Kerala High Court
Thekkanattu Firms vs Commissioner Of Income-Tax And Ors. on 23 November, 1994
Equivalent citations: [1995]214ITR355(KER)
JUDGMENT T.L. Viswanatha Iyer, J.
1. The appellant is an unregistered firm doing abkari business. The appellant did not file any return for purposes of assessment under the Income-tax Act, 1961, inter alia, for the year 1973-74 until the search of the residential premises of the managing partner in September, 1974, after which the appellant filed its return for the year 1973-74. An assessment was completed on the basis of this return under Section 143(3) on March 31, 1976, on a total income of Rs. 1,14,000. This was reduced in appeal to Rs. 1,03,230. The appellant had made a disclosure under the Voluntary Disclosure Scheme of the Income and Wealth Ordinance, 1975. In determining the amount of tax payable under the assessment, the amount of tax paid under this scheme was given credit. In the original assessment made on March 31, 1976, a copy of which is exhibit P-1, the Income-tax Officer did not levy any interest either under Section 159(8) or 217.
2. The assessment was reopened under Section 147(a) to bring to tax an amount of Rs. 82,376 claimed as sales tax liability. The reassessment was made on November 22, 1981 (exhibit P-2), and in completing it the Income-tax Officer levied interest of Rs. 43,628 under Section 139(8) and Rs. 49,816 under Section 217. This assessment was modified in appeal by the order, exhibit P-3, dated October 1, 1982, by which the Commissioner (Appeals) deleted the amount of sales tax liability to the extent of Rs. 79,688, sustaining the balance.
3. In the meanwhile, the appellant had filed an application dated December 18, 1981, before the Inspecting Assistant Commissioner of Income-tax for waiver of the interest charged on it. The Inspecting Assistant Commissioner issued directions to the Income-tax Officer who rectified the assessment in consequence by his proceedings, exhibit P-5, dated March 2, 1982. Thereby he reduced the amount of interest under Section 139(8) to Rs. 22,868 and under Section 217 to Rs. 26,135. The appellant challenged this order in revision before the Commissioner under Section 264 of the Act. The Commissioner noted, inter alia, that the reduced interest was the amount of interest leviable on the income assessed in the regular assessment completed on March 31, 1976. He held that the levy of interest under Section 139(8) under the reassessment order, exhibit P-2, was not barred by any provision of the Act and, therefore, sustained it overruling the contention of the appellant that interest under Section 139(8) can be levied only in the course of regular assessment. So far as the interest under Section 217 was concerned, the Commissioner held that the levy of such interest in reassessment proceedings even if it was restricted to the tax determined in the original regular assessment cannot be upheld. He disposed of the revision petition accordingly confirming the levy of interest under Section 139(8) and cancelling the levy under Section 217. A copy of this order is exhibit P-7. The appellant challenged this order by filing the writ petition which was dismissed by the learned single judge (see [1993] 202 ITR 389 (Ker)). The appeal is filed therefrbm, the challenge being to the levy of interest under Section 139(8) along with the reassessment order, exhibit P-2.
4. We must note even in the first instance that the interest is not levied on the amount of tax determined on reassessment, but only on the amount of tax due as per the original regular assessment, exhibit P-1, completed on March 31, 1976. We must also note that the appellant has no case that interest under Section 139(8) is not leviable, the only case put forward being that it could not have been levied along with the reassessment order, exhibit P-2.
5. A large number of decisions were relied on by either side, the applicability of which, we feel, it is unnecessary to consider having regard to the view that we are taking. We shall, however, briefly refer to them in deference to the contentions raised on either side. We may state here that according to counsel for the Revenue an assessment under Section 147 is also a regular assessment as defined in Section 2(40), namely, an assessment made under Section 143 or 144. Counsel points out that once a notice is issued under Section 148 and the assessment is reopened, the further proceedings are under Section 143. He refers to the decision in Laxmi Narain Bhadani v. CIT [1948] 16 ITR 359 (Patna), which was confirmed on another point in Lakshminarain Bhadani v. CIT [1951] 20 ITR 594 (SC), where it was held that Section 34 of the 1922 Act requires issuance of notice for assessment and for that purpose the provisions of Section 23 also apply. Counsel also made reference to the decision of this court in Kerala Kaumudi (P.) Ltd. v. CIT [1990] 181 ITR 30, where it was held that once proceedings are initiated under Section 147, the assessment proceedings start afresh and the proceedings for assessment for that year will -be pending and will continue until a final order is rendered. When the assessment is reopened, Section 143(3) is attracted, bringing in its trail Section 144B as well, if the intended addition to the returned income is more than Rs. 1,00,000. The submission was that the reassessment being under Section 143, it was a regular assessment under Section 2(40), in the course of which interest under Section 139(8) could be levied.
