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Rameswar Goenka Vs. Income-tax Officer and ors. - Court Judgment

LegalCrystal Citation
Subject;Direct Taxation
CourtGuwahati High Court
Decided On
Case NumberCivil Rule No. 127 of 1971
Judge
ActsIncome Tax Act, 1961 - Sections 139, 139(1) and 139(4)
AppellantRameswar Goenka
Respondentincome-tax Officer and ors.
Appellant AdvocateM.K. Sarma, Adv.
Respondent AdvocateB.P. Saraf and J. Baruah, Advs.
Excerpt:
.....which the return relates. 6. it was also held that for the purpose of assessment under the act, a registered firm as well as a partner of such registered firm are separate entities. both a registered firm as well as its partners are assessed to tax independently, the registered firm on its income and the partner on his share of income of the registered firm, at the respective rates of tax, the income in each case being computed under the provisions of the act. under section 139, both the registered firm as well as its partners individually are liable to be charged with interest. sekhar [1985]151itr433(sc) ,one of the questions referred was 'whether, on the facts and in the circumstances of the case, the appellate tribunal was justified in concluding that the charging of interest..........firm to be treated as an unregistered firm and there is no separate provision to treat the firm as registered firm again and charge interest on the amount of tax payable by the partners afterascertaining the income of the partners from that firm, the charging of inrerest is without any authority of law and ought to be set aside.5. dr. b.p. saraf, the learned counsel for the respondents, submits that this case is fully covered by a full bench decision of this court involving the same parties in shankarlall goenka v. ito and mungi debi goenka v. ito . in the aforesaid decision, both the questions, namely, when no application for extension of time was made whether interest could be charged under section 139(4) of the act ; and whether interest could be levied on the tax upon the.....
Judgment:

K.N. Saikta, J.

1. The petitioner, a resident of Police Bazar, Shillong, impugns the notice demanding interest of Rs. 3,972 levied under Section 139 of the Income-tax Act, 1961, shortly 'the Act', for delayed filing of return. During the assessment year 1962-63, he had income from two firms, namely, M/s. Ganeshdas Sreeram and M/s. A.V. Morello & Co., both having their head offices at Shillong, The Income-tax Officer, A-Ward, Shillong, made final assessment under Section 143(3)/154 of the Act and found his total income at Rs. 91,451 computed as follows :

Rs.

(1)

Share of profit from M/s. Ganeshdas Sreeram :

 

(a)

Business

80,291

(b)

Property

10,183

90,474

(2)

Share of profit from M/s. A. V. Morello & Co.

   977

Total :

91,451

2. A demand notice dated March 27, 1967, for payment of Rs. 51,246 as tax for the said assessment year 1962-63, including an amount of Rs. 6,031 as interest under Section 139 of the Act, was issued. The petitioner filed a petition for waiver of the interest as provided under rule 117 A of the Income-tax (Second Amendment) Rules, 1964, which was rejected on May 30, 1969. The firm, M/s. Ganeshdas Sreeram, of which the petitioner was a partner, filed an appeal wherein the income was reduced to Rs. 74,981 and consequently his tax was reduced to Rs. 37,938 which included interest of Rs. 3,972 levied under Section 139 of the Act, the demand for which is being impugned in this petition.

3. Bearing in mind the decisions in Titaghur Paper Mills Co. Ltd. v. State, of Orissa : [1983]142ITR663(SC) and Raleigh Investment Co. Ltd. v. Governor-General in Council [1947] 15 ITR 332, we first examined the question whether an appeal against levying interest under Section 139 of the Act was provided for in the Act. In K.B. Stores v. CIT , it has been held that interest is not a tax under the Act and that it is only an adjunct of the tax assessed and, therefore, no appeal lies from an order of the Income-tax Officer under Section 139(8) of the Act charging interest for delayed filing of return, as Section 246(c) does not provide for such an appeal. As also the rule in this petition was issued as far back as on March 26, 1971, and similar petitions were entertained and decided by this court, we proceed to decide the petition on merits.

4. Dr. M.K. Sarma, the learned counsel for the petitioner, makes two submissions, namely : (i) that under Section 139 of the Act, the Income-tax Officer is given power to charge interest on the amount of tax only when there is an application praying for extension of time for filing the ' return of income' and on the application so made an order has been passed extending the time. As in the instant case neither was any application made to the Income-tax Officer nor any order extending the time was passed, the Income-tax Officer had no power to charge interest on the amount of tax and the demand made thereunder is without jurisdiction and it ought to be set aside, (ii) That the Income-tax Officer had no power to charge interest on the amount of tax in the hands of the partner of a registered firm. Since it is provided under sub-clause (a) of Clause (in) to the proviso of Sub-section (1) of Section 139 of the Act, that a registered firm shall be treated as an unregistered firm, and it gives power to the Income-tax Officer to charge interest on the firm alone and since the above provision requires every registered firm to be treated as an unregistered firm and there is no separate provision to treat the firm as registered firm again and charge interest on the amount of tax payable by the partners after

ascertaining the income of the partners from that firm, the charging of inrerest is without any authority of law and ought to be set aside.

