High Court Of Karnataka
B.L. Srinivasa Gowda (HUF) & ANR. vs. Assistant Commissioner Ofagricultural Income Tax & Anr.
Section KAR Agrl. 18(3A)
Asst. Year 1995-96, 1996-97
D.V. Shylendra Kumar, J.
Writ Petn. No. 41114 of 2003 b/w Writ Petn. No. 34039 of 2003
25th February, 2004
Counsel Appeared :
S. Parthasarathi, for the Petitioner : Smt. Niloufer Akbar, for the Respondents
JUDGMENT
D.V. Shylendra Kumar, J. :
I have heard learned counsel for the petitioners and the learned HCGP appearing for the respondents. The statement of objections has also been filed on behalf of the respondents.
In these petitions, a common question having been raised on behalf of the petitioners, these petitions are disposed of by this common order.
The petitioners are assessees under the provisions of the Karnataka Agrl. IT Act, 1957. The petitioner in WP No. 41114 of 2003 filed his return of agricultural income for the asst. yr. 1996-97 on 18th March, 1998. This return, the petitioner was required to file by 31st July, 1996. On such return, the AO completed the assessment as per his order dt. 16th March, 1999, and the AO on noticing that there was a delay in filing the return of income, proposed levy of interest under s. 18(3A) of the Act. After affording an opportunity to the assessee, by his order dt. 31st Jan., 2002, levied a sum of Rs. 81,764 as interest payable by the assessee due to the delayed filing of his agricultural income and due to the delayed payment of tax. Likewise, the petitioner in WP No. 34039 of 2003 in respect of the asst. yr. 1995-96, a return for which was due by 31st July, 1995, filed only by 28th March, 1996. The assessment order was passed on 2nd March, 2001. In this case also, the AO having issued notice to the assessee regarding the proposal for levy of interest under s. 18(3A) of the Act for the delayed filing of return and the delayed payment of tax, as per his order dt. 30th Jan., 2002, a copy of which is produced at Annex. D, called upon the assessee to pay a sum of Rs. 45,246 as interest under s. 18(3A) of the Act.
It is the levy of such interest under the provisions of s. 18(3A) of the Act that has been challenged in these writ petitions. Sec. 18(3A) of the Act, reads as under : “18. (3A) Where a return under sub-s. (1) or sub-s. (2) or sub-s. (3) for any assessment year is furnished after the date specified under sub-s. (1) or is not furnished then, in cases where the Agrl. ITO has not extended the date of furnishing the return under s. 61, the assessee shall be liable to pay in addition to the tax payable, interest at the rate of twenty-four per cent per annum reckoned from the day immediately following the date specified in sub-s. (1) to the date of the furnishing of the return or where no return has been furnished, the date of completion of the assessment, on the amount of the tax payable on the total agricultural income as determined on regular assessment as reduced by the tax paid, if any.”
The submission of Sri S. Parthasarathi, learned counsel for the petitioner, is that the levy of interest under these provisions is not reasonable, that the petitioner in fact at the time of filing of the return had paid whatever taxes were due as per the returns that they were filing and the petitioners, have become liable to pay certain further amounts only for the reason that the AO has not accepted the returns which has been filed, but is determining the amount over and above what had been indicated by the petitioners as the tax liability. Learned counsel submits that the final determination being by the assessing authority and being not known to the petitioners, it is not reasonable to levy interest on the premise that the returns are filed belatedly or the amount of tax as determined under the assessment order ought to have been paid, even while filing the return of income. It is also the submission of learned counsel that the amount of tax as determined by the AO has been paid within the permitted time and as such there is no occasion for levy of any other interest under the provisions of s. 18(3A) of the Act. Learned counsel for the petitioners submits that though the petitioners urged before the AO that they are not liable to pay such interest under the provisions of s. 18(3A) of the Act, the AO nevertheless having levied such interest, the petitioners are compelled to approach this Court, bypassing the remedies available under the statute as it is a pure question of law and depends on the interpretation of the provisions of s. 18(3A) of the Act. It is submitted that the petitioners having no other remedy under the statute they have approached this Court. The only question that arises for consideration is as to whether there is any justification for levy of interest under s. 18 (3A) of the Act, is it in any way bad in law and as to whether the AO was justified in calling upon the petitioner to pay this amount of interest as determined in the case of each of the petitioners.
On the aspect of understanding the provisions of s. 18(3A) of the Act, Sri Parthasarathi, learned counsel for the petitioner, has drawn my attention to the corresponding provisions in the IT Act, 1961, viz., s. 234A. Learned counsel has also brought to my notice the decision of the Supreme Court in CIT vs. Ranchi Club Ltd. (2000) 164 CTR (SC) 200 : (2001) 247 ITR 209 (SC).
