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TMI Blog1973 (2) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... a total income of Rs. 4,25,393 on the basis of its return and a demand notice was accordingly issued for payment of Rs. 61,379.21 and actually Rs. 22,219.21 being reduced by the advance tax of Rs. 39,160, already paid. Thereafter, the respondent No. 1 made an assessment under section 143(3) of the Act and determined the total income of the petitioner as Rs. 4,22,111 (annexure " A "). A demand notice accordingly was issued on 16th December, 1968, for a sum of Rs. 56,142 which, after adjustment of the amounts paid earlier, came to Rs. 2,584. The calculation arrived at included a sum of Rs. 3,158 charged as interest under section 139 (annexure " B "). The petitioner submitted an application to the respondent No. 1 on 15th March, 1967, for waiver of the interest under section 139(8) read with rule 117A of the Income-tax Rules (annexure " C "). The respondent No. 1 also made an order under section 154 of the Act rectifying his earlier assessment made under section 143(3) and thereby the total income was reduced to Rs. 4,17,954. Although the total income was reduced, the total tax charged was enhanced to Rs. 56,372 and the interest charged under section 139 was also enhanced to Rs. 4,09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mises, Mr. Baruah, the learned counsel for the petitioner, made the following submissions : (1) The Income-tax Officer can charge interest under proviso (iii) to section 139 only when he allows extension of time for filing the return to the assessee on an application made by him and, in the instant case, the petitioner not having applied for extension of time, the charging of interest for delayed return is without jurisdiction. (2) Clause (a) of proviso (iii) to section 139 is violative of article 14 of the Constitution inasmuch as while all other assessees are liable to pay compensatory interest on the balance of tax actually found due, the petitioner, a registered firm, has to pay interest on a much more onerous basis and not on the amount due from it but on a very much higher amount that would have been due if the assessee had been assessed as an unregistered firm. (3) The Income-tax Officer is bound in law to allow the petitioner credit for advance tax paid by it while computing the interest payable under proviso (iii). Before we deal with the first submission, we may set out the relevant provision of section 139 as was in force at the relevant time. " 139. (1) Every ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hstanding anything contained in clause (iii) of the proviso to sub-section (1), the Income-tax Officer may, in such cases and under such circumstances as may be prescribed, reduce or waive the interest payable by any person under any provision of this section." (Inserted by the Finance Act, 1963). Mr. Baruah submits that the petitioner in this case had not made any application for extension of time to furnish its return and there was, therefore, no occasion for the Income-tax Officer to extend time. He submits that an application by the assessee and a consequent order extending time for furnishing the return are conditions precedent for authorising the Income-tax Officer to charge interest under clause (iii) of the proviso to section 139(1) which is invoked in this case by the department. Under section 139(1), every person who has a taxable income in the previous year is under an obligation to furnish a return of his income. Different time-limits for submission of return are mentioned in clauses (a) and (b). These time-limits are allowed under the Act and there is no need for any application when the return is submitted within the time allowed under section 139(1)(a) and (b). The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the previous year on 11th April, 1966, before the assessment has been made in this case and before the expiry of the period mentioned in the sub-section. That immediately attracts clause (iii) of the proviso to sub-section (1) which empowers the Income-tax Officer to charge interest for late submission of the return. Sub-section (4) of section 139 is, therefore, a complete answer to the first submission of Mr. Baruah. There is, therefore, no substance in this contention. Mr. Baruah has drawn our attention to a decision of the Andhra Pradesh High Court in Kishanlal Haricharan v. Income-tax Officer and he strenously urges us to take the same view as expressed in the following passage relied upon by him : "A perusal of the proviso (proviso to section 139(1)) makes it clear that it is only when an assessee requests for time under the third clause, he can be directed to pay penal interest as provided in the clause. Where the assessee does not request for time for submitting a return, the third clause has no application. Other consequences may follow. For example, the petitioner may subject himself to the penalty provided in section 271 of the Act." With respect, we are unable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being penal as well as compensatory. It is penal as it entails (sic) on account of a breach of the mandate of section 139 and hence has relevance only to default in submission of a return and not to wrongful detention of money due. We are not required to consider in this case whether the position would be the same in cases of interest payable under several other provisions of the Act, such as, sections 215, 217, 220(2) and 243 of the Act wherein withholding of money due to a party appears to be the relevant consideration. Mr. Baruah strenuously submitted that we should hold charging of interest as a compensatory measure instead of it being penal in order to steer clear of the decision of the Supreme Court in Jain Brothers v. Union of India. In that case, a challenge was made to section 271(2) of the Act of 1961, on the ground of contravention of article 14. The Supreme Court held in that case as follows : "Now a firm when registered is treated as a separate entity liable to tax. After 1956 it has to pay tax at a special reduced rate. If a firm got itself registered the partners were entitled to certain benefits and advantages. It was, however, open to the legislature to say that ..... 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