1982 (6) TMI 26 - HC - Income Tax

Summary

Issues:
1. Challenge to the appellate order passed by the AAC.
2. Disallowance of general expenses.
3. Disallowance regarding bad debt.
4. Charging of interest under s. 139(1).
5. Appealability of the order passed under s. 139(1) of the I.T. Act.
6. Constitutional validity of s. 139(1) proviso, cl. (iii)(a).

Analysis:
1. The petitioner challenged the appellate order passed by the AAC, which was in response to the I.T. assessment order for the assessment year 1967-68. The AAC reduced the disallowance of general expenses to Rs. 1,000 and confirmed the disallowance regarding bad debt. The AAC declined to interfere with the charging of interest under s. 139(1) as it was deemed non-appealable under s. 246, granting relief of Rs. 1,000 to the appellant. The ITO was directed to implement the order in the hands of the firm and partners, partially allowing the appeal.

2. The objection was raised against the disallowance of general expenses amounting to Rs. 2,000. The AAC considered previous disallowances and granted relief of Rs. 1,000, reducing the disallowance to that amount. The appellant received relief of Rs. 1,000 in this regard.

3. The ground regarding bad debt was not pressed by the representative, leading to the confirmation of the disallowance regarding bad debt by the AAC.

4. The representative pressed the ground concerning the charging of interest under s. 139(1). However, the AAC observed that such charging of interest was not appealable under s. 246, thereby declining to interfere in this matter.

5. The High Court found the AAC's decision on the appealability of the order passed under s. 139(1) of the I.T. Act to be erroneous. The High Court held that the charging of interest under s. 139(1) is appealable under s. 246, directing the AAC to re-hear the appeal concerning the interest charge.

6. The High Court examined the constitutional validity of s. 139(1) proviso, cl. (iii)(a) in light of the argument that it equated registered and unregistered firms, alleging a violation of Article 14 of the Constitution. The High Court disagreed with the contention, citing precedents and legislative intent to justify the provision's non-discriminatory nature. The High Court upheld the validity of the provision, emphasizing that no discrimination arises as registered firms are treated as unregistered firms for penalty purposes upon default.

In conclusion, the High Court made the rule absolute to the extent indicated, directing the AAC to re-hear the appeal on interest and affirming the remainder of the appellate order. The High Court stayed the operation of the order for four weeks from the date of the judgment.