1994 (3) TMI 141 - AT - Income Tax

Summary

Issues Involved:
1. Legality of charging interest under Section 139(8) of the Income Tax Act.
2. Interpretation of the term "month" in the context of Section 139(8) and Rule 119A of the Income Tax Rules, 1962.
3. Validity of the rectification orders under Section 154.

Detailed Analysis:

1. Legality of Charging Interest under Section 139(8):
The Revenue appealed against the CIT(A)'s decision to quash the rectification orders and delete the interest charged under Section 139(8) for the assessment years 1984-85 and 1985-86. The Assessing Officer (AO) had rectified the original assessment orders on the grounds that the returns were filed one month late and charged interest accordingly. The CIT(A) held that the delay was not for a complete month and thus, interest under Section 139(8) was misconstrued.

2. Interpretation of the Term "Month":
The core issue revolved around the interpretation of the term "month" as used in Section 139(8) and Rule 119A. The CIT(A) relied on the Karnataka High Court's decision in B.V. Aswathaiah & Bros., which construed "month" as a calendar month, following the Madras High Court in CIT vs. Kadri Mills and the Calcutta High Court in CIT vs. Brijlal Lohia & Mahabir Prosad Khemka. The Departmental Representative (DR) argued that the actual date of filing should be included in the default period, making the interest chargeable for a complete month.

3. Validity of the Rectification Orders under Section 154:
The Tribunal examined whether the rectification orders under Section 154 were valid. The Tribunal noted that the Karnataka High Court's interpretation of "month" as a calendar month was consistent with the General Clauses Act. The Tribunal found that the term "month" in Rule 119A should be interpreted as a calendar month, not a period of 30 days, thus supporting the CIT(A)'s decision to quash the rectification orders.

The Tribunal considered the conflicting views of different High Courts. The Allahabad High Court in CIT vs. Laxmi Ratan Cotton Mills Ltd. interpreted "month" as a period of 30 days, differing from the Madras and Calcutta High Courts' interpretation. The Tribunal noted that the Calcutta High Court's decision in CIT vs. Brijlal Lohia & Mahabir Prosad Khemka, which followed the Madras High Court, was binding and applicable to the term "month" in the entire Income Tax Act, 1961.

Conclusion:
The Tribunal upheld the CIT(A)'s orders, concluding that the returns filed on 31st July 1984 and 31st July 1985 were within the calendar month and thus, the charging of interest under Section 139(8) was illegal. The Tribunal emphasized that the language of Section 139 read with Rule 119A was ambiguous and capable of multiple interpretations. Following the Supreme Court's principle in CIT vs. Vegetable Products Ltd., the Tribunal adopted the interpretation favoring the assessee. Consequently, the Tribunal dismissed the Departmental appeals and upheld the CIT(A)'s orders.