1994 (3) TMI 140 - AT - Income Tax

Assessing Officer, Assessment Order, Assessment Year, Late Filing, Mistake Apparent From Record

Summary

Issues Involved:
1. Charging of interest under section 139(8) for late filing of returns.
2. Interpretation of the term "month" for calculating interest under section 139(8).
3. Applicability of Rule 119A in calculating the period of default.
4. Validity of rectification orders under section 154.

Detailed Analysis:

1. Charging of Interest under Section 139(8):
The primary issue revolves around whether the Assessing Officer (A.O.) correctly charged interest under section 139(8) for the assessment years 1984-85 and 1985-86 due to the late filing of returns. The A.O. rectified the original assessment orders, charging interest because the returns were filed one month late. The CIT(A) quashed these rectification orders, holding that the delay was not for a complete month, thus interest under section 139(8) was misconstrued.

2. Interpretation of the Term "Month":
The core of the dispute is the interpretation of the term "month" for calculating interest under section 139(8). The CIT(A) relied on the Karnataka High Court's decision in B.V. Aswathaiah & Bros., which interpreted "month" as a calendar month, not a period of 30 days. This interpretation was based on decisions from the Madras High Court (CIT v. Kadri Mills) and the Calcutta High Court (CIT v. Brijlal Lohia and Mahabir Prosad Khemka), which held that the term "month" should be construed as a calendar month according to section 3(35) of the General Clauses Act, 1897.

3. Applicability of Rule 119A:
Rule 119A of the Income-tax Rules, 1962, states that any fraction of a month should be ignored when calculating interest. The CIT(A) and the assessee argued that since the returns were filed before the completion of a full calendar month, no interest should be charged. The A.O., however, included the date of filing the return in the period of default, leading to the charging of interest. The Tribunal noted that the term "period" is emphasized in Rule 119A, and the rounding off to a whole month supports the interpretation that the interest should not be charged for an incomplete month.

4. Validity of Rectification Orders under Section 154:
The Tribunal examined whether the rectification orders under section 154 were valid. It was argued that the issue of charging interest under section 139(8) is debatable and not clear-cut, making it unsuitable for rectification under section 154. The Tribunal referred to the Supreme Court's decision in T.S. Balaram, ITO v. Volkart Bros., which held that debatable issues cannot be rectified under section 154.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, agreeing that the returns filed on 31st July 1984 and 31st July 1985 did not complete a full calendar month of delay. Consequently, charging interest under section 139(8) was deemed illegal. The interpretation favoring the assessee was adopted, following the Karnataka High Court's decision in B.V. Aswathaiah & Bros. and the binding precedent of the Calcutta High Court. The rectification orders under section 154 were quashed, and the departmental appeals were dismissed.