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TMI Blog1973 (12) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioners and the second respondent is the Additional Commissioner of Income-tax, Gujarat III, who has jurisdiction over the cases of the three petitioners. The short facts giving rise to these three petitions are as follows. The partnership firm is carrying on its business at Morvi in Rajkot District. All the partners of the partnership firm are Indian citizens. The firm is registered under the provisions of the Indian Partnership Act. The firm maintains its books of account on mercantile basis and has adopted Samvat year as its accounting year. The relevant assessment year was 1967-68, the accounting year being Samvat year 2022. The registered firm is an assessee under the Income-tax Act and is being assessed by the first respondent at Morvi. On September 4, 1970, the partnership firm filed its return of income under section 139 of the Income-tax Act along with a declaration in Form No. 12 under section 184, sub-section (7), for assessment year 1967-68. For the relevant assessment year 1967-68 the return of income under section 139(1) of the Income-tax Act had to be furnished before June 30, 1967. The partnership firm did not make any application to the first respondent for e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 227 of the Constitution praying for a writ of certiorari and/or mandamus or any other appropriate writ, order or direction calling for the record of the case and to quash and set aside the orders charging interest and the orders passed in revision confirming the orders levying interest. The petitioner-firm has prayed for an order directing the respondents to refund to it the amount of interest of Rs. 4,000 charged under section 139(1) of the Act. In the case of the petitioner in Special Civil Application No. 655 of 1972, penal interest has been levied by the Income-tax Officer for assessment years 1967-68, 1968-69 and 1969-70 and on the same grounds as the grounds on which the partnership-firm has challenged the order levying interest, the petitioner in Special Civil Application No. 655 of 1972 has prayed that the orders levying penal interest should be quashed and set aside. The petitioner in Special Civil Application No. 1112 of 1972 has been ordered to pay penal interest for assessment years 1967-68, 1968-69 and 1969-70 and she has also prayed that the orders levying penal interest should be quashed and set aside by this High Court. Mr. Patel appearing on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he maximum amount which is not chargeable to income-tax, has to furnish a return of his income or the income of such other person during the previous year in the prescribed manner and setting forth such other particulars as maybe prescribed. Proviso to sub-section (1) of section 139 is material and was in these terms: "Provided that, on an application made in the prescribed manner, the Income-tax Officer may, in his discretion, extend the date for furnishing the return--- . ..... (iii) up to any period falling beyond the dates mentioned in clauses (i) and (ii), in which case, interest at nine per cent. per annum shall be payable from the 1st day of October or the 1st day of January, as the case may be, of the assessment year to the date of the furnishing of the return-- (a) in the case of a registered firm or an unregistered firm which has been assessed under clause (b) of section 183, on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm ; and (b) in any other case, on the amount of tax payable on the total income, reduced by the advance tax, if any, paid or by any tax deducted at source, as the case may be." Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under clause (iii) of the third proviso to section 139(1)(b), only if he had asked for extension of time for submitting a return. Where the assessee did not request for time for submitting a return, clause (iii) of the third proviso to section 139(1)(b) would not apply. Therefore, the Income-tax Officer was not justified, according to the Andhra Pradesh High Court, in levying penal interest and the levy of penal interest was liable to be quashed. At page 662 of the report it has been observed: "A perusal of the proviso makes it clear that it is only when an assessee requests for time under the third clause that 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. The petitioner may also subject himself to a best judgment assessment by the Income-tax Officer. Those consequences may follow when the assessee fails to submit a return, bat the consequences of paying penal interest does not follow. An assessee is liable to pay penal int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to interest. Therefore, the decision of the Andhra Pradesh High Court holding that no interest could be levied on the petitioner was right on the merits of the case. But the observation made therein that sub-clause (iii) of the proviso to sub-section (1) of section 139 has no application where the assessee does not request for time for submitting his return is too wide a statement from which we respectfully dissent." In the case before the Mysore High Court the assessee failed to submit returns for the assessment years 1963-64 to 1969-70. Notice under section 139(2) was served on the assessee for the assessment year 1969-70 and a