Income Tax Appellate Tribunal - Mumbai
Deputy Commissioner Of Income Tax vs Bennett Coleman & Co. Ltd. on 30 August, 2001
Equivalent citations: [2002]81ITD219(MUM)
ORDER
S.C. Tiwari, A.M.
1. In this appeal filed by Revenue the order of the learned CIT(A) that interest under Section 215 was not chargeable by the AO in the assessment made under Section 143(3) r/w Section 263 is disputed. Facts of the case leading to this appeal, briefly, are that the AO completed the assessment for asst. yr. 1985-86 for the first time on 28th March, 1988, and levied interest under Section 215 amounting to Rs. 13,67,999 which was reduced to Rs. 8,63,650 in appeal. The assesses thereafter made an application under Rule 40 of IT Rules seeking waiver of this interest and Dy. CIT, Special Range-18, Bombay, as per his order dt. 28th March, 1989, reduced the interest under Section 215 to Rs. 4,13,630, as he waived the interest levied by the AO to the extent of Rs. 4,40,020 in exercise of his powers under Rule 40(1) of the IT Rules. Thereafter the assessment originally made on 28th March, 1988, was set aside by the order of the learned CIT, Bombay City-VI, Bombay, dt. 30th March, 1990 and the AO was directed to make the entire assessment de novo. In compliance to this order under Section 263 the AO made an assessment order under s 143(3) r/w Section 263 on 9th March, 1992. While determining the tax payable by the assessee the AO levied interest under Section 215 amounting to Rs. 23,91,413, Aggrieved by this action of the AO the assessee preferred appeal before the learned CIT(A) and argued that it was not open to the AO to charge interest under Section 215 while making the fresh assessment in compliance to an order under Section 263. The main plank of the assessee's argument was that the subsequent assessment made by the AO was not a "regular assessment". In the impugned order the learned CIT(A) first held that as the assessee was denying its liability for being charged of interest, this issue could be agitated in appeal before him as held by Hon'ble Supreme Court in their judgment in Central Provinces Manganese Ore Co. Ltd. v. CIT (1986) 160 ITR 961 (SO). He observed that it was not clear whether in the original assessment the interest under Section 215 had been charged or not. The learned CIT(A) further held that as far as the judgment of Hon'ble Bombay High Court CIT v. Carona Sahu Co. Ltd. (1984) 146 ITR 452 (Bom) was concerned, the same did not deal with the question as to whether an assessment made in compliance to an order under Section 263 will be regular assessment or not. However, as far as Rajasthan High Court judgment CIT v. Multimetals Ltd. (1991) 187 ITR 98 (Raj) was concerned, the same related to the question of levy of interest under Section 215 in an assessment made under a direction under Section 263. Hon'ble Rajasthan High Court held that as the subsequent assessment order in compliance to Section 263 was not a "regular assessment" interest under Section 215 was not chargeable. In that judgment they also considered the amendment to Section 215 brought in w.e.f. 1st April, 1985. The learned CIT(A) also held that provisions of Section 215(6) referred to a reassessment made under Section 147 only. It did not refer to a reassessment made under Section 263. In this view of the matter the learned CIT(A) further held that the view which has been taken by Rajasthan High Court (supra) is nearer to reality. The learned CIT(A), therefore, decided that issue in the following words :
"I, therefore, agree with the learned counsel that this assessment is not regular assessment and hence, interest cannot be charged under Section 215 or 139(8) unless of course if had been charged earlier or it falls within the meaning of Section 3 of Section 215 or 139(8)(b). Hence, this issue is decided in favour of the appellant."
Aggrieved by this order, Revenue is in appeal before us.
2. During the course of hearing before us, the learned Departmental Representative clarified that the word "conspiratory" appearing in the ground of appeal taken by Revenue was a typographical mistake and it should be read as "compensatory". The learned Departmental Representative pointed out that under the provisions of Section 2(40) "regular assessment", has been defined as an assessment made under Section 143(3) or Section 144. Merely because the impugned assessment was made in compliance to a direction under Section 263, it did not cease to be an assessment under Section 143(3). In any case, the earlier assessment made under Section 143(3) had been entirely set aside by the learned CIT under Section 263 with the direction to make entire assessment de novo and, therefore, it was the impugned assessment which was the first assessment order under Section 143(3) and, therefore, there was no reason as to why it should not be treated to be "regular assessment". Referring to the judgments relied upon by the learned CIT(A), the learned Departmental Representative argued that there was a difference between an order under Section 263 and reopening of an assessment under Section 147. While the order under Section 263 obliterated the existence of the original assessment a reassessment under Section 147 only modified the original assessment. Finally, the learned Departmental Representative pointed out that the learned CIT(A) has wrongly held that interest was not charged in the original assessment. The fact of the matter was that interest under Section 215 had been charged even when the assessment was earlier made under Section 143(3).
