Law:

Section:

Section 217 of the Income-tax Act, 1961 read, with rule 40A(5) of the Income-tax Rules, 1962 - Advance tax - Interest payable by assessee when no estimate made - Assessment years 1965-66 to 1968-69 - Whether for purpose of levying interest under section 217, distinction between person against whom an order is passed under section 210 and person who has not been previously assessed and who has not filed estimate as required by section 212(3), is based on reasonable classification and, therefore, section 217 is not violative of article 14 of Constitution - Held, yes - Whether, further, power conferred under rule 40(5) of the Income-tax Rules, 1962 on IAC is not unguided power and on that ground section 217 could not be struck down as unconstitutional - Held, yes FACTS The assessee-firm and its partners, had not been assessed to income-tax at any time prior to the assessment year 1965-66. The orders of assessment in respect of the years 1965-66, to 1968-69 were passed by the ITO in the year 1969. While passing the said orders of assessment, the ITO levied interest at the prevailing rate under section 217(1) in respect of the advance tax which they had to pay according to the provisions of the Act. Aggrieved by that part of the order of assessment, the petitioners filed petitions before the Commissioner requesting him to exempt payment of the interest levied under section 217(1) in exercise of his power under rule 40 of the Income-tax Rules 1962 read with section 264. The Commissioner found that there was no valid reason for exempting the petitioners from payment of interest in question. Accordingly, he rejected the petitions. On writ petitions, the petitioners had not questioned the correctness of the order passed by the Commissioner. But they challenged the levy of interest on the ground that section 217 was unconstitutional as, according to them, it was violative of article 14 of the Constitution. It was argued that where persons who had not been previously assessed either under the 1961 Act or under the 1922 Act and who had not filed any estimate as required by section 212(3) were made liable to pay interest under section 217(1) persons against whom an order is…

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