivalent to a return filed u/s 139(2). The High Court cited precedents from the Calcutta High Court and Gauhati High Court supporting this interpretation. Consequently, the Tribunal was correct in holding that the assessee was not liable to pay interest for the late filing of returns.

Re: Question No. 2:
The second issue was whether the Tribunal was correct in allowing the application for rectification u/s 154 of the Act. The Revenue argued that the matter of charging interest was debatable and not a mistake apparent from the record, which could be rectified u/s 154. The High Court agreed with the Revenue, stating that a mistake apparent from the record must be obvious and patent, not something that requires a long drawn process of reasoning. Given the divergence of opinion among various High Courts on whether a return filed in response to a notice u/s 148 is a return u/s 139(2), the issue was indeed debatable. Therefore, the Tribunal was not justified in allowing the rectification application u/s 154.

Conclusion:
1. The assessee was not liable to pay interest for the late filing of returns for the assessment years 1968-69 and 1969-70.
2. The Tribunal was incorrect in holding that the issue regarding the charging of interest was not debatable and hence not beyond the scope of section 154 of the Act.