3. The learned authorised representative of the assessee referred: to the judgment of Hon'ble Supreme Court Modi Industries Ltd. and Ors. v. CIT and Anr., (1995) 216 ITR 759 (SC) and argued that it was a well settled legal position now that only the first assessment made would qualify to be a "regular assessment". In this view of the matter, the impugned order passed by the AO under Section 143(3) r/w Section 263 was not a ''regular assessment".
Secondly, the learned authorised representative of the assessee argued that provisions of Section 215(6) did not make any provision for a revisionary order under Section 263. It enumerated only Section 147. This fact also suggested that it was not the intention of the legislature that interest under Section 215 should be charged when an assessment is made in compliance to the directions given in an order under Section 263.
4. The learned authorised representative of the assessee pointed out to the order under Rule 40(1) made by the Dy. CIT on 20th March, 1989 and pointed out that as per that order it was held that the delay in finalisation of the assessment was not attributable to the assessee and, therefore, interest under Section 215 was not chargeable beyond one year of the filing of the return of income. Hence, in any case, interest could not be charged for a period exceeding one year.
However, Hon'ble Bombay High Court have in their judgment CIT v. Bennet Colman & Co. Ltd., (1996) 217 ITR 216 (Bom) held that that entire amount of interest should be waived. Hence, no interest could be charged in the fresh assessment as made by the AO. Finally, the learned authorised representative of the assessee pointed out that while completing the impugned assessment order under Section 143(3) r/w Section 263 the AO omitted to include any directions for levy of interest under Section 215. Hence, as per the view taken by Hon'ble Supreme Court in their judgment CIT v. Ranchi Club Ltd. (2001) 247 ITR 209 (SC), interest under Section 215 could not be levied upon the assessee in subsequent computation. The learned authorised representative argued that provisions of Section 215(3) have to be read in the light of Hon'ble Supreme Court judgment reported in 247 ITR 209 (SC) (supra).
5. We have carefully considered the rival submissions. At the outset, we may mention that the relief granted by the learned CIT(A) to the assessee is conditional on no interest having been charged under Section 215 in the earlier assessment made by the AO. From the order under Rule 40(1) of IT Rules, dt. 20th March 1989, by Dy. CIT, Special Range-18, Bombay, which was raised upon by the learned authorised representative of the assessee during the course of hearing before us, it is clear that interest amounting to Rs. 13,67,999 was charged by the AO in the original assessment made on 28th March, 1988. In this view of the matter, the correct interpretation of the impugned order of the learned CIT(A) is that though it says the issue is decided in favour of the assessee, the assessee's appeal on this point has been rejected. According to the learned CIT(A), if the interest was charged in the original assessment, the interest charged in the subsequent assessment r/w Section 263 would fall within the meaning of Section 215(3) or 139(8)(b). The Department's appeal before us is therefore, liable to succeed for this short reason alone. However, as elaborate arguments were made before us on some other related aspects as well, we proceed to deal with the same in the subsequent paragraphs.
6. During the course of hearing before us, there was considerable debate on the question of "regular assessment". In our considered opinion, this debate is not material in relation to the asst. yrs. 1985-86 and onwards. The case law relied upon by the assessee before the learned CIT(A) in this respect pertains to assessment years prior to the amendments, particularly the provisions of Section 215(3) w.e.f. 1st April, 1985. Even the judgment of Hon'ble Rajasthan High Court in the case of CIT v. Multimetals Ltd. (supra) pertains to asst. yr. 1977-78 and is not concerned with the legal position emerging after amendments w.e.f. asst. yr. 1985-86. It is true that at p. 104 of this judgment, certain observations have been made by the Hon'ble Rajasthan High Court in relation to the amended provisions but they are only to the extent that it has been held that where in the original assessment no interest has been charged, the provisions of Section 215(3) cannot be applied while levying interest in relation to the subsequent assessment. We, therefore, hold that the learned CIT(A) has rightly taken the view that the assessee would be out of the clutches of the provisions of Section 215(3) only if no interest had been charged earlier which, however, is not a fact of this case.
