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Issues: Liability to pay interest on income-tax when returns are filed after receiving a notice under section 148 of the Income-tax Act.
The High Court of Andhra Pradesh, in the case of a partnership firm, addressed the issue of whether interest on income-tax is payable when returns are filed after receiving a notice under section 148 of the Income-tax Act. The petitioner firm, M/s. Progressive Engineering Company, did not file returns for the assessment years 1968-69 and 1969-70 within the prescribed time under section 139(1) of the Act. The Income-tax Officer issued a notice under section 148, prompting the firm to file the returns. Subsequently, the Income-tax Officer assessed the firm's tax liability and imposed interest on the tax assessed. The firm appealed against the interest levy, arguing that the penal provision of section 139(1) could not be invoked when returns are filed in response to a notice. The court analyzed the provisions of section 139(1) and held that the firm's failure to file returns within the specified time under clauses (i) and (ii) of the proviso to section 139(1) made them liable for interest under clause (iii) of the proviso. The court distinguished the present case from a previous judgment where no returns were filed at all, emphasizing that filing returns after receiving a notice still attracts the interest provision. The court also noted that the firm could seek reduction or waiver of interest under rule 117A. Consequently, the writ petitions challenging the interest levy were dismissed, with the petitioner firm directed to pay costs. In the judgment, Justice OBUL REDDY examined the statutory provisions of section 139(1) and its provisos to determine the petitioner's liability for interest on income-tax. The court highlighted that the firm's failure to file returns voluntarily within the prescribed time, but only after receiving a notice under section 148, did not exempt them from interest liability under clause (iii) of the proviso to section 139(1). The court emphasized that the timing of return filing, beyond the dates specified in clauses (i) and (ii) of the proviso, triggered the application of sub-section (4) of section 139, making the interest provision applicable. Justice OBUL REDDY distinguished the present case from a prior decision where no returns were filed despite a notice, clarifying that the circumstances of filing after receiving a notice do not absolve the firm from interest payment. The court's analysis underscored the interplay between clause (iii) of the proviso and sub-section (4) of section 139, establishing the firm's liability for interest despite the absence of an extension request. Additionally, the court mentioned the option for the firm to seek relief from interest under rule 117A, providing a potential avenue for mitigation of the interest burden. Ultimately, the judgment upheld the interest levy on the petitioner firm and dismissed the writ petitions, with a directive to pay costs.
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