1. The Income -tax Officer, J.- Ward, Hyderabad has preferred this appeal against the order dated 8th April, 1975 passed by our learned brother ,Gangadhara Rao, J., allowing the Writ, Petn. No. 1464 of 1972 filed by the respondent.
2. The facts relevant for purposes of this appeal are these: The respondent was a firm originally constituted in 1961. It was registered under the Indian Income-tax Act, hereinafter referred to as the Act. On 31-3-66, one of the partners by name G. S. Naidu retired and a new partner A. S. Nandagopal was brought into the partnership. For the assessment year 1968-69, the return was filed, on 20-1-1971. The respondent firm paid a sum of Rs. 4,720/- on 11-2-1971 on self assessment basis under s. 140-A of the Income-tax Act. The assessment was completed on 20-5-1971 and the Income-tax Officer levied besides the tax a sum of Rs. 1,056/- as interest under S. 217 of the Act for failure to voluntarily file the provisional estimate. The Income-tax Officer also levied an interest of Rs. 7,750/- under S. 139(1) of the Act for belated submission of the return of the income. The petitioner having exhausted all the remedies under the Act eventually filed the writ petition. Before Gangadhara Rao, J. three contentions were advanced by the respondent which were as follows :-
1. That the firm was assessed to income-tax for the assessment year 1967-68 : as such, there was no obligation on the part of the firm to file a voluntary estimate of its income for the assessment year 1968-69 without a notice in writing calling upon the firm to file the provisional estimate. As such, the Income-tax Officer was incorrect in levying a fine of Rs. 1,056/- for not filing voluntary estimate.
2. That the Income-tax Officer erred in levying an interest of Rs. 7,750/- under S. 139(1) of the Income-tax Act although no extension of time was prayed for and granted as envisaged in S. 139(1) (a) and (b) of the Act.
3. That the respondent-assessee had paid a sum of Rs. 4,720/- on 11-2-1971 as tax and, therefore, in levying the interest the amount of tax already paid ought to have been deducted from the tax which was levied by the Income-tax Officer and on that amount interest ought to have been levied.
3. These three contentions found favour with our learned brother. So far as the first contention is concerned, the learned Judge was of the opinion that the assessee firm was already assessed for the assessment year 1967-68. If during the relevant period one of the partners retired and a new partner was introduced in the firm, it did not amount to a new entity, but only a change in the constitution of the firm and, therefore, the assessee firm need not file a voluntary provisional estimate for the assessment year 1968-69 without the receipt of notice. For this proposition the learned Judge relied upon a judgment of a Full Bench of this Court in Addl. Commr. of Income-tax, Andhra Pradesh, Hyderabad v. Visakha Flour Mills, (1976) 2 Andh WR 1 : (1977 Tax LR 41 (FB) ), wherein it was held that the death of the partners in the middle of the accounting year would only amount to a change in the constitution of the firm within the meaning of S. 187 of the Income-tax Act and S. 188 has no application. Relying upon this ruling the learned Judge held that since there was only a change in the constitution of partnership, the firm was not liable to file its provisional estimate without receipt of any notice from the Income-tax authority and, therefore, in these circumstances, since admittedly no notice was issued by the Income-tax authorities calling upon the assessee firm for filing the provisional estimate, interest levied by the Income-tax Officer, was incorrect.
4. So far as the second contention is concerned, the learned Judge relying upon the ruling of a Bench decision of this Court in Kishanlal Haricharan v. Income-tax Officer, A-Ward, Nizamabad, : 82ITR660(AP) , came to the conclusion that having regard to the provisions of S. 139(1)only when time was extended by the Income-tax Officer on an application put forward by the assessee for the filing of the return, then only could the Income-tax Officer levy penalty under S. 139(1).
5. So far as the third contention is concerned, the learned Judge relying upon a judgment of the Supreme Court in Commr. of Income-tax. West Bengal v. Vegetable Products Ltd., : 88ITR192(SC) , held that the Income-tax Officer was incorrect in levying an interest of Rs. 4,720/- on the total tax assessed by him. The Income-tax Officer ought to have deducted the amount of tax already paid by the assessee and ought to have levied interest only on the balance.
