1987 (10) TMI 127 - AT - Income Tax

Summary

Issues:
- Appeal against cancellation of interest levied under section 139(8) of the IT Act 1961.

Analysis:

1. The appeal was filed by the Revenue against the order of the CIT(A) canceling the interest levied under section 139(8) of the IT Act 1961. The assessee, a registered firm, filed its return late for the assessment year 1982-83, admitting income of Rs. 1,04,560. The ITO accepted the return but levied interest of Rs. 2906 under section 139(8) of the IT Act.

2. The assessee disputed the levy of interest, citing a Full Bench decision of the Bombay High Court in CIT vs. Daimler Benz A.G. The CIT(A) entertained the appeal, relying on the judgment of the Gauhati High Court in CIT vs. Maskara Tea Estate, which held that if the tax payable on assessment was fully covered by advance tax paid, no interest should be levied under section 139(8).

3. During the hearing, the Departmental Representative supported the levy of interest, referencing decisions of various High Courts. The representative argued that for penalty under section 271(1)(a), the tax payable as an unregistered firm should be the basis, even if the registered firm had no tax liability.

4. The learned counsel for the assessee supported the order of the CIT(A), while the Tribunal considered both sides' submissions. The CIT(A) found that the income returned was accepted, and the tax payable was covered by advance tax paid, resulting in a refund. The Tribunal cited the Supreme Court's ruling that interest levy is part of the assessment process and can be disputed in appeal.

5. The Tribunal noted that decisions of various High Courts related to penalty under section 271(1)(a) for registered firms, emphasizing the tax payable as an unregistered firm as the basis for penalty. Explaining section 139(8)(a) with Explanation 2, the Tribunal held that interest should be levied based on the tax payable if the firm were assessed as an unregistered firm.

6. Referring to the Kerala High Court decision in Geo Sea Food vs. ITO, the Tribunal held that the basis for interest levy under section 139(8) should be the tax payable as if the firm were assessed as an unregistered firm. Consequently, the Tribunal reversed the CIT(A)'s decision and restored the ITO's order to levy interest under section 139(8) for the assessment year 1982-83.