Civil Appeal Nos 1032 1036 of 1973
From the Judgment and order dated 1621973 of the Gauhati High Court in Civil Rule Nos 1142 to 1146 of 1971 ST Desai RP Agarwala Mrs Kum Kum Sen Praveen Kumar DN Mukherjee Ranjan Mukherjee and NR Choudhary for the Appellants
Dr V Gauri Shanker and Miss A Subhashini for the Respondents
The Judgment of the Court was delivered by DUIT J
The appellants who are all registered firms within the meaning of section 239 of the Income Tax Act 1961 hereinafter referred to as the Act  have preferred these appeals against the judgments of the Gauhati High Court overruling the challenge of the appellants as to the legality of the interest charged by the Income tax officer for the delayed filing of returns and also as to the constitutional validity of sub section 4 of section 139 of the Act as it stood before April 1 197 l The relevant provisions of section 139 as it stood prior to April 1 1971 are as follows section 1391
Every person if his total income   during the previous year exceeded the maximum amount which is not chargeable to Income tax shall furnish a return of his income     a in the case of every person  before the expiry of six months from the end of the previous 692 year   or before the 30th day of June of the assessment year whichever is later b in the case of every other person before the 30th day of June of the assessment year Provided that on an application made in the pre scribed manner the Income tax officer may in his discretion extend the date for furnishing the return i in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired on or before the 31st day of December of the year immediately preceding the assessment year and in the case of any person referred to in clause b up to a period not extending beyond the 30th day of September of the assessment year without charging any interest ii in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired after the 31st day of December of the year immediately preceding the assessment year up to the 31st day of December of the assessment year without charging any interest and iiiup to any period falling beyond the dates mentioned in clauses i and ii in which case interest at nine per cent per annum shall be pay able from the 1st day of October or the 1st day of January as the case may be of the assessment year to the date of the furnishing of the return a in the case of a registered firm or an unregistered firm which has been assessed under clause b of section 183 on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm and b in any other case on the amount of tax payable on the total income
693 reduced by the advance tax if any paid or by any tax deducted at source as the case may be
In the case of any person who in the Income tax officer s opinion is assessable under this Act whether on his own total income or on the total income of any other person during the previous year the Income tax officer may before the end of the relevant assessment year serve a notice upon him requiring him to furnish within thirty days from the date of service of the notice a return of his income or the income of such other person during the previous year in the prescribed form and verified in the prescribed manner setting forthwith such other particulars as may be prescribed Provided that on an application in the prescribed manner the Income tax officer may in his discretion extend the date for the furnishing of the return and when the date for furnishing the return whether fixed originally or on extension falls beyond the 30th day of September or as the case may be the 31st day of December of the assessment year the provisions of sub clause iii of the proviso to sub section  1 shall apply
Any person who has not furnished a return within the time allowed to him under sub section 1 or sub section 2 may before the assessment is made furnish the return for any previous year at any time before the end of four assessment years from the end of the assessment year to which the return relates and the provisions of sub clause iii of the proviso to sub section 1 shall apply in every such case
 In all these cases it is not disputed that no application for extension of time to file returns was made by the appellants for the relevant assessment years
The returns were submitted before the assessment was made and also before the end of the four assessment years as mentioned in sub section 4 of section 139 of the Act
The Income tax officer assessed the appellants under section 1433 of the Act and determined the total incomes of the appellants and the amounts of tax payable by them
In view of sub section 4 of section 139 the Income tax officer also added to the amount of tax interest calculated at the rate of six per cent per annum on the amount of tax which would have H 694 been payable if the firms had been assessed as unregistered firms
A Being aggrieved by the charging of interest under sub section 4 read with clause iiia of the proviso to sub section  I of section 139 of the Act the appellants filed writ petitions before the Gauhati High Court challenging the charging of interest and the validity of subsection 4 read with clause iiia of the proviso to sub section  1 of section 139 of the Act as violative of Article 14 of the Constitution The Gauhati High Court as stated already overruled the challenge and dismissed the writ petitions except that some writ petitions were allowed in part only as the High Court directed the Income tax officers to take into account the advance tax paid by the assessees before calculating the interest
Hence these appeals
