2013 (10) TMI 307 - HC - Income Tax

Interest payable by assessee - Amendment to section 139(8) and 215(3) of the Act is retrospective or prospective - Assessing Officer, while rejecting the application for rectification preferred by the assessee charged interest under section 139(8) on the assessed income and interest under section 215(3) from 1.4.84 to 30.3.09 Held that - As per the old provision of section 139(8), interest for late filing of return was to be calculated on the tax paid as per the regular assessment originally framed and not on the enhanced amount of tax payable as per the new order. Keeping in view the fact that this was an additional liability of payment of tax, this will have the effect prospectively and not retrospectively - Interest for the period from 1.4.84 to 30.8.88 was therefore correctly held admissible Decided against the Revenue.

Summary

Issues:
1. Whether the amendment to section 139(8) and 215(3) of the Income Tax Act is retrospective or prospective?

Analysis:
The judgment revolves around the interpretation of the retrospective or prospective application of the amendment made in section 139(8) of the Income Tax Act. The Assessing Officer had charged interest under section 139(8) on the assessed income and interest under section 215(3) from a specific period. The contention was whether this interest could be charged retrospectively or only on the tax liability determined on regular assessment.

The CIT(Appeals) held that interest should be charged as per the amended provision from the date subsequent to the filing of the return specified under section 139(1) until the return was filed. It concluded that interest could only be charged on the tax liability determined on regular assessment for a specific period. The Tribunal also held the amendment in section 139(8) as prospective, allowing interest to be charged only on the tax liability determined on regular assessment. It further determined the period for which interest under section 215(3) could be charged.

The High Court analyzed the provisions of section 139(8) and section 215(3) of the Income Tax Act. It noted that the tax liability could not be increased as there was no provision for such enhancement earlier. The court highlighted that the amendment in section 139(8) was effective from a specific date and could not be applied retrospectively to the assessment year in question. The old provision of section 139(8) calculated interest for late filing of the return based on the tax paid as per the original regular assessment, not on any enhanced amount of tax payable from a new order.

Ultimately, the court upheld that the interest for the tax liability determined on regular assessment for a specific period was correctly admissible. Consequently, the appeal was dismissed, affirming that the interest was to be charged prospectively based on the amended provision and not retrospectively.