B. Babu and Co. vs Sixth Income Tax Officer and Another

Puttaswamy, J.—For the assessment year 1981-82 relevant to the accounting year ending on March 31, 1980, the petitioner did not file his return under the Income Tax Act, 1961, on or before the appointed date. In that view, the VIth Income Tax Officer, Hubli, commenced proceedings u/s 147(a) of the Act and issued a consequent notice u/s 148 of the Act calling upon the petitioner to file his return, with which the petitioner complied. On an examination of the return filed, the Income Tax Officer completed the assessment on August 9, 1984, determined the taxes payable for the said year and levied a sum of Rs. 8,463 as interest thereon u/s 139(8) of the Act. In this petition, under article 226 of the Constitution, the petitioner has challenged the assessment order made by the Income Tax Officer on August 9, 1984, (Annexure A), in so far as it levied interest of Rs. 8,463 u/s 139(8) of the Act.

Sri Kishore Mallya, learned counsel for the petitioner, contends that the levy of interest in a proceeding u/s 147(a) of the Act, as the law then stood, is wholly without jurisdiction and illegal. In support of his contention, Sri Mallya strongly relies on a Division Bench ruling of this court in Charles D''souza Vs. Commissioner of Income Tax, Karnataka-II, .

Sri H. Raghavendra Rao, learned junior standing counsel for the Income Tax Department, appearing for the respondents, sought to support the impugned order.

As per the assessment order itself, the Income Tax Officer has invoked his powers u/s 147(a) of the Act and not sections 143 and 144 of the Act. In Charles D''souza Vs. Commissioner of Income Tax, Karnataka-II, this court examining a similar question, as the law then stood, has held that interest cannot be levied in proceedings u/s 147(a) of the Act. In this view, the levy of interest by the Income Tax Officer on the petitioner is liable to be struck down.

In the light of our above discussion, we quash the interest of Rs. 8,463 in the assessment order dated August 9, 1984 of the Income Tax Officer (Annexure-A).

Rule issued is made absolute. But, in the circumstances of the case, we direct the parties to bear their own costs.