The first contention made on behalf of the appellants is that it is clear from the provisos to sub sections  1 and 2 of section 139 of the Act that unless an application is made for extension of the date for furnishing the return the question of charging any interest on the amount of tax does not at all arise
A similar contention was made before the High Court by the appellants but the High Court overruled the same
Much reliance has been placed on behalf of the appellants on an observation of this Court in Commissioner of Income tax AP vs M Chandra Sekhar  In that case this Court has observed that it is only where the Income tax officer extends the time for furnishing the return beyond September 30 or December 31 as the case may be the interest becomes payable The said observation has been made by this Court relating to clause iii of the proviso to sub section  1 of section 139 of the Act while considering the question whether charging of interest indicated that the Income tax officer was satisfied that there was sufficient cause for the delay in filing the return of income and whether the cancellation of the penalties levied under section 271a of the Act was justified
Nothing has however been said by this Court in respect of sub section 4 of section 139 of the Act
Sub section 4 is a substantive provision and it does not provide for making an application to the Income tax officer for the purpose of extension of the date for the furnishing of the return
What is provided in sub section 4 is that even though a person does not furnish the return within the time allowed to him under sub section I or subsection 2 yet he may furnish the same before the end of the four assessment years concerned
695 The substantive provision of sub sections l and 2 of section 139 specify the time within which the return has to be filed The provisos to sub sections 1 and 2 confer power on the Income tax officer to extend the date for filing the return on an application in that regard made by the assessee
So it is clear that the expression time allowed  in sub section 4 of section 139 is not confined only to the extension of time granted by the Income tax officer but also to the time originally fixed for the filing of returns under sub sections  1 and 2 of section 139 of the Act
There may be two types of cases for the late filing of returns namely  1 the assessee after getting the date extended by the Income tax officer under sub section  1 or sub section 2 of section 139 of the Act does not file the return within the extended date but files the same before the end of four assessment years concerned and 2 the assessee without filing any application for extension of time files the return beyond the period mentioned in sub section  1 or sub section 2 but before the end of four assessment years in question
In either case the provision of clause iii of the proviso to sub section l of section 139 will apply
In other words the Income tax officer will be entitled to charge interest on the amount of tax in accordance with the provision of clause iii of the proviso to sub section  1 of section 139
Thus where time has been extended by the Income tax officer on an application made in that regard by the assessee and the assessee does not file the return within the time allowed and where no such application has been made by the assessee but the return is filed by him beyond the time allowed but before the end of the four assessment years concerned in either case the Income tax officer will be entitled to charge interest in accordance with the provision of clause iii of the proviso to sub section 1 of section 139 of the Act
There is therefore no substance in the contention of the appellants that as the appellants had not made any application praying for the extension of time for the filing of returns the Income tax officer had no authority to charge interest under the provision of clause iii of the proviso to sub section  I of section 139 of the Act The next question that requires consideration relates to the validity of sub section 4 read with clause iiia of the proviso to subsection I of section 139
It is submitted by the learned Counsel appearing on behalf of the appellants that as in view of the late filing of the returns there is postponement of the payment of tax and the Revenue suffers loss on account of delayed payment of tax the interest when levied takes the character of penalty This contention 696 need not detain us long for it has already been decided by this Court in Central Provinces Manganese ore Co Ltd vs Commissioner of Income tax  that interest is levied by way of compensation and not by way of penalty
In Chandra Sekhar s case supra this Court also has taken a similar view
The High Court however has taken the view that the interest charged partakes also of a penal character
In expressing that view the High Court has placed reliance upon a decision of this Court in Jain Brothers and others vs Union of India and others  In that case this Court was mainly considering a challenge to section 2712 of the Act which is a penal provision on the ground of contravention of Article 14 of the Constitution
The question whether charging of interest under the proviso to section 1391 of the Act was in the nature of penalty or not was not considered by this Court
Indeed the subject matter was different from that with which we are concerned
In view of the decisions of this Court in Chandra Sekhar s case supra and in the case of Central Provinces Manganese ore Co Ltd supra we hold that the charging of interest did not become transformed to penalty
