TMI Blog1986 (7) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... der sub-sec. (8) of sec. 139 of the Income-tax Act, 1961 amounting to ₹ 56, 391 and interest under sec. 215 of that Act amounting to ₹ 9,42,336, subsequently reduced to ₹ 5,07,880 were levied against the appellant. According to the appellant there was ample and clear justification for the delay in furnishing the return under sec. 139 and for the payment of advance tax under Sec. 212 at a figure less than 75 per cent of the assessed tax. On March 22, 1971 the appellant preferred an appeal under cl. (c) of s. 246 of the Act before the Appellate Assistant Commissioner of Income-tax, Nagpur raising objection to the total income assessed and also including grounds objecting to the interest charged under ss. 139 and 215 of the Act. On being advised thereafter that the grounds objecting to the charge of interest were infructuous inasmuch as orders under ss. 139 and 215 of the Act were not appealable, the appellant filed two revision petitions before the Commissioner of Income-tax under s. 264 of the Act, one objecting to the levy of interest under sub-s. (8) of s. 139 and the other to the interest levied under s. 215. In the two revision petitions the appellant explained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4) for an assessment year is furnished after the 30th day of September of the assessment year, or is not furnished, then (whether or not the Income-tax Officer has extended the date for furnishing the return under sub-section (1) or sub-section (2), the assessee shall be liable to pay simple interest at nine per cent per annum, reckoned from the 1st day of October of the assessment year to the date of the furnishing of the return or, where no return has been furnished, the date of completion of the assessment under section 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid and any tax deducted at source: Provided that in the case of any person whose total income includes any income from business or profession, the previous year in respect of which expired after the 31st day of December of the year immediately preceding the asessment year, such interest shall be reckoned from the 1st day of January instead of 1st day of October of the assessment year: Provided further that the Income-tax Officer may, in such cases and under such circumstances as may be prescribed, reduce or waive the intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore than one year after the submission of the return, the delay in assessment not being attributable to the assessee. (5) Any case in which the Inspecting Assistant Commissioner considers that the circumstances are such that a reduction or waiver of the interest payable under section 215 or section 217 is justified. At the very outset, it is necessary to consider the nature of the levy of interest under sub-s. (8) of s. 139 and under s. 215. It is not correct to refer to the levy of such interest as a penalty. The expression penal interest has acquired usage, but is in fact an inaccurate description of the levy. Having regard to the reason for the levy and the circumstances in which it is imposed it is clear that interest is levied by way of compensation and not by way of penalty. The Income-tax Act makes a clear distinction between the levy of a penalty and other levies under that statute. Interest is levied under sub-s. (8) of s. 139 and under s. 215 because by reason of the omission or default mentioned in the relevant provision the Revenue is deprived of the benefit of the tax for the period during which it has remained unpaid. The very period for which interest is lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvance tax at all or the amount of advance tax determined as payable by the Income-tax Officer is not correct; but if the assesee does not dispute the amount of advance tax determined as payable by the Income-tax Officer, he merely cannot object to the levy of penal interest or question its quantum. xx xxx xxx xx The levy of penal interest under section 139 or section 215 is made in the regular assessment order; the demand issued pursuant to the assessment order is for the total amount of liability imposed inclusive of tax and interest. While levy of penal interest under section 18A of the 1922 Act up to 1st April 1952, was automatic as was noticed by Chagla, C.J. in Ramnath s case [1955] 27 ITR 192 (Bom.), under the Act such levy is not automatic; discretion is vested in the Income-tax Officer to waive or reduce penal interest in the cases and circumstances mentioned in rule 117A and rule 40 of the Income-tax Rules, 1962. If the case of the assessee falls within the scope of the said Rules, the Income-tax Officer is bound in law to consider whether the assessee was entitled to waiver or reduction of interest. It is, therefore, clear that levy of penal interest under sections 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-s. (8) of s. 139 and to the Inspecting Assistant Commissioner before doing so under s. 215 to issue notice to the assessee and hear him in the matter. In cases where the jurisdictional fact attracting the levy cannot be disputed, for example that the return has been furnished under s. 139 with delay, it will be a question merely of satisfying the relevant authority that there are circumstances calling for a reduction or waiver of the interest. If an opportunity to do so has not been made available to the assessee before the order levying interest is made, it will be open to the assessee to apply to the Income-tax Officer after such order has been made to show that a reduction or waiver of interest is justified. We have been referred to the judgment by one of us (Sabyasachi Mukharji, J.) in Premchand Sitanath Roy v. Addl. Commissioner of Income-tax, West Bengal-III, [1977] 109 ITR 751. In that case the question was a very different one. The question was whether a right of appeal was available in regard to the improper exercise of discretion under sub-s. (8) of s. 139. We think that in holding that no right of appeal lay in such a case the High Court was plainly right. As the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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