M NAGAPPA Vs. ADDL COMMR OF INCOME TAX

JUDGEMENT

(1.) The petitioners in the above petitions ape 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 ouestion of law arises for consideration in all these petitions they are disposed of by this common judgment.

(2.) WPs.926 927 & 928 of 1972 are fied by M|s. M. Nagappa and the relevant assessment years are 1965-66 1966-67 and 1968-69. WP.3401/73 is filed by M/s. Southern Express Transport Co., and the relevant year of assessment is 1969-70. WPs.3402 & 3403|73 are filed by M/s.Mahadeswara Lorry Service against the orders of assessment passed in respect of assessment years 1969-70 & 1970-71. Being aggrieved by the amount of interest claimed under S.139 of the Act and included in the relevant orders of assessment the petitioners have filed those petitions. The concerned Income Tax Officer the Union of India and the Commr of Income Tax have been impleaded as respondents. In all the cases interest under S.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 S. 139(1) read with S.139 (4) (as they stood prior to 1-4-1971) 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 Art 14 of the Constn. 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 lew interest on the tax which they are not in law liable to pay under the Act.

(3.) In order to sustain an attack based on Art. 14 of the Constn of India the classification made by the legislature should satisfy two tests: (1) that there is an intelligible differentia between persons and things which are grouped together and those which are excluded from the group; and (2) that there is a reasonable nexus between the classification and the object intended to be achieved by the classification. The contention of the petitioners is that a registered firm which is an assassee under the Act which has not filed its return within the prescribed time and which files the return either within the time extended by the ITO or after the prescribed time when no extension of time is granted by the ITO cannot be treated differently from the other assessees under the Act in the matter of calculation of interest levied on account of delay in filing the return. If a return ia not filed by an assessee within the prescribed time and the time is not extended for furnishing the return by the ITO under S.139 the assassee has to pay interest at the prescribed rate and also will be liable to pay penalty levied under S.271(1) subject of course to any waiver or reduction of interest and penalty by the appropriate authority. Sub-sec. (2) of S.271 of the Act prescribes that when the person liable to penalty is a registered firm then notwithstanding anything contained in the other provisiops of the Act the penalty imposable under sub-sec(1) of S.271 shall be the same amount as would be imposable on that firm if that firm were an unregistered firm. In Jain Bros v. Union of India, 77 ITB 107. the Supreme Court has up held the constitutionality of the above provision after negativing the contention that it was violative of Art. 14 of the Constn. In that connection the Supreme Court observed as follows :