GANESH DASS SREERAM, ETC. versus INCOME TAX OFFICER, 'A' WARD, SHILLONG AND OTHERS ETC.

Citation: [1988] 1 S.C.R. 689 · Decided: 30-10-1987 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Disposed off

Judgment (excerpt)

GANESH DASS SREERAM, ETC. 
v. 
INCOME TAX OFFICER, 'A' WARD, SHILLONG 
OTHERS ETC. 
OCTOBER 30, 1987 
AND 
[R.S. PATHAK, CJ, RANGANATH MISRA AND MURARI 
MOHON DUTT, JJ.] 
Income Tax Act, 1961-Interest charged by Income Tax Officer for 
delayed filing of returns-Legality of-Sub-section ( 4) of section 139 of 
the Act, as it stood before April 1, 1971-Constitutional validity of. 
A 
B 
c 
The appellants, registered firms under the Income Tax Act, 1961, 
filed delayed returns. The Income Tax Officer assessed the appellants 
under section 143(3) of the Act and determined the total incomes of the 
appellants and the amounts of the tax payable by them. The Income Tax 
Officer also determined and added, under sub-section (4) of section 139 D 
of the Act, the amounts of interest on the amounts of tax payable by the 
appellants. The appellants challenged the charging of interest in the 
High Court by writ petitions. The High Court dismissed all but some 
writ petitions which were allowed in part to the extent that the Income-
tax Officer was directed to take i::.to account the advance tax paid by the 
assessees while calculating the interest. The appellants have filed Civil E 
Appeals Nos. 1032-1036 of 1973, 1927-1933 of 1978 and 1288 and 1289 
of 1980 against the decision of the High Court. 
Allowing Civil Appeal No. 1035 of 1973 and dismissing all the 
other appeals, the Court, 
HELD: Sub-section (4) of se'ction 139 of the Income Tax Act is a 
substantive provision, which does not provide for the making of an 
application to the Income Tax Officer for extention of the date for 
furnishing return. The sub-section provides that even though a person 
does not furnish the return within the time allowed under sub-section (1) 
F 
or (2) of section 139, yet he may furnish the same before the end of four G 
assessment years concerned. The substantive provisions of sub-sections (1) 
and (2) specify the time within which the return has to be filed. The provisos 
to the sub-sections confer power on the Income-tax Officer to extend the 
date for filing the return on an application. The expression "time 
allowed" in sub-section (4) is not confined only to the extension of time 
granted by the Income-tax Officer but also to the time originally fixed for H 
689 
B 
c 
690 
SUPREME COURT REPORTS 
[ 1988] I S.C.R. 
filing the returns under sub-sections (1) and (2). [694G-H; 695A·DI 
The Income-Tax Officer is entitled to charge interest in accord-
ance with the provisions of clanse (iii) of the proviso to sub-section (l) 
.·of section 139 in a case where time has been extended by the Income-
. Tax Officer to file returns on application made by the assessee and the 
return is not filed within the time allowed, and in a case where no such 
application has been made by the assessee, and' the return is filed 
beyond the time allowed but before the end of the four assessment years 
concerned. [695D-F] 
' 
Secondly·; as decided by this Court in Central Provinces 
Manganese Ore Co. Ltd. v. Commissioner of Income-Tax, (19861160 
ITR 961, and Con/missioner of Income Tax A.P. v. Chandra Sekhar, 
(1955) 151 ITR 433, the Interest is levied by way of compensation, and 
not by way of penalty as contended by the appellants. [696A] 
The contention of the appellants that the provisions· of Sub-
D Section,(4) of section 139, read with clause (iii) (a) of the proviso to 
Sub-Se~tion (1) of section 139 is discriminatory and violative of Article 
14 of the Constitution because Sub-Section (4) has placed the registered 
firms In a separate category inasmuch as they have to pay interest 
calculated on the amount of fu payable by them as unregistered· firms, 
and a registered firm is treated as an unregistered firm, for purposes of. ).._ 
E 
qualification of interest, is not comprehensible, Section 139 (4) read with 
clause (iii)(a) of the proviso to section 139(1), as it stood prior to April 
.1, 1971, has placed the registered firms and the unregistered firms on 
the same footing and is not violative of Article 14 or the Constitution 
. and is quite legal and valid. [697H; 698A-D] 
'· F 
·. 
Where advance tax duly covers the entire amount of the tax asses-
-
'· sed, there is no question of charging a registered firm with interest if the -"fl 
return is med beyond the time allowed, regard being given to the fact 
I 
that paymj!nl of interest is only compensatory in nature.· As the entire 
amount or the tax is paid by way or advance tax, the question of pay-
' men!

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