It is urged on behalf of the appellants that all the assessees who are charged with interest for the late filing of returns should be classified in one and the same category inasmuch as they are similarly situated but sub section 4 read with clause iii of the proviso to sub section  I of section 139 of the Act has without any reasonable justification placed the registered firms in a separate category inasmuch as for the late filing of returns by such firms they are saddled with interest to be calculated on the amount of tax payable by them as unregistered firms
It is submitted that such separate classification of the registered firms for the purpose of payment of interest under section 139 does not bear any nexus to the object sought to be achieved by the section and accordingly the provision of sub section 4 read with clause iiia of the proviso to sub section 1 of section 139 of the Act is discriminatory and violative of the provision of Article 14 of the Constitution and as such is void
In support of the contention the appellants have placed much reliance upon a decision of the Karnataka High Court in M Nagappa vs Income tax officer Central Circle 1 Bangalore  In that case a learned Single Judge of the Karnataka High Court has struck down as void the provision of sub section 4 read with clause iiia of the proviso to sub section  1 of section 139 The reason that weighed with the learned Judge is that the loss suffered by the Government which is sought to be compensated by the legislative measure 697 should be the same in all cases irrespective of the fact that the assessee who is responsible for it is a registered firm or
any other kind of assessee
If that is the case then the amount claimed by way of interest should be directly correlated to the amount of tax withheld by the assessee without reference to the kind of assessee concerned in a given case
It is observed that the object of levy of interest being just reimbursement of what the Government would lose by delayed payment of tax resulting from the delayed filing of the return it is clear that the levy of interest in the case of a registered firm on the tax which would have been payable if the firm had been assessed as an unregistered firm is outside the said object
Accordingly it has been held that section 1394 to the extent it required a registered firm to pay interest at the specified rate on the tax assessed as if it were an unregistered firm whenever the registered firm did not file the return within the specified time was violative of Article 14 of the Constitution and is therefore void
That decision of the learned Single Judge has been upheld by a Division Bench of the Karnataka High Court and is since reported in  The Karnataka High Court before holding that provision of sub section 4 of section 139 read with clause iiia of the proviso to sub section  1 of section 139 of the Act as violative of Article 14 of the Constitution has not considered the reason why when a registered firm submits a return beyond time it is charged with interest calculated on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm
It is because of certain privileges which have been conferred on a registered firm
One of the privileges is that the firm is considered as an assessable unit and is taxed at a reduced rate and the partners are assessed on their respective shares in the income of the firm
This privilege which has been conferred on a registered firm by the Act is not available to an unregistered firm
The Legislature is however competent to withhold any of the privileges conferred on a registered firm if it violates any of the provisions of the Act
A registered firm is required to file its return within the time as prescribed by the Act
Clause iiia of the proviso to section 1391 read with sub section 4 of section 139 in effect only provides for the withdrawal of the privilege of the registered firm to be assessed at a reduced rate because of its non compliance with the provisions of sub sections 1 and 2 of section 139 of the Act
In other words the registered firm is treated as an unregistered firm for purposes of quantification of interest
The contention of the appellants that by treating the registered 698 firms as unregistered firms for the charging of interest the Legislature has placed the registered firms in a separate category is not at all comprehensible
On the other hand by treating the registered firms as unregistered firms the Legislature has avoided the discrimination that would have been there if the registered firms were not so treated for the purpose of charging of interest
In other words if the registered firms had been charged with interest on the amount of tax assessed at a reduced rate for the late filing of the returns there would have been discrimination between registered firm and unregistered firms
When a registered firm and an unregistered firm commit the same default in filing returns beyond the time allowed under sub sections  1 and 2 of section 139 of the Act it would be unreasonable and unjust to charge two different rates of interest one at a reduced rate for the registered firm and the other at a higher rate for the unregistered firm
So in our opinion section 1394 read with clause iiia to the proviso of section 1391 of the Act as it stood prior to April 1 1971 has placed the registered firms and the unregistered firms on the same footing as for the purpose of interest they are similarly situated
