1988 (2) TMI 48 - HC - Income Tax

Summary

Issues:
1. Whether the assessee's income from salt production qualifies as agricultural income under section 10(1).
2. Challenge against the levy of interest under section 139 for belated filing of the return.
3. Appealability of the levy of interest under section 139 in an appeal against the assessment.
4. Interpretation of rule 117A of the Income-tax Rules, 1962.
5. The correctness of the Tribunal's view that interest under section 139(1) can only be sustained if the assessee applied for an extension of time.

Analysis:

1. The assessee, a registered firm, contended that income from salt production should be exempted as agricultural income under section 10(1). However, all authorities, including the Tribunal, rejected this contention.

2. The Income-tax Officer levied interest under section 139 for late filing of the return, which was challenged by the assessee. The Appellate Assistant Commissioner initially held that an appeal against the levy of interest was not maintainable. However, the Tribunal allowed the appeal to contest the levy of interest in an appeal filed against the assessment order.

3. The Tribunal's decision was based on the Supreme Court ruling that the levy of interest can be challenged in an appeal against the assessment. The Tribunal directed the Income-tax Officer to examine the additional grounds filed regarding the levy of interest under section 139.

4. The Tribunal's reference to rule 117A of the Income-tax Rules was questioned by the Revenue, arguing that the appeal was limited to the quantum of interest, not the levy itself. However, the court rejected this argument, stating that the appeal did contest the levy of interest as such, not just the amount.

5. The court clarified that interest under section 139(8) is leviable for late filing of returns, regardless of whether an application for extension of time was made. The court cited a Supreme Court decision to support this interpretation, emphasizing that the Income-tax Officer has the authority to charge interest under certain circumstances outlined in the law.

In conclusion, the court answered question No. (1) and (2) against the Revenue, affirming the assessee's right to dispute the levy of interest in an appeal against the assessment. However, question No. (3) was answered in favor of the Revenue, rejecting the Tribunal's view on the necessity of an application for extension of time for the levy of interest under section 139(1).