7. Considerable emphasis was made by the learned authorised representative of the assessee on the fact that in the amended provisions of Section 215(6) there was reference to the provisions of Section 147 only and not to the provisions of Section 263. On a reading of the provisions of Section 215(3) with 215(6) we find the same to be operating is separate fields. The mention of s.. 147 is common both in Section 215(3) as well as Section 215(6) for the simple reason that an assessment under Section 147 can be made for the first time as well as an assessment under Section 147 can be made by way of reassessment. As the provisions of Section 215(3) operate only when there is reassessment under Section 147, the provisions of Section 215(6) are intended to take care of assessments made for the first time under Section 147. We are, therefore, unable to appreciate as to how non-mention of the provisions of Section 263 in the provisions of Section 215(6) is of any help to the assessee. As the matter stands, the assessee before us, on its facts of the case, is clearly caught by the mischief of the provisions of Section 215(3).
8. During the course of hearing before us, the learned authorised representative of the assessee argued that in the impugned order under Section 143(3) r/w Section 263, the AO did not specifically order for interest under Section 215 to be charged. The interest was charged only in the subsequent computation of tax payable by the assessee. Hence, following the judgment of Hon'ble Supreme Court in the case of CIT v. Ranchi Club Ltd. (supra), it should be held that the AO was not entitled to charge interest under Section 215, The argument of the learned authorised representative of the assessee is that the provisions of Section 215(3) should be read in conjunction with the judgment of Hon'ble Supreme Court in the case of Ranchi Club Ltd. on careful consideration of this argument we do not see force in this contention of the assessee. In the case of Ranchi Club Ltd. Hon'ble Courts were concerned with levy of interest under ss. 234A, 234B and 234C, Hon'ble Patna High Court in their judgment in Ranchi Club Ltd. v. CIT (1996) 222 ITR 44 (Pat) reproduced the provisions of Section 234A and Section 156. Hon'ble Patna High Court held that from the bare reading of Section 156 it is clear that notice of demand claiming interest can be issued only when there is an order in the assessment order levying interest. Therefore, the Hon'ble High Court held that the assessee must be made to know that the AO after applying his mind has ordered the charging of interest and under which of the sections of the Act. A notice of demand is somewhat like a decree in a civil suit which must follow the order; When a judgment does not specify any amount to be charged under any particular section, the decree cannot contain any such amount. In our view, the language of the provisions of Section 215(3) is significant in this respect. The provisions of Section 215(3) as substituted by the Taxation Laws (Amendment) Act, 1984, mandatory required enhancement pr reduction of interest if the amount on which interest was payable had been increase or reduced. It is further significant to note that the steps to be taken by the AO have also been laid down within the provision's of Section 2l5(3), i.e., in a case where the interest is increased, the AO shall serve on the assessee, a notice of demand in the prescribed form specifying the sura payable. From the language of the provisions of Section 215(3) it is very clear that there should be increase in the amount of interest by a notice of demand issued under Section 156, which is precisely what the AO has done in the instant case. We, therefore, hold that in view of the specific language of the provisions of Section 215(3), enhancement or reduction in the interest originally charged can be made by the AO by simple issue of notice under Section 156 or, as the case may be, by simple issue of refund voucher.
9. During the course of hearing before us, considerable reliance was put by the learned authorised representative of the assessee on the order under Rule 40(1) of the IT Rules made by Dy. CIT on 20th March, 1989. The learned authorised representative argued that the entire interest amount should have been waived in view of the judgment of Hon'ble Bombay High Court in the assessee's own case reported in (1996) 217 ITR 216 (Bom) (supra). In the first instance, the fact of the matter remains that the learned Dy. CIT only partially waived the interest under Section 215 and as on date, that order is final. We cannot proceed on the footing of a deemed waiver of the entire interest chargeable under Section 215. Secondly, the earlier order under Rule 40(1) made on 20th March, 1989, was in relation to the earlier assessment order made by the AO on 28th March, 1988. That assessment order was entirely set aside by the learned CIT under Section 263 and fresh assessment order has been made. For that reason also, the earlier order under Rule 40(1) made by Dy. CIT on 20th March, 1989, cannot be straightaway applied to the impugned assessment order under Section 143(3) r/w Section 263 made by the AO on 9th March, 1992. At any rate, we do not find any question of waiver arising out of the order appealed against. There is also no cross-objection filed by the assessee in this respect. We do, not find it appropriate to deal with the question of waiver under Rule 40(1) in the instant appeal which has been filed by Revenue and not by the assessee. We, therefore, do not see any force in the contentions of the assessee based on order under Rule 40(1) of the IT Rules which was made way back in March, 1989.
10. In view of the discussion in the foregoing paragraphs we reverse the impugned order of the learned CIT(A) in respect of levy of interest under Section 215 and restore the interest under Section 215 levied by the AO by way of issue of demand notice under Section 156 along with assessment order under Section 143(3) r/w Section 263.
11. In the result, this appeal filed by Revenue succeeds and is accordingly allowed.