1991 (4) TMI 166 - AT - Income Tax

Summary

Issues:
Leviability of interest under section 139(8) for a registered firm in the assessment year 1984-85.

Analysis:
The department filed an appeal against the CIT(A)'s order regarding the levy of interest under section 139(8) for the assessment year 1984-85. The Assessing Officer rectified the assessment order under section 154 to charge interest under section 139(8) as it was not initially charged. The assessee contended that no interest was payable as a refund was due based on the regular assessment. The CIT(A) held in favor of the assessee, emphasizing that interest under section 139(8) could not be charged if no tax was payable after considering advance tax and TDS. The CIT(A) highlighted the purpose of section 139(8) to ensure timely filing of returns and payment of interest only when tax is due after considering all payments made.

The department argued that the CIT(A) misinterpreted Explanation 2 to section 139(8) applicable for the assessment year 1984-85. They relied on decisions of the Bombay High Court to support their stance. On the other hand, the assessee relied on a Supreme Court decision to support their position that no interest should be charged when the entire tax liability is covered by advance tax payments. The tribunal analyzed the provisions of section 139(8) and the relevant explanations. They concluded that the CIT(A) erred in applying the old Explanation 2 and that the interest was correctly levied under section 139(8) as per the law applicable for the assessment year 1984-85.

The tribunal distinguished the Supreme Court decision cited by the assessee, as it pertained to an earlier provision of section 139(8) and was not relevant to the current case. They upheld the department's appeal, emphasizing the applicability of the current law and the Bombay High Court decisions supporting the levy of interest under section 139(8) for registered firms. Consequently, the tribunal reversed the CIT(A)'s order and reinstated the interest charged under section 139(8) for the registered firm in the assessment year 1984-85.