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Issues Involved:
1. Levy of interest under sub-clause (iii) to the proviso to section 139(1) of the Income-tax Act, 1961. 2. Applicability of the provisions of the Income-tax Act, 1961, to assessments for periods prior to 1st April, 1962. Issue-wise Detailed Analysis: 1. Levy of Interest under Sub-Clause (iii) to the Proviso to Section 139(1) of the Income-tax Act, 1961: The main contention was whether interest could be levied under sub-clause (iii) of the proviso to section 139(1) of the Income-tax Act, 1961, when the assessee filed returns in response to notices under section 148 of the same Act. The Tribunal had held that interest could not be charged under the said provision as the assessee did not apply for an extension of time for filing returns nor filed returns under section 139(4). The Tribunal's decision was based on the interpretation that the language of section 297(2)(d)(ii) differed from section 297(2)(g), and the conditions for charging interest under section 139(1) were not met. The High Court examined various judicial precedents, including conflicting decisions from different High Courts. It was noted that some courts had held that interest could not be levied without an application for an extension of time, while others upheld the levy of interest even without such an application. The High Court refrained from expressing an opinion on the construction of section 139 as it stood before its amendment, stating that the pronouncements in Narain Das Paramanand Das [1979] 117 ITR 174 (Cal) were obiter and not binding. 2. Applicability of the Provisions of the Income-tax Act, 1961, to Assessments for Periods Prior to 1st April, 1962: The more fundamental issue addressed by the High Court was whether the provisions of the Income-tax Act, 1961, including those for charging interest, applied to assessments for periods before 1st April, 1962. The High Court referred to the Supreme Court's decision in Govinddas v. ITO [1976] 103 ITR 123 (SC), which held that unless expressly provided, retrospective operation should not be given to a statute that imposes a new liability or obligation. The High Court concluded that section 139 of the 1961 Act, which imposed a liability to pay interest for delayed filing of returns, did not have retrospective effect. The substantive law to determine the liability must be the law under the old Act of 1922, and only the procedure of the new Act could be applied. The High Court held that in respect of assessment years prior to 1st April, 1962, the substantive provisions of the old Act must apply, and the new Act's provisions could not impose a new liability. Therefore, interest could not be charged under the 1961 Act for defaults committed under the 1922 Act. Judgment: 1. Question No. 1: The levy of interest under sub-clause (iii) to the proviso to section 139(1) of the Income-tax Act, 1961, by the Income-tax Officer was not proper and valid in law. (Answered in the negative and in favor of the assessee). 2. Question No. 2: The Tribunal was correct in holding that interest was not chargeable under sub-clause (iii) of the Income-tax Act, 1961, inasmuch as the assessee had filed returns in response to notices under section 148 of the said Act. (Answered in the affirmative and in favor of the assessee). The reference was disposed of accordingly, with no order as to costs. The court also expressed appreciation for the assistance rendered by Mr. Pranab Kumar Pal as amicus curiae.
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