6. We shall now refer to the decisions referred on the assessee's side. But before doing so, we may mention that the Full Bench of this court which dealt with the question as to what is a regular assessment in Lally Jacob v. ITO [1992] 197 ITR 439 and held that an assessment made for the first time under Section 147 was also a regular assessment, did hot expressly deal with the question as to whether a second assessment by way of reassessment would be a regular assessment or not. The Full Bench made it clear that they were concerned only with the question as to whether an assessment made for the first time by resort to Section 147 was a regular assessment or not. We must also note that the said decision was one rendered regarding interest under Section 217.
7. In Gates Foam and Rubber Co. v. CIT [1973] 90 ITR 422 (Ker), the decision in which led to the reference to the Full Bench and the decision in Lally Jacob's case [1992] 197 ITR 439 (Ker) [FB] was one in which it was held that reassessments made after resort to Section 147 are not assessments under Section 143. As such, it was held that these assessments were not regular assessments for purposes of Section 273 of the Act. In CIT v. G. B. Transports [1985] 155 ITR 548, the Full Bench of this court dealt with the question as to whether an assessment made pursuant to an appellate order was a regular assessment for the purpose of Section 214 of the Act. The Full Bench answered the question in the negative. In P. A. Abdul Muthalif Rowther v. ITO [1976] 102 ITR 694, a Division Bench of this court held that Section 148 treats reassessment proceedings as assessment proceedings under Section 139 and, therefore, interest under Section 139 can be levied in proceedings under Section 148 as well. The decision on which considerable reliance was made by Sri P. Balachandran for the appellant was that of the Karnataka High Court in Charles D'Souza v. CIT [1984] 147 ITR 694, where the court held, inter alia, that a regular assessment as defined in Section 2(40) means an assessment made under Section 143 or 144 in contradistinction to an assessment/reassessment made under Section 147. It was accordingly held that interest under Sections 139(8) and 217 cannot be levied in the ease of a reassessment under Section 147. It must be noted that the interest with which the court was concerned in that decision was one levied on the amount computed as the tax payable on reassessment and it was in that context that the court made the observations mentioned above. Counsel stressed on the point that the Supreme Court dismissed the special leave petition against this decision as is evident from the note at page 28 of [1990] 186 ITR (St.). He also pointed out that a similar decision of the Punjab and Haryana High Court was also confirmed by the Supreme Court by dismissal of the special leave petition as is evident from the note at page 78 of [1991] 191 ITR (St.).
8. We have already pointed out that the case with which we are concerned is one in which the interest levied was what was leviable even under the original order of assessment, but which was not actually levied. We have also pointed out that there was no dispute about the correctness of the levy apart from the contention that it ought not to have been levied in the reassessment proceedings. Section 139(8) provides that the assessee shall be liable to pay interest in the circumstances and for the period mentioned therein on the amount of tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid and any tax deducted at source. The Explanation which was added with effect from April 1, 1985, clarified that even an assessment made for the first time under Section 147 will be a regular assessment. The reference in the sub-section to regular assessment is only in relation to the quantum of tax on which the interest is payable, that is, it is the amount of tax determined on regular assessment less the deductions mentioned. The section does not, on its face, speak of the period of time at which the levy should be made, whether it should be in the regular assessment itself or whether it could be in subsequent proceedings. When the reference to regular assessment is only for the purpose of quantifying the interest and pegging it down to the tax determined on regular assessment, we do not find any reason why we should further peg down the levy itself to the date of the regular assessment foreclosing its levy on a subsequent date. The Commissioner in his revisional order, exhibit P-7, has taken the view that the only injunction contained in Section 139(8) is that the interest is to be levied with reference to the tax determined on regular assessment and, therefore, the reduced interest levied under the provision based on the tax determined on the regular assessment cannot be stated to be incorrect or improper. We are not prepared to hold that this conclusion of the Commissioner suffers from any error apparent on the face of the record justifying interference with the same in certiorari proceedings under Article 226. We must also note that since the levy itself is not being challenged on the merits, no manifest injustice is caused to the assessee by sustenance of the levy. The view taken by the Commissioner is supported by the language of the section which does not foreclose the levy in subsequent proceedings provided it is related to the quantum of tax determined in the original assessment. Since there is no error apparent on the face of the record, we do not feel that this is a fit case for interference under Article 226 of the Constitution of India. The learned judge has also exercised the discretion against the appellant.
9. This writ appeal is, therefore, dismissed.