Karnataka High Court
B.L. Srinivasa Gowda (Huf) And Anr. vs The Asst. Commissioner Of Agricultural ... on 25 February, 2004
Equivalent citations: ILR2004KAR2608, [2004]270ITR332(KAR), [2004]270ITR332(KARN), 2004 AIR - KANT. H. C. R. 2460, 2004 TAX LR 954, (2004) 270 ITR 332, (2004) 180 TAXATION 230, (2004) 57 KANTLJ(TRIB) 210
Author: D.V. Shylendra Kumar
Bench: D.V. Shylendra Kumar
JUDGMENT D.V. Shylendra Kumar, J.
1. I have heard the learned Counsel for the petitioner and the learned HCGP appearing for the respondents.
2. Statement of objections has also been filed on behalf of the respondents.
3. In these petitions a common question having been raised on behalf of the petitioners, these petition are disposed of by this common order.
4. Petitioners are assesses under the provision of the Karnataka Agriculture Income Tax Act, 1957.
5. Petitioner in W.P No. 41114/03 filed his returns of agricultural income for the assessment year 1996-1997 on 18-03-1998. This return, the petitioner was required to file by 31-07-1996. On such return, the Assessing officer completed the assessment as per his order dated 16-03-1999 and the Assessing Officer on noticing that there was a delay in filing the return of income, proposed levy of interest under Section 18(3-A) of the Act. After affording an opportunity to the assessee, by his order dated 31-1-2002 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.
6. Likewise, the petitioner in W.P.No 34039/2003 in respect of the assessment year 1995-96, a return for which was due by 31-7-1995 filed only by 28-3-1996. The assessment order was passed on 2.3.01. In this case also the assessing officer having issued notice to the assessee regarding the proposal for levy of interest under Section 18(3)(A) of the Act for the delayed filing of return and the delayed payment of tax, as per his order dated 30-01-2002, a copy of which is produced at Annexure-D, called upon the assessee to pay a sum of Rs. 45,246/- as interest under Section 18(3-A) of the Act.
7. It is the levy of such interest under the provision of Section 18(3)(A) of the act that has been challenged in these writ petition, Section 18 (3-A) of the Act, reads as under:-
"Section 18(3-A) where a return under Sub-section (1) or Sub-section (2) or Sub-section (3) for any assessment year is furnished after the date specified under Sub-section (1) or is not furnished then in cases where the Agricultural Income-Tax Officer has not extended the date of furnishing the return under Section 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-section (1) to the date of the furnishing 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."
8. 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 what ever taxes were due as per the returns that they were filing and petitioners, have become liable to pay certain farther amounts only for the reason that the Assessing officer has not accepted the returns which has been filed, but is determining the amount over and above what had been indicated by the petitioner 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 the learned Counsel that the amount of tax as determined by the assessing officer has been paid within the permitted time and as such there is no occasion for levy of any other interest under the provision of Section 18(3-A) of the Act.
9. Learned Counsel for the petitioner submit that though petitioners urged before the assessing Officer that they are not liable to pay such interest under the provisions of Section 18(3-A) of the Act, Assessing officer nevertheless having levied such interest, petitioners are compelled to approach this Court by passing the remedies available under the statute as it is a pure question of law and depends on the interpretation of the provisions of Section 18(3-A) of the Act. It is submitted that the petitioner 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 Section 18(3-A) of the Act, is it in any way bad in law and as to whether the Assessing officer was justified in calling upon the petitioner to pay this amount of interest as determined in the case of each of the petitioner.
10. On the aspect of understanding the provisions of Section 18(3-A) of the Act, Sri. Parthasarathi, learned Counsel for the petitioner has drawn my attention to the corresponding provisions in the Income Tax Act, 1961 viz., Section 234-A The learned Counsel has also brought to my notice the decision of the supreme Court in COMMISSIONER OF INCOME TAX v. RANCHI CLUB LTD., 247 ITR 209
11. In so far as the levy of interest under the provision of Section 18(3-A) 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 that the learned Counsel has placed reliance on the decision of the Supreme Court in COMMISSIONER OF INCOME TAX AND ORS. v. RANCHI CLUB LTD.
12. I am of the view that this decision of the Supreme Court rendered in the context of interpretation of the provisions of Section 234-A of the Income Tax Act does not further the case of the petitioner in as much as the provisions of Section 18(3-A) of the Karnataka Agricultural Income Tax Act and the provision of the Section 234-A of the Income Tax Act, 1961 are not para materia. The provisions of Sections 234-A reads as under :
" INTEREST FOR DEFAULTS IN FURNISHING RETURN OF INCOME 234-A (1) where the return of income for any assessment year under Sub-section (1) or Sub-section (4) of Section 139, or in response to a notice under Sub-section (1) of Section 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 Section 144, On the amount, of (the tax on the total income as determined under Sub-section (1) of Section 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-section (1) of Section 139 as applicable in the case of the assessee.
Explanation 2: In this Sub-section, "Tax on the total income as determined under Sub-section (1) of Section 143" shall not include the additional income-tax. If any, payable under Section 143.) Explanation 3: Where, in relation to an assessment year, an assessment is made for the first time under Section 147 (or Section 153A), the assessment so made shall be regarded as a regular assessment for the purpose of this Section.
Explanation 4 : (1) Omitted by the Finance Act, 2001, w.r.e.f. 1.4.1989. Prior to its omission, Explanation 4, as inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1.4.1989, read as under:
'Explanation 4 : In this sub-section, " tax on the total income as determined under Sub-section (1) of Section 143 or on regular assessment "shall , for the purposes of computing the interest payable under Section 140-A, be deemed to be tax on total income as declared in the return" .
(2) The interest payable under Sub-section (1) shall be reduced by the interest, if any, paid under Section 140-A towards the interest chargeable under this Section.
13. The decision of the Supreme Court was mainly attributable to the existence of explanation 4 to this provision of the I.T 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 assessing officer, the supreme Court rendered its decision in the case of CIT v. RANCHI CLUB LTD.
14. In fact in the light of the decision of the Supreme Court legislature has stepped in and Explanation 4 to Section 234-A of the Income Tax Act, has now been omitted by the finance Act 2003 and this provision has been given retrospective effect from 1.4.1989. In fact the provisions of Section 18 (3-A) of the State Act and Section 234-A of the Central Act can now be said to be similar in as much 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 Section 18(3-A) of the Act, the indication is that the levy of interest on the tax liability only as per the return of income was up held by the Supreme Court purely based on Explanation 4 to Section 234-A as it is stood earlier. It indicates that but for the explanation it could have been on the liability as determined under the assessment order itself.
15. Having regard to the object of the provision that it is for compensating the revenue for the losses that has 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 return. It is only reasonable to infer that the interest to be levied under Section 18(3-A) of the Act can be with reference to the tax liability as determined by the assessing officer 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 assessing officer 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 the learned Counsel for the petitioners. Accordingly, these petitions are dismissed.