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Constitutional validity of Expln. 2 to sub-s. (8) of s. 139 of the Income-tax Act, 1961 challenged on grounds of violation of art. 14 of the Constitution. Analysis: The petitioner, a registered firm, challenged the additional interest demand raised by the Income Tax Officer (ITO) under s. 139(8) of the Act for filing the return after the specified date. The petitioner argued that Expln. 2 to sub-s. (8) of s. 139 was ultra vires art. 14 of the Constitution. Expln. 2 states that for registered or unregistered firms assessed under a specific clause, the tax payable shall be as if the firm were unregistered. The petitioner's application for interest waiver was rejected by the ITO and the Commissioner of Income-tax. The court referred to s. 271(2), which imposes penalties on registered firms as if they were unregistered. The court highlighted that the Act categorizes firms as registered or unregistered, granting benefits to registered firms but treating them equally for interest and penalty provisions in case of default. The court cited the Supreme Court's decision in Jain Brothers v. Union of India, stating that the legislature can treat a registered firm as unregistered for penalty purposes upon default. The court emphasized that the Act's provisions aim to prevent revenue loss due to late filings. The court rejected the petitioner's argument that Expln. 2 created discrimination, noting that registered firms receive benefits but are equally liable for interest and penalties in case of default. The court disagreed with a Karnataka High Court decision that favored the petitioner's argument, stating that registered firms enjoy exemptions and lower tax rates. The court upheld the validity of Expln. 2, citing judgments from Gujarat, Madras, and Gauhati High Courts supporting the provision. The court concluded that Expln. 2 does not violate the Constitution and dismissed the writ petition without costs. In conclusion, the court upheld the constitutional validity of Expln. 2 to sub-s. (8) of s. 139 of the Income-tax Act, 1961, stating that it does not discriminate against registered firms and serves the purpose of compensating for revenue loss due to delayed filings. The court highlighted the legislative intent to treat registered and unregistered firms equally for interest and penalty provisions in case of default.
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