Income Tax Appellate Tribunal - Mumbai
Addl. Cit (Asstt.), Special Range, ... vs Hindalco Industries Ltd. on 30 August, 2005
Equivalent citations: [2005]4SOT757(MUM)
ORDER
D.C. Agrawal, A.M. First six appeals have been filed by the revenue and other two appeals have been filed by the assessee. The first set of three appeals are against the combined order of CIT(A) dated 30-3-1995 for the assessment years 1978-79,1979-80and 1980-81 whereas second set of three appeals are against another combined order of the CIT(A), dated 9-11-1995 for the same assessment years. In the order dated 30-3-1995 the CIT(A) partly set aside the order of the assessing officer dated 17-2-1995 and gave part relief. Against this order, the revenue has filed the appeals, which are numbered as 1173 to 1175. The assessing officer gave appeal effect to the order of the CIT(A) on 19-5-1995, which was challenged in appeal before CIT(A), who passed a combined order on 9-11-1995. Against this order of CIT(A), the revenue has preferred further appeal to the Tribunal, which are numbered as 69 to 71. The assessee preferred appeals for the assessment years 1979-80 and 1980-81, which are numbered as 1308 and 1309.
2. Main issues involved in these appeals are about chargeability of interest under sections 139(8), 217 and 220(2), whether they are appealable and whether non-mentioning of interest in the assessment order amounts to waiver. During the course of hearing detailed arguments took place and written submissions were given by both the parties. These written submissions will be reproduced part by part at appropriate places in this order for the sake of convenience and justice.
3. The assessee was earlier called Renusagar Power Co. Ltd. is now merged with Hindalco Industries Ltd.
4. The revenue submitted a summary of facts leading to present dispute. This is reproduced below.
5. All six appeals of the department are against the orders of learned CIT(A) for assessment years 1978-79, 1979-80 and 1980-81. Appeal No. 1173/ALD/95 and Appeal No. 69/ALD/96 are directed against the order of learned CIT(A) dated 30-3-1995 and 9-11-1995 respectively for assessment year 1978-79. Appeal No. 1174/ALD/95 and Appeal No. 70/ALD/96 are directed against the order of learned CIT(A) dated 30-3-1995 and 9-11-1995 respectively for assessment year 1979-80. Similarly, Appeal No. 1175/ALD/95 and Appeal No. 71/ALD/1996 are directed against the order of learned CIT(A) dated 30-3-1995 and 9-11-1995 respectively for assessment year 1980-81. All these appeals broadly revolves around on the issue of chargeability of interest under sections 139(8), 217 and 220(2).
(1) Assessment year 1978-79-Appeal Nos. 1173/ALD/95 and 69/ALD/ 1996
6. The assessee filed return of income on 27-7-1978 declaring a loss of Rs. 12,50,86,535 as against the due date for filing the return under section 139(l) on 30-6-1978. Subsequently, the case was selected for scrutiny and an order under section 143(3) was passed on 28-2-1981 (Refer Page Nos. 6 to 12 of the Paper Book) assessing the total income at Rs. 4,12,42,730 on account of various additions/disallowances and accordingly the tax determined to be payable was Rs. 2,48,69,366. In the said tax/demand working, no interest either under section 139(8) or 217 was levied. Against the said assessment order dated 28-2-1981, the assessee filed an appeal before the learned CIT(A). The learned CIT(A) vide his order dated 17-8-1981 (Refer Page Nos. 139 to 143 of the Paper Book) has partly allowed the appeal of the assessee. Order giving effect to the CIT(A)'s order dated 17-8-1981 was passed on 30-9-1981 revising the total income to Rs. 4,17,98,182. However, the order giving effect to the said order is not available on record. Against the order of learned CIT(A) dated 17-8-1981, both the department as well as the assessee filed an appeal before the Hon'ble ITAT. The Hon'ble ITAT vide its combined order dated 25-6-1988 (Refer Page Nos. 153 to 160 of the Paper Book) has partly allowed the appeal of the department