notice under section 148 was served with regard to the other assessment years. The assessee filed the returns within the dates specified in the notices under sections 139(2) and 148. The Income-tax Officer levied interest under sections 139 and 217 and issued notices for penalty for late submission of returns and non-filing of estimates of advance tax. The assessee applied to the Commissioner to waive the penalty under section 271(4A) and requested for oral hearing. The Commissioner rejected the application without giving the hearing. Thereupon, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take note of the fact that the provisions of clauses (i) and (ii) of the proviso to section 139(1) have to be looked at in order to find out the significance of the dates, 1st day of October and 1st day of January, occurring in clause (iii). In our opinion, the legislature has incorporated by reference the provisions of clause (iii) of the proviso to sub-section (1) in section 139(4) and once those provisions are read as having been so incorporated, so much of these provisions of clause (iii) of the proviso have to be read in section 139(4) as may be applicable and as may be consistent with the language of the two provisions. Under these circumstances, on a mere construction of the provisions of section 139(4) read with the third clause of the proviso to sub-section (1) of section 139, it must be held that an assessee who does not furnish his return within the time mentioned in sub-section (1) of section 139 or within the time given to him under the notice under section 139(2) may file his return before the assessment is made so long as it is filed within the period of four years from the end of the assessment year under consideration. But such belated filing would attract the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 139. When, therefore, over and above the penal interest it is proposed to levy penalty under section 271, there is no question of imposition of double penalty. It is true that this compensation amount could be charged as the law then stood at the time of the relevant assessment year from assessees who filed belated returns but assessees filing no returns at all were not required to pay any such compensation in the shape of interest. It is now well-settled that while article 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation. In order, however, to pass the test of permissible classification, two conditions must be fulfilled, namely: (i) that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group, and (ii) that that differentia must have a rational relation to the object sought to be achieved by the statute in question. In East India Tobacco Co. v. State of Andhra Pradesh and Twyford Tea Co. v. State of Kerala, the Supreme Court has held that in order to be able to succeed on the charge of discrimination and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of article 14 of the Constitution must fail. The third submission applies only to the petitioner in Special Civil Application No. 294 of 1972, because the petitioner in that special civil application is a firm registered under the provisions of the Income-tax Act and under clause (iii) of the proviso to sub-section (1) of section 139, the registered firm has to pay penal interest on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm. Under the scheme of the Income-tax Act, a registered firm as distinguished from an unregistered firm pays tax at a special rate on its total income and such special rate is a concessional rate whereas an unregistered firm pays income-tax on the total income of the firm and at a higher rate. The concession which is given to a registered firm is withdrawn in the case of penal interest and we find that a similar withdrawal of privileges of a registered firm is also provided for in the case of levying of penalty under section 271 of the Income-tax Act. In Jain Brothers v. Union of India Grover J., delivering the judgment of the Supreme Court, has pointed out: "According to that provision when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registered firm. We find that the same view which we are taking in this case regarding a registered firm has been taken by the Madras High Court in Mahendrakumar Ishwarlal Co. v. Union of India. The Madras High Court has held: "It is open to the legislature to say that once a registered firm fails to submit its returns within the prescribed time and applies for extension of time before the officer, it can prescribe certain conditions for the exercise of such a discretion in favour of the defaulting assessee and consequentially impose an additional burden of paying interest at the prescribed rate for the period of extension. No question of discrimination under article 14 of the Constitution can, therefore, arise in such a situation." In Ganesh Das Sreeram v. Income-tax Officer, the Gauhati High Court also has taken a similar view. In paragraph 10 of its judgment the Gauhati High Court has pointed out: "It is obvious that registered firms are entitled to certain privileges under the provisions of the Income-tax Act vis-a-vis other assessable entities. There is, therefore, a reasonable classification in placing them in one group subjecting them to certain liabilities in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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