NAGAPPA M Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THE petitioners in the above petitions are all registered firms who are assessed to income-tax under the provisions of the Income-tax Act, 1961, hereinafter referred to as "the Act". Because a common question of law arises for consideration in all these petitions, they are disposed of by this common judgment.

(2.) W. Ps. Nos. 926, 927 and 928 of 1972 are filed by M/s. M. Nagappa and the relevant assessment years are 1965-66, 1966-67 and 1968-69. W. P. No. 3401/73 is filed by M/s. Southern Express Transport Co., and the relevant year of assessment is 1969-70. W. P. Nos. 3402 and 3403 of 1973 are filed by M/s. Mahadeswara Lorry Service against the orders of assessment passed in respect of assessment years 1969-70 and 1970-71. Being aggrieved by the amount of interest claimed under 139 of the Act and included in the relevant orders of assessment, the petitioners have filed these petitions. The concerned Income-tax Officer, the Union of India and Commissioner of Income-tax have been impleaded as respondents. In all these cases, interest under 139 is calculated at the prevailing rate on the amount of tax which would have been payable if the concerned firm had been assessed as an unregistered firm. The contention of the petitioners is that 139(1) read with 139(4) (as they stood prior to April 1, 1971) which authorised collection of interest from a registered firm at the prescribed rate on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm is discriminatory and violative of article 14 of the Constitution. They claim that they are liable to pay interest on the actual tax payable by them like all other assessees and that there is no justification to levy interest on the tax which they are not in law liable to pay under the Act.

(3.) 139(1) authorises the levy of interest on the amount of tax with held by the assessee when the assessee has not filed his return in time. What is the character of the interest that is levied under 139(1) ? Is it compensatory or penal in character ? The answer to the above questions, according to me, would determine the issue that arises for consideration in these cases.