5. Dr. B.P. Saraf, the learned counsel for the respondents, submits that this case is fully covered by a Full Bench decision of this court involving the same parties in Shankarlall Goenka v. ITO and Mungi Debi Goenka v. ITO . In the aforesaid decision, both the questions, namely, when no application for extension of time was made whether interest could be charged under Section 139(4) of the Act ; and whether interest could be levied on the tax upon the share of income of a partner of a registered firm treated as an unregistered firm for the purpose of Section 139(1), Sub-clause (a) of Clause (iii) of the proviso, arose. It was held by a majority that the language of Sub-section (4) of Section 139 of the Act does not spell out that it is to be applied only in cases where the assessee filed an application for extension of time for filing the return and the Income-tax Officer grants such an extension. The words ' shall apply in every such case' occurring at the end of the sub-section mean, in all cases, where the assessee who failed to submit his return within the time allowed under Sub-sections (1) and (2) furnishes his return for any previous year before the assessment is made at any time before the .end of four assessment years from the end of the assessment year to which the return relates. To interpret the provisions of the sub-section as having application only in such cases where the assessee already applied for extension of time and the Income-tax Officer has granted the same will amount to 'doing violence to the language used by the legislature'. The incorporation of the entire proviso to Sub-section (1) in Sub-section (4) or literal application of the entire proviso to cases coming under Sub-section (4) is not possible and will make no sense. Hence, filing of an application for extension of time by the assessee and grant of such extension by the Income-tax Officer are not conditions precedent for application of Sub-section (4) of Section 139. Under the provisions of Section 139(4) read with Clause (iii) of the proviso to Section 139(1), an assessee who has not furnished his return within the time mentioned in Sub-section (1) of Section 139 or within the time given to him in the notice under Sub-section (2) of Section 139 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 subject, however, to the condition that such belated filing would attract the provisions of Clause (iii) of the proviso to Sub-section (1) and make the assessee liable to pay interest as mentioned in the said clause.

6. It was also held that for the purpose of assessment under the Act, a registered firm as well as a partner of such registered firm are separate entities. Both a registered firm as well as its partners are assessed to tax

independently, the registered firm on its income and the partner on his share of income of the registered firm, at the respective rates of tax, the income in each case being computed under the provisions of the Act. Under Section 139, both the registered firm as well as its partners individually are liable to be charged with interest. Under sub-clause (a) of Clause (iii) of the proviso to Sub-section (1) of Section 139, a registered firm is liable to be charged with interest as if it had been an unregistered firm. But, merely because the registered firm has been treated as an unregistered firm for the purposes of charging interest, the liability of the partner of the registered firm to be charged with interest on his share of income does not cease. It is only if the registered firm had been treated as an unregistered firm for assessment of tax under the Act that the liability of the partner to be assessed to tax would cease and not where it is only for the purpose of charging interest under Section 139, that the registered firm is treated as an unregistered firm. For the purposes of assessment of tax under the Act, the registered firm continues to be treated as a registered firm and its partners continue to be similarly treated. Hence, the mere fact that for the purpose of charging interest, the registered firm is treated as if it were an unregistered firm does not take away the liability of the partner of the registered firm to be charged with interest on his share of the income tinder sub-clause (b) of Clause (iii) of the proviso to Section 139(1).

7. As we are bound by the aforesaid majority decision and we do not find any reason to differ from it, we do not consider it necessary to discuss the minority view. In CIT v. M. Chandra. Sekhar : [1985]151ITR433(SC) , one of the questions referred was ' Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in concluding that the charging of interest indicated that the Income-tax Officer was satisfied that there was sufficient cause for delay in filing the return of income ?' Their Lordships held that where the assessee filed voluntary returns before the end of four years from the end of the relevant assessment year and the Income-tax Officer levied interest up to the date of the filing of the returns, it must be presumed that the Income-tax Officer had extended the time for filing the returns after satisfying himself that it was a case for extension of time. The presumption was founded on the principle that an officer entrusted with a judicial or quasi-judicial duty must be presumed to have discharged his duties in a proper and bona fide manner.

8. In the instant case, admittedly, no application for extension of time was made. We are, however, bound by the majority decision that no application for extension of time need have been made for charging interest under Section 139 of the Act. This petition is accordingly dismissed and the rule discharged. We, however, make no order as to costs.


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