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TMI Blog1971 (11) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... l was dismissed as not maintainable. On further appeal, the Income-tax Appellate Tribunal held that the appeal was maintainable and directed the AAC to dispose of the appeal on merits. At the instance of the Commissioner of Income-tax, the following question has been referred to us under s. 256(1) of the I.T. Act, 1961 : " Whether the assessee's appeal to the Appellate Assistant Commissioner against the interest levied on it under s. 139(1)(iii)(b) of the Income-tax Act, 1961, was maintainable in terms of clause (c) of section 246 of the Act ?" Now, under the third clause of the proviso to s. 139(1), an ITO is invested with the discretion to extend the time for furnishing the return beyond the dates mentioned in clauses 1 and 2, in whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 18A(6) is not a part of the process of assessment of the income of the assessee. Penal interest is imposed only to compel an assessee not to underestimate his income during the current year. A special procedure is prescribed for imposing it and that is regulated by section 18A(6) of the Act. Under that section, the penal interest imposed under section 18A(6) is added to the tax determined under section 23. The fact that the interest is added to the tax determined under section 23 brings out the distinction between the tax determined and the penal interest imposed. Section 29 enables the Income-tax Officer to collect the total amount, i. e., the tax and the penal interest, in the same manner. To put it shortly, the adding of interest to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel for the assessee, contended that these decisions are not good law in view of the observations of their Lordships of the Supreme Court in certain cases to which I shall now refer. In C. A. Abraham v. ITO [1961] 41 ITR 425, the Supreme Court considered the question whether penalty under s. 28 of the 1922 Act could be levied on a partner of a dissolved firm by virtue of the provisions of s. 44 of that Act which enabled the assessment of a partner of a dissolved firm in respect of the income of the dissolved firm. The Supreme Court held that it could be done since the expression " assessment " included not merely the computation of income but the declaration and imposition of the tax liability and the machinery for enforcemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alter the true character of penalty imposed under the two Acts. " In Mathuradas B. Mohta v. CIT [1965] 56 ITR 269 (Bom), the Bombay High Court thought that the ratio of these two decisions was that whatever addition was made in the amount of tax by reason of the provisions of the Act which formed part of the machinery for assessment of tax liability was a tax. We do not think that we will be justified in interpreting the observations of the Supreme Court made in other contexts as laying down a broad proposition equating " penalty " and " penal interest " with " tax ". The concepts of "tax", " penalty " and " penal interest " are too well known for that. It is one thing to say that the levy of " penalty" and " penal interest " is part o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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