Insofar as the levy of interest under the provisions of s. 18(3A) of the Act is concerned, undisputedly, it is in the nature of a compensatory payment and interest is confined to the shortfall in payment of the tax liability and in respect of the period of delay beyond the permitted time. The amount that was due to the Revenue at a specified point of time having not been paid at that point of time and having been paid at a later date and the non-payment within the permitted time being attributable to the non-filing of the return within the stipulated period, if there is a provision to compensate the Revenue, i.e., the loss due to this, it cannot be said that such a provision is unreasonable or oppressive on the assessee. However, the attack on the orders is on the premise that the interest to be calculated should be with respect to the income declared in the return and not the income assessed and in support of this submission, learned counsel has placed reliance on the decision of the Supreme Court in CIT vs. Ranchi Club Ltd. (supra).
I am of the view that this decision of the Supreme Court rendered in the context of the interpretation of the provisions of s. 234A of the IT Act does not further the case of the petitioner inasmuch as the provisions of s. 18(3A) of the Karnataka Agrl. IT Act and the provisions of s. 234A of the IT Act, 1961, are not pari materia. The provisions of s. 234A read as under : “234A. Interest for defaults in furnishing return of income.—Where the return of income for any assessment year under sub-s. (1) or sub-s. (4) of s. 139, or in response to a notice under sub-s. (1) of s. 142, is furnished after the due date, or is not furnished, the assessee shall be liable to pay simple interest at the rate of one and one fourth per cent for every month or part of a month comprised in the period commencing on the date immediately following the due date, and,— (a) where the return is furnished after the due date, ending on the date of furnishing of the return; or (b) where no return has been furnished, ending on the date of completion of the assessment under s. 144, on the amount of the tax on the total income as determined under sub-s. (1) of s. 143 or on regular assessment as reduced by the advance tax, if any, paid and any tax deducted or collected at source.
Explanation 1.—In this section, ‘due date’ means the date specified in sub-s. (1) of s. 139 as applicable in the case of the assessee. Explanation
2.—In this sub-section, ‘tax on the total income as determined under sub-s. (1) of s. 143’, shall not include the additional income-tax, if any, payable under s. 143. Explanation
3.—Where, in relation to an assessment year, an assessment is made for the first time under s. 147 or s. 153A, the assessment so made shall be regarded as a regular assessment for the purposes of this section. Explanation 4.—(1) Omitted by the Finance Act, 2001, with retrospective effect from 1st April, 1989. Prior to its omission, Expln. 4, as inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1st April, 1989, read as under : ‘Explanation
4—In this sub-section, ‘tax on the total income as determined under sub-s. (1) of s. 143 or on regular assessment’ shall, for the purposes of computing the interest payable under s. 140A, be deemed to be tax on total income as declared in the return’. (2) The interest payable under sub-s. (1) shall be reduced by the interest, if any, paid under s. 140A towards the interest chargeable under this section.”
The decision of the Supreme Court was mainly attributable to the existence of Expln. 4 to this provision of the IT Act, 1961. It was due to this Explanation, wherein it had been specifically made clear that for the purpose of levy of interest, the liability should be looked into only on the income as declared in the return and not as determined by the AO, the Supreme Court rendered its decision in the case of CIT vs. Ranchi Club Ltd. (supra).
In fact in the light of the decision of the Supreme Court, the legislature has stepped in and Expln. 4 to s. 234A of the IT Act, has now been omitted by the Finance Act, 2001, and this provision has been given retrospective effect from 1st April, 1989. In fact the provisions of s. 18 (3A) of the State Act and s. 234A of the Central Act can now be said to be similar inasmuch as there was no such Explanation in the State Act from the very beginning. The decision of the Supreme Court though does not constitute a direct authority for the interpretation of the provisions of s. 18(3A) of the Act, the indication is that the levy of interest on the tax liability only as per the return of income was upheld by the Supreme Court purely based on Expln. 4 to s. 234A as it stood earlier. It indicates that but for the Explanation it could have been on the liability as determined under the assessment order itself.
Having regard to the object of the provision that it is for compensating the Revenue for the losses that have occurred to the State, due to the delayed remittance or payment of the tax liability and which liability is always determined under the assessment order and not only as per the returns, it is only reasonable to infer that the interest to be levied under s. 18(3A) of the Act can be with reference to the tax liability as determined by the AO. The provision being not in the nature of penalty, but in the nature of a compensatory payment, the calculation of interest as is done by the AO is reasonable and is also justified in view of the admitted delay in filing of the returns, which action called for levy of such interest.
16. In the circumstances, there is no merit in the submissions made by learned counsel for the petitioners. Accordingly, these petitions are dismissed.
[Citation : 270 ITR 332]