Dr Gouri Shankar learned Counsel appearing for the Revenue has pointed out to us that except the Karnataka High Court other High Courts namely Madras High Court Gujarat High Court Madhya Pradesh High Court Punjab  Haryana High Court and the Calcutta High Court in Mahendrakumar Ishwarlal  Co vs Union of India  since affirmed on an appeal reported in  Chhotalal  Co vs Income tax officer  Jiwanmal Hospital vs Income tax officer  Hindustan Steel Forges vs Commissioner of Income tax  and Mohanlal Soni vs Union of India  respectively have taken the view that treating of registered firms as unregistered firms for the purpose of charging of interest for the late filing of returns cannot be said to be arbitrary and violative of Article 14 of the Constitution
The view expressed in these decisions in our opinion is correct
As has been noticed already the Karnataka High Court did not consider the question of withholding of the privileges conferred on the registered firm on their default in filing returns within the time allowed under sub sections 1 and 2 of section 139 of the Act so that they may be treated on equal footing with unregistered firms making the same default
In the circumstances no discrimination has been made between a registered firm and an unregistered firm and accordingly the provision of sub section 4 of section 139 read with clause iiia of the proviso to sub section 1 of section 139 of the Act is not violative of Article 14 of the Constitution and is quite 699 legal and valid
The decision of the Karnataka High Court in Nagappa s case supra as affirmed on appeal by the Division Bench of that High Court in so far as it declares the said provision as ultra vires Article 14 of the Constitution is erroneous
Before we part with these appeals we think we should clarify one situation namely where the advance tax duly paid covers the entire amount of tax assessed there is no question of charging the registered firm with interest even though the return is filed by it beyond the time allowed regard being had to the fact that payment of interest is only compensatory in nature
As the entire amount of tax is paid by way of advance tax the question of payment of any compensation does not arise
In CA No 1035 of 1973 it appears that total tax for the assessment year 1968 69 was assessed at RS 16288
The assessee paid advance tax amounting to Rs39018 in three instalments on 2591967 2411968 and 231968
It is apparent that the amount of advance tax paid by the assessee fully covered the amount of tax payable by it
In spite of that the Income tax officer charged the assessee for the said assessment year a sum of Rs 14233 as interest under section 139 of the Act for the delayed filing of the return
As has been observed earlier when the amount of tax and already been paid in the shape of advance tax the question of payment of compensation by way of interest does not arise and the Income tax officer was not therefore justified in charging interest
The assessee is therefore entitled to get refund of the amount paid by way of interest for the said assessment year
The Income tax officer is directed to refund to the assessee the amount paid on account of interest
In the result CA No 1035 of 1973 is allowed and the remaining appeals are dismissed
There will however be no order as to costs in any of these appeals
SL Appeal No 103573 allowed and others dismissed


Summary:
There was a dispute between the first respondent and the appellant in respect of Silt Clearance of River Peali from Uttarbhag Canning Road Bridge up to Hobon Sluice
The matter was referred to the Arbitrator who made his award
The respondent was paid a sum of Rs3252562 in terms of the award and a true copy of the award was forwarded to the Court
The first respondent filed an application under Sections 14 15 16 and 30 of the  for setting aside the award
A Single Judge of the High Court dismissed the application and passsed a judgment in terms of the award
The Division Bench having allowed the appeal of the respondent the matter again came up before the Single Judge who allowed the application of the respondent under Section 5 11 and 12 of the Act and appointed a retire Judge of the High Court as arbitrator and later revoked the authority of the said arbitrator and appointed a lawyer of the High Court as arbitrator
The appellant filed an appeal against the said decision to the Division Bench which held that as there was an extension of time in making the award and the award having been filed within the extended time the award was not beyond time
However it held that an unsigned award could not be made a rule of the Court
Disposing of the appeal by special leave this Court  HELD Under law the mandatory rule is that the award should be signed by the Arbitrator
No doubt an unsigned award cannot be made a rule of the Court
But it is only a formal defect
The Court in such circumstances can extend time for making the award and direct 70 curing of the formal defect in the award
So much time and effort should not be allowed to go waste
Law must subserve justice and endeavour to serve the purpose of law
71 F G In the instant case the award was handed over to the parties and a letter was sent to the parties concerned and award bore no signature of the Arbitrator
The parties acted upon the award
In a situation of this nature the proper order in the interest of justice would be to remit the award under Section 16 of the  for enabling the Arbitrator named therein for signing the award and for that purpose if it is necessary under Section 28 of the  the Court has the power to extend the time to the Arbitrator for making the award final71F H 72A B Accordingly the time is extended by four months and the award remitted to the Arbitrator for signature