T.V.K. Natarajachandran, Accountant Member - (1.) THIS is an appeal by the revenue which is directed against the order of the Commissioner of Income-tax (Appeals), Nagpur, dated 26-4-1984, wherein he has cancelled the interest levied under Section 139(8) of the Income-tax Act, 1961. The revenue has taken the ground to urge that in the facts and in the circumstances of the case the learned CIT(A) erred in cancelling the interest charged under Section 139(8) of the IT Act, 1961.
(2.) The relevant facts are that the assessee is a registered firm carrying on business in cloth on retail basis. For the assessment year 1982-83, for which Diwali year 1981 is the accounting year, the assessee filed return on 23-2-1983, though due on 30-6-1982, admitting income of Rs. 1,04,560. This was accepted by the Income-tax Officer in toto and the status was adopted as registered firm. While computing the tax, the ITO levied interest of Rs. 2,906 under Section 139(8) of the IT Act, 1961. The assessee disputed the levy of interest relying on the Full Bench decision of the Bombay High Court in the case of CIT v. Daimler Benz A.G. [1977] 108 ITR 961. In that case the Bombay High Court held in connection with levy of penal interest under Section 18A(8) of the IT Act, 1922 on a non-resident company that appeal was maintainable under Section 30(1) on a proper construction of the phrase occurring in Section 30(1), namely, 'denying hi3 liability to be assessed under this Act'. According to the High Court on a proper construction of the relevant phrase occurring in Section 30(1) that it had to be held where the levy of penal interest is denied, appeal would lie to the AAC whereas no appeal would lie merely against quantum of interest charged by the ITO. Therefore, the CIT(A) entertained the appeal filed by the assessee on the ground that the very levy of interest under Section 139(8) has been challenged by the assessee by relying on the judgment of the Bombay High Court in the case of Daimler Benz A.G. (supra). On merits, the CIT(A) relied on the Gauhati High Court decision in the case of CIT v. Maskara Tea Estate [1981] 130 ITR 955 which held that when the tax payable on the assessment was fully covered by the advance tax paid and there was in fact a refund, there was no cause for levy of any interest under Section 139(8) of the IT Act, 1961. Consequently, he cancelled the levy of interest and allowed the appeal filed by the assessee.
(3.) AT the time of hearing, the learned Departmental Representative besides reiterating the ground, supported the levy of interest by relying on the decision of the Bombay High Court in the case of CIT v. Janata Trading Co. [1984] 150 ITR 676, wherein it has been held that in case of registered firm penalty for delay in filing return of income could be imposed on the basis of tax payable as unregistered firm and not on the net amount of tax, if any, payable by it as a registered firm. Even if the tax payable by the registered firm was 'nil' still penalty was imposable on such firm treating it as unregistered firm. In other words, the tax payable treating the registered firm as unregistered firm was the basis for levy of penalty under Section 271(1)(a) and not the net tax payable by the registered firm as such. Reliance was also placed on the decision of the Calcutta High Court in the case of CIT v. Prlya Gopal Bishoyee [1981] 127 ITR 778, which also related to levy of penalty under Section 271(1)(a) read with Section 271(2) of the IT Act, 1961 for delay in filing the return of income. The Calcutta High Court held the same view as the Bombay High Court in the case of Janata Trading Co. (supra). Reliance was also placed on the Full Bench judgment of the Patna High Court in the case of Jamunadas Mannalal v. CIT wherein the Patna High Court held for delay in filing return of income in the case of registered firm even though no tax is payable on assessment, penalty could still be leviable on the basis that firm is an unregistered firm. He pointed out that the legal fiction under Section 271(2) is independent of the tax liability and once it is found that there is default on the part of the registered firm so as to attract the penal provisions of Section 271(1)(a), Sub-section (2) of Section 271 should come into play. In other words, the Patna High Court held that for the purpose of penalty under Section 271(1)(a), the tax payable by the registered firm as an unregistered firm should be the basis even though no tax is due as registered firm. In the light of these decisions, the learned Departmental Representative vehemently supported the levy of interest made by the ITO and urged that the order of the CIT(A) should be set aside and that of the ITO be restored.;