for assessment year 1978-79 and dismissed the appeal for assessment year 1979-80. Whereas, the appeal of the assessee was dismissed vide its order dated 11-6-1982 (Refer Page Nos. 161 to 162 of the Paper Book). Subsequently, the order giving effect to the CIT(A)'s order dated 30-9-1981 was rectified under section 154 on 14-12-1984 (Refer Page Nos. 13 to 14 of the Paper Book) with a view to ascertain the carry forward development rebate, and unabsorbed depreciation. Accordingly, in the said rectification order, the total income was revised to Rs. 27,40,855. Again, rectification order dated 14-12-1984 was further rectified on 15-3-1985 (Refer Page Nos. 15 to 16 of the Paper Book) wherein a total loss of Rs. 1,88,292 was determined. The learned CIT(A) vide its order dated 27-1-1986 for assessment year 1980-81 has directed the assessing officer to modify the unabsorbed losses, depreciation and allowances of earlier years as these have not correctly worked out. Accordingly, the order giving effect to the CIT(A)'s order dated 27-1-1986 was carried out on 28-12-1992 under section 254/251/143(3) (Refer Page Nos. 17 to 25 of the Paper Book) wherein the total income for the year under consideration was revised to Rs. 2,79,75,560. In the demand notice ITNS 150, the tax payable was determined at Rs. 5,05,85,681 which includes interest under sections 139(8), 217 and 220(2) and were charged for the first time (Copy of ITNS-150 is enclosed herewith). The above appeal effect order dated 28-12-1992 was rectified under section 154 on 15-2-1993 (Refer Page Nos. 26 to 30 of the Paper Book) to charge the tax @ 55% instead of 65%. Accordingly, as per ITNS-150, the tax payable was determined at Rs. 3,96,22,224 which includes all the interest charged under sections 139(8), 217 and 220(2). The assessee aggrieved against order giving effect to CIT(A)'s order dated 28-12-1992 in charging the interest under sections 139(8), 217 and 220(2) for the first time, filed an appeal before the learned CIT(A). The learned CIT(A) vide order dated 22-3-1993 (Refer Page Nos. 31 to 35 of the Paper Book) has set aside the order dated 28-12-1992 and directed the assessing officer to re-frame the order afresh. Aggrieved by the order of learned CIT(A) dated 22-3-1993, the department has carried the matter to the Hon'ble ITAT. The Hon'ble ITAT vide their common order dated 10-8-1994 (Refer Page Nos. 37 to 38 of the Paper Book) for assessment years 1978-79, 1979-80 and 1980-81 has set aside the order of CIT(A) dated 22-3-1993 and restored the matter to the file of assessing officer to decide the case afresh. The order giving effect to the order of CIT(A) dated 22-3-1993 was passed on 17-2-1995 (Refer Page Nos, 39 to 43 of the Paper Book) under section 143(3) read with section 251/254/154 and accordingly the revised total income was computed at Rs. 1,61,77,621 and the demand as per ITNS-150 was of Rs. 3,48,19,208 which again included all the interest levied under various sections as discussed above. Again, the above order under section 143(3) read with section 251/254/154 dated 17-2-1995 was challenged before the CIT(A) and the learned CIT(A) vide a combined order dated 30-3-1995 (Refer Page Nos. 60 to 73 of the Paper Book) for assessment years 197879, 1979-80 and 1980-81 has partly allowed the appeal of the assessee. It is against this order of the learned CIT(A) dated 30-3-1995, that the department filed present appeal before the ITAT and numbered as ITA No. 1173/ALD/95. The order giving effect to the CIT(A) dated 30-3-1995 was passed on 19-5-1995 (Refer Page Nos. 74 to 76 of the Paper Book) and the total income was revised to Rs. 3,24,40,090 and the demand raised as per ITNS 150 was of Rs. 49,71,829. It may be pertinent to note that in the above appeal effect order, no interests under sections 139(8), 217 and 220(2) were charged. The above order giving effect to CIT(A) order dated 19-5-1995 is again challenged before the CIT(A) by the assessee. In appeal, the learned CIT(A) vide order dated 9-11-1