Kapoor Chand Kulish Vs. Union of India (Uoi) and ors. - Court Judgment

Excerpt:
- - through this notice, the petitioner was asked to give a declaration to the following effect :1. the return of income was filed by the assessee prior to the service of a notice to him under section 139(2). 2. the return of income was filed by the assessee voluntarily and in good faith.k.c. agrawal, c. j. 1. through this writ petition filed under article 226 of the constitution of india, the petitioner, kapoor chand kulish, proprietor, rajasthan patrika, jaipur, has sought a writ of certiorari for quashing the order dated september 1, 1980, passed by the commissioner of income-tax, jaipur, rejecting the applications under section 273a of the income-tax act for the assessment years 1974-75, 1975-76 and 1976-77.2. the petitioner is an assessee and is assessed by the income-tax officer, b-ward, jaipur. according to the petitioner, he furnished his return of income under section 139(1) of the income-tax act, 1961 (hereinafter referred to as the 'act'), for the assessment year 1974-75 on october 23, 1975. this return was revised on october 30, 1976. the figures relating to the assessment year 1974-75 are quoted below :date of filingincome amounttaxdate of paymentdate of asst. order12345rs.rs.23-10-7570,79035,14420-11-7530-10-1976 undersection 143(3)revised on 30-10-19762,15,415 + 104apenalty droppedincome assessedassessed tax and interestdates of payment of tax678rs.rs.rs.2,26,512tax 1,77,71430,496 on 26-12-1977interest 139(8) 27,92625,000 on 21 3-1977 2,05,64025,000 on 25-3-197750,000 on 20-5-197740,000 on 202-19771,70,496 + 140-a paymentrs. 35,144.3.the reason for filing the revised return was that, as the petitioner had claimed a difference in the rate of papers, the same being on loan, and which was actually paid in the next year, that amount was deductible in the subsequent assessment year. the assessment for 1974-75 was framed by the income-tax officer on october 30, 1976.4. according to the petitioner, for the assessment year 1975-76, the return was filed on january 3, 1978, voluntarily and without any notice by the income-tax officer. an amount of rs. 2,35,708 was deposited by way of tax payable under section 140a of the act within the specified time. the assessment for this year was framed by the income-tax officer on february 23, 1978.5. for the assessment year 1976-77 also, the petitioner filed a return voluntarily on may 31, 1978, and paid tax within the time. the assessment for this year was framed by the income-tax officer on february 14, 1979.6. as the returns for the aforesaid assessment years 1974-75, 1975-76 and 1976-77 were not furnished within the time prescribed by section 139(1) of the act, the income-tax officer levied interest under section 139(8) of the act as per details given below :assessment yearamount levied(rs.)1974-7527,9261975-7652,1181976-7735,1727. for the assessment years 1975-76 and 1976-77, the income-tax officer also imposed penalties under section 271(1)(a) of the act for late filing of the returns.8. proceedings under section 271(1)(a) of the act were initiated for the assessment year 1975-76 and a penalty of rs. 1,26,066 was imposed under section 271(1)(a) by order dated august 12, 1980, which is annexure iv to this writ petition. similar proceedings were initiated for the assessment year 1976-77 also and vide order dated september 6, 1980, a penalty of rs. 62,119 was imposed. the order has been annexed as annexure v to the writ petition. penalty was also imposed for the assessment year 1974-75 but the same was dropped on february 29, 1979, annexure vi to the writ petition.9. the petitioner thereafter moved an application under section 273a(1) of the act for filing petitions before the commissioner of income-tax for the aforesaid three assessment years for waiver. the petitioner thereafter filed three petitions for waiver of penalty and interest for the aforesaid three assessment years. these petitions are annexures vii, viii and ix to the writ petition.10. the petitioner received a registered notice dated january 18, 1979, from the commissioner of income-tax, jaipur, in regard to the petition under section 273a for the assessment years 1974-75 and 1975-76, which is annexure x to the writ petition. through this notice, the petitioner was asked to give a declaration to the following effect :' 1. the return of income was filed by the assessee prior to the service of a notice to him under section 139(2).2. the return of income was filed by the assessee voluntarily and in good faith.3. the assessee has co-operated in all the enquiries relating to the assessment of his income.4. the assessee has paid the taxes or interest payable in consequence of an order passed under the income-tax act.5. the assessee also paid the taxes payable by him under section 140a(1) within the time prescribed to prove that he has co-operated with the department in complying with the provisions of law.'11. a similar notice was received in respect of the assessment year 1976-77. following was the reply given by the petitioner (annexure xiii to the writ petition) :'1. that the assessee had paid the entire taxes including interest in consequence of an order passed under section 143 under the income-tax act. a photostat copy of the demand notice is enclosed for ready reference.2. the claim made under section 273a is for the first time.'12. since the dispute in the present case is only about the interest which had been charged for late filing of the return under sub-section (8) of section 139 of the act, i need not deliberate on and decide the other items of penalty. the penalty was imposed for the two assessment years, namely, 1975-76 and 1976-77, whereas interest was charged for the assessment years 1974-75, 1975-76 and 1976-77. details which are relevant for the purposes of this case are given below :amount of interest amount of penaltyassessment yearcharged and provisionlevied under section 271(l)(a)1974-75139(8)no.rs. 27,9261975-766rs. 52,118rs. 1,26,066 reduced to rs. 5,043 by the cit (a)1976-77rs. 35,172nil13. it would be seen from the above chart that penalty- of rs. 1,26,066 was imposed for the assessment year 1975-76 but the same was reduced to rs. 5,043 in appeal by the commissioner of income-tax, since a substantial reduction has already been granted, there appears no justification for the same being reduced further by the high court under article 226 of the constitution.14. for the assessment year 1974-75, an amount of rs. 27,926 had been imposed as interest for late filing of return under sub-section (8) of section 139 of the act. similarly, an amount of rs. 52,118 was imposed as interest for the assessment year 1975-76 and rs. 35,172 for 1976-77. under subsection (8)(a) of section 139 of the act, if the return for an assessment year is furnished after the specified date, the assessee shall be liable to pay simple interest at 15 per cent, per annum, reckoned from the day immediately following the specified date to the date of the furnishing of the return. the provisions of this sub-section apply only for the assessment years prior to 1989-90, the levy of interest is a part of the process of assessment and interest is levied by way of compensation and not by way of penalty. this fact has to be kept into account in the assessment proceeding, for, otherwise, the levy of the same would lose its basic character. penalty involves the idea of punishment, corporal or pecuniary. a penalty is a sum inserted in a contract not as a measure of compensation but, rather, as punishment for a default.15. in the.present case, i have mentioned above that, in respect of three years, i. e., 1974-75, 1975-76 and 1976-77, interest for late payment of income-tax had been imposed. the commissioner did not consider that when the assessee himself had filed the revised return, there could be no desire to evade payment of tax.16. however, the question in the instant case is whether the high court, under article 226 of the constitution, can reduce the interest or fix it itself. under article 226, the high court exercises supervisory power and not that of a court of appeal. but, as the basic character of interest which is payable under section 139(8) of the act had not been taken note of by the assessing officer, i would consider sending back the case to the commissioner of income-tax for consideration of the circumstances requiring reduction in interest.17. consequently, the petition is allowed in part for the assessment year1975-76 and allowed in respect of the assessment years 1974-75 and1976-77. the commissioner of income-tax is directed to decide the petitions of the petitioner relating to the assessment years 1974-75, 1975-76 and 1976-77, afresh taking into account the circumstances under which the petitioner could not pay the tax within time. this may be done within three months of the presentation of a copy of this order. the parties shall bear their own costs.