RANCHI CLUB LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE petitioner, a company registered under the Indian Companies Act, has challenged the validity of the assessment order and consequential demand notice under the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for the assessment year 1991-92, so far as it relates to the levy of interest. It has also challenged the vires of the provisions of Sections 234A and 234B of the Act.

(2.) I do not think there is any substance in the challenge to the vires of the provisions, for, as is evident from a plain reading of these provisions, they are not penal in nature and, therefore, no element of arbitrariness or violation of rules of natural justice, as alleged, can be attached to them. They merely provide for payment of interest by an assessee who commits default in furnishing the return either under Section 139(1) or Section 139(4), or in response to a notice under Section 142(1) of the Act has either failed to pay the advance tax or the advance tax already paid is less than 90 per cent. of the tax assessed against him. No person can make a grievance as to any provision which enjoins upon him the obligation to submit the return in respect of his taxable income or to pay advance tax at the appropriate time and within the prescribed period. It is clear, therefore, that any default committed in that regard even though likely to visit him with evil consequences is of his own making. The consequence thus cannot be said to be penal. The amount on which the interest is levied is the amount which can legitimately be said to be public revenue which although payable by the assessee, has actually not been paid by him. Levy of interest on such amount which the assessee withholds and makes use of cannot be said to be anything but a compensatory measure meant to offset the loss which the Revenue suffers on account of nonpayment of the said amount. This becomes evident also from the fact that the sections contain specific provisions in regard to the period for which this additional liability is imposed on the defaulting assessees.

(3.) SECTION 140A lays down that where any tax is payable on the basis of a return required to be furnished under SECTION 139 or SECTION 148, after taking into consideration the amount of tax, if any, already paid under any provision of the Act, the assessee shall be liable to pay such tax, together with interest payable under any provision of the Act for any delay in furnishing the return or any default or delay in the payment of advance tax, before furnishing the return and the return shall be accompanied by proof of payment of such tax and interest.