1977 (7) TMI 26 - HC - Income Tax

Summary

Issues Involved
1. Levy of interest under Section 217 for failure to file a provisional estimate.
2. Levy of interest under Section 139(1)(iii) for delayed return submission without seeking an extension.
3. Deduction of tax already paid while calculating interest under Section 139(1)(iii).

Detailed Analysis

1. Levy of Interest under Section 217 for Failure to File a Provisional Estimate
The respondent contended that the firm, having been assessed for the assessment year 1967-68, was not obligated to file a voluntary estimate for 1968-69 without a notice from the Income-tax Officer. The court agreed, referencing the Full Bench decision in Additional Commissioner of Income-tax v. Visakha Flour Mills [1977] 108 ITR 466, which held that changes in the firm's constitution due to partner changes did not create a new entity. Thus, the firm was not required to file a provisional estimate without notice, making the interest levied by the Income-tax Officer incorrect.

2. Levy of Interest under Section 139(1)(iii) for Delayed Return Submission Without Seeking an Extension
The respondent argued that interest under Section 139(1)(iii) was wrongly levied as no extension was sought or granted. Initially, the court sided with the respondent, citing Kishanlal Haricharan v. Income-tax Officer [1971] 82 ITR 660 (AP), which stated that interest could only be levied if an extension was requested and granted. However, upon appeal, this issue was referred to a Full Bench due to conflicting decisions.

The Full Bench analyzed the provisions of Section 139, particularly subsections (1) and (4), and concluded that interest under clause (iii) of the proviso to Section 139(1) is leviable even if no extension of time is sought. The Bench noted that the scheme of Section 139 required interest to be paid from October 1 or January 1 of the assessment year until the return is filed, regardless of whether an extension was requested. This interpretation aligned with decisions from other High Courts, such as Karnataka, Gauhati, Orissa, and Gujarat, which also held that interest is due for late returns irrespective of extension requests.

3. Deduction of Tax Already Paid While Calculating Interest under Section 139(1)(iii)
The respondent claimed that the amount of tax already paid should be deducted from the total tax assessed before calculating interest. The court initially agreed, referencing Commissioner of Income-tax v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC), which supported this deduction. However, upon further examination, it was clarified that the tax payment made on February 11, 1971, was not concurrent with the filing of the estimate on January 20, 1971. Thus, the Income-tax Officer was justified in levying interest on the entire tax amount as no tax was paid when the estimate was filed.

Final Judgment
Following the Full Bench's decision, the Division Bench concluded that interest under Section 139(1)(iii) is indeed leviable for delayed returns without an extension request. Consequently, the appeal was partly allowed, and the previous order was set aside to the extent it contradicted this interpretation. The respondent's contentions regarding the deduction of already paid tax and the non-obligation to file a provisional estimate without notice were upheld. There was no order as to costs.