6. In this appeal, Mr. Rama Rao, the learned Advocate appearing for the Revenue, contends that the induction of a partner on the retirement of the existing partner would amount to a change of the firm and coming into existence of a new firm and, therefore, he submits that the learned Judge was incorrect in holding that the induction of a partner on the retirement of the existing partner was only a change in the constitution of the firm. We regret, we cannot accede to this contention because, to our mind, the retirement of a partner during the relevant assessment year and the introduction of a new partner only amounts to a change in the constitution of the firm, and that is exactly what the Full Bench has decided in Addl. Commr. of Income-tax, Andhra Pradesh, Hyderabad v. Visakha Flour Mills, (1976) 2 Andh WR 1 : (1977 Tax LR 41 (FB)).
7. So far as the third contention is concerned, Mr. Rama Rao contends that the learned Judge was incorrect in coming to the conclusion as he did on the basis of S. 139(1) of the Act. What Mr. Rama Rao contends is that the respondent-assessee had not paid the tax along with the estimate which he had filed on 20-1-1971 and admittedly had paid the tax on the basis of his estimate much afterwards i.e., on 11-2-1971. The interest levied by the Income-tax Officer was only up to the date on which the estimate was filed and since the assessee had not paid the tax on the day when the estimate was filed by him, the Income-tax Officer was justified in levying interest on the whole amount of tax under Section 139(1) of the Act. We are of the opinion that this contention has to be acceded to having regard to the provisions of S. 139(1) of the Act. According to S. 139(1) (a) or (b) the assessee has to furnish a return of his income generally before 30th June of the assessment year. The proviso to that section empowers the Income-tax Officer to extend the date for furnishing the return on an application filed by the assessee. According to Proviso (iii), if the Income-tax Officer extends the date beyond the dates mentioned in provisos (i) and (ii), he is empowered to levy interest at 6% per annum from the 1st day of October or the 1st day of January as the case might be of the assessment year to the date of the furnishing of the return. According to S. 139(1) proviso (iii) (b), interest at 6% could be levied 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 might be. From a reading of S. 139(1), it becomes evident that if along with the estimate the assessee has paid the advance tax, then the Income-tax Officer could levy interest under S. 139(1)(iii) after deducting the advance tax paid by the assessee at the time of the filing of the provisional estimate.
8. In the instant case, if the respondent had paid the tax along with the estimate which he filed, then in that case the ruling relied upon both by the learned Judge and by the respondent, namely Commr. of Income-tax, West Bengal v. Vegetable Products Ltd., : 88ITR192(SC) , would have been made applicable. But as pointed out earlier, no tax was paid by the respondent on the date when he filed the estimate, nor any time earlier, but much later on 11-2-71. What the Income-tax Officer has done is that he levied interest only up to the date of filing of the estimate, and since no tax was paid by the respondent on that date, he was fully justified in levying interest as he did. Hence, with respect, the order o the learned Judge to this extent is set aside.
9. So far as the second contention is concerned, Mr. Rama Rao contends that the learned Judge was incorrect in relying upon the judgment of a Bench of this Court in Kishenlal Haricharan v. Income-tax Officer, A-Ward Nizamabad, : 82ITR660(AP) . What Mr. Rama Rao contends is that in the judgment of the Bench S. 139(1) was not taken into consideration and Obul Reddi, J., as he then was, in Progressive Eng. Co. v. I.T.O., Gudivada, 1974 Tax LR 359 (Andh Pra), had taken sub-sec. (4) of S. 139(4) into consideration and had held that even in a case where the assessee does not file an application for the extension of time, even then, interest could be levied by the Income-tax Officer. We have examined the provisions of S. 139 (1) and (40 in detail and have gone through the judgment of the Bench as well as the judgment of Obul Reddi, J., and we are of the opinion that a point arises in this case which requires a decision by a Full Bench. We, therefore, formulate the following point for the decision of the Full Bench, which is in the following terms:-
'Is interest not leviable under S. 139(1) where the assessee has committed delay in filing the return of his income without seeking extension of time to file the return from the concerned Income-tax Officer ?'
10. The papers may be placed before the Hon'ble the Chief Justice for the formation of the Bench. The Officer will post the Writ Appeal for further orders after the decision of the Full Bench.