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19. It was next argued on behalf of the petitioners that since there is overlapping both in respect of the period for which the amount of interest is calculated as also the amount on which the same is worked out, the levy must be held to be penal nature. Reference in this connection was made to the examples cited in Circular No. 549 (see [1990] 182 ITR (St.) 1), dated 31st October, 1989, issued by the Central Board of Direct Taxes. This circular and the examples given therein, inter alia, point out the method of calculation of the amount of interest payable in the event of an assessee committing default under the impugned provisions. In terms of the example the liability to pay interest under section 234A is incurred by the assessee if he delays the filing of the return, but besides interest under section 234A the assessee also incurs the liability to pay interest under section 234B of the Act in case he has not paid advance tax in accordance with the provisions of the Act. A careful reading of the Board Circular does show that there is an overlapping in so far as the period for which the interest is calculated under the said two provisions is concerned. In other words, interest is calculated first under section 234A of the Act and again under section 234B for the same period. It was argued that if the levy of interest was compensatory in character there was no question of the Revenue levying any such charge twice over gain for the same period. Inasmuch as interest was being charged for the same period twice, though under two different provisions, argued learned counsel, the same were in substance and reality provisions in the nature of penalty.

20. Mr. Dattu, on the other hand, strenuously submitted that the provisions of sections 234A, 234B and 234C have to be seen as independent provisions, catering to different situations and not as a single provision, applying to any one of such situations. He argued that so viewed the provisions are self-contained and their compensatory character is not lost.

21. I find considerable merit in the submission made by Mr. Dattu. The provisions of sections 234A, 234B and 234C are meant to cater to different situations. Each situation is distinctly different from the other and attracts a liability by way of interest. The question whether the provision making interest payable on the happening of any event is a provision which is compensatory in character will have to be answered in the context of the language and the purpose behind the provision and not by reference to other provisions of similar or analogous nature. Viewed thus, it is not possible to hold that the provisions of sections 234A, 234B and 234C are provisions of a penal nature simply because, in actual application of these provisions there may be situations where an assessee may render himself liable to payment of interest under each one of these provisions simultaneously for the same period nor can the compensatory nature of the provisions be deemed to have been lost simply because in a given situation the provisions may, on account of their simultaneous application to an assessee raise the liability to pay interest for the overlapping period to a rate higher than two per cent. per month. So long as the basic character of the levy remains compensatory the rate of interest which is levied either by the provision itself or on account of its dual effect in a given situation will be wholly immaterial. I have, therefore, no hesitation in repelling the argument advanced by learned counsel for the petitioners that the levy envisaged by sections 234A, 234B and 234C is penal in character by reason only of the said provisions in certain situations applying for periods which are overlapping.

22. It was then submitted by learned counsel appearing for the petitioners that since the rate of interest chargeable under the impugned provisions was higher than the rate which was admissible to the assessee in the event of the refund of tax paid in excess, the charge under the impugned provisions was in the nature of a penalty. Reference in this connection was made by learned counsel to the provisions of sections 220(2), 244 and 244A to show that different rates of interest were prescribed for different situations. It was argued that there was a definite legislative design behind the imposition of interest at different rates and, therefore, the charge of interest at the rate of two per cent. per month in the case of sections 234A and 234B and one and a half per cent. per month in the case of section 234C, besides being highly excessive, manifestly makes the levy penal in nature. I find no substance even in this submission of learned counsel. The very fact that for refunds due to an assessee from the Department on account of excess amount of tax paid the rate of interest applicable is lower than two per cent. or that different rates are prescribed for different situations covered by different statutory provisions does not in my opinion go to show that the rate of interest prescribed under the impugned provisions is either penal in character or that the same makes the provisions themselves penal. As a matter of fact the levy of interest under sections 234A, 234B and 234C has no co-relation whatsoever with the provision regarding payment of interest by the Department on the refunds due to the assessee. Even if there was no provision for payment of interest on the refunds due to an assessee the provisions of sections 234A, 234B and 234C could not be said to be penal in character simply because of the absence of a provision for payment of interest on the refunds. The very fact that a lower rate of interest is prescribed for refunds to be made to the assessees therefore does in no manner suggest let aloe conclusively show that the higher rate of interest prescribed by the provisions of sections 234A, 234B and 234C of the Act makes the said provisions penal in nature. Reference in this connection may be made to Khazan Chand v. State of Jammu and Kashmir . That was a case in which the provisions of the Jammu and Kashmir Sales Tax Act providing for interest from 12 per cent. to 36 per cent per annum were called in question on the ground that the imposition of such a high rate was per se arbitrary and therefore unconstitutional. Repelling the argument, the Supreme Court held that even though the rate of two per cent. per month and particularly the rate of three per cent. per month can be said to be on the higher side yet it was difficult to appreciate how the imposition of such a higher rate of interest would make the provision void or unconstitutional. The following observations are apposite in this connection (at page 224) :

38. A plain reading of the above provisions would show that the power vested in the Board can be exercised only for the benefit of the assessees and not to their prejudice. It is also apparent that the power vested in sub-section (2) includes the power to relax the provisions of sections 234A, 234B and 234C which relaxation can be either in whole or in part. The relaxation can be made either by general order or by special orders issued on the subject in respect of any class of incomes or class of cases, which in the opinion of the Board may deserve such a concession. In other words, the Legislature has itself provided a mechanism for reducing hardship in cases where the same deserved to be mitigated. The inclusion of sections 234A, 234B and 234C in the provisions of section 119(2) is a recognition of the fact that even when the impugned provisions may be compensatory in nature, the same may deserve to be relaxed in certain situations or class of cases to be prescribed by the Board by a general or special order issued in that behalf. It is also obvious that Parliament has anticipated and has provided for contingencies which may make the effect of even a compensatory provision also look harsh in certain situations. The provisions of section 119(2) are meant to provide a healing touch to the assessees falling in a particular category or class that may be found deserving. It is not, therefore, as though Parliament has made no provision whatsoever to cater to a situation which may warrant a lenient view against an assessee. The provisions of section 119 and in particular sub-section (2) thereof are in my opinion a sufficient legislative safeguard against the provisions of sections 234A, 234B and 234C operating harshly in a particular situation. The argument that the Board may not have the power to give relief in an individual case under section 119(2), does not impress me. The question is not whether the Board can grant relief in individual cases. The question is whether the Board can provide for relief in a class of cases which deserve a lenient, a more liberal or a less stringent view of the impugned provisions. So long as that power to prescribe the class of cases in which the provisions would apply less harshly is there, it is a sufficient safeguard.