1984 (4) TMI 4 - HC - Income Tax

Summary

Issues:
1. Validity of the order directing payment of interest under section 139(8) of the Income-tax Act for the assessment year 1972-73.
2. Discriminatory treatment of registered firms for the purpose of interest calculation.
3. Violation of Article 14 of the Constitution of India.
4. Interpretation of section 139(8) as compensatory or penal.
5. Conflict between judgments of different High Courts on the issue.

Analysis:
The petitioner, a firm engaged in business as Esso dealers, challenged the order directing the payment of interest under section 139(8) of the Income-tax Act for the assessment year 1972-73. The Income-tax Officer assessed the firm to income tax at Rs. 70,300, including interest of Rs. 3,416 for being treated as an unregistered firm. The petitioner contended that treating registered firms as unregistered for interest calculation was discriminatory. The petitioner relied on the Karnataka High Court decision in M Nagappa v. ITO [1975] 99 ITR 32, arguing that the levy of interest is compensatory and should be uniform for delayed filers. The Commissioner of Income-tax rejected the contention, leading to the writ petition.

The High Court considered conflicting judgments on the issue. While the Karnataka High Court viewed interest under section 139 as compensatory, the Madras High Court, in Mahendra Kumar Iswarlal & Co. v. Union of India [1974] 94 ITR 65, upheld treating registered firms as unregistered for interest levy. The court held that the legislature could withdraw privileges for defaulting registered firms without discrimination. The court emphasized that the levy was compensatory and not penal. The decision in Mahendra Kumar Iswarlal & Co. v. Union of India [1974] 94 ITR 65 was supported by other High Courts, including Gauhati, Gujarat, Madhya Pradesh, Punjab & Haryana, and Calcutta. The court dismissed the writ petition, upholding the constitutionality of section 139(8) and denying the oral application for leave to appeal to the Supreme Court.

The court refused to reconsider the decision based on the Karnataka High Court's view, as the Madras High Court's stance had wider acceptance. The court found no grounds to grant leave to appeal to the Supreme Court, given the consistent view on the constitutional validity of section 139(8) across High Courts. The judgment highlighted the uniformity in the interpretation of the Income-tax Act's provisions, emphasizing the compensatory nature of interest levies and the legislative authority to regulate privileges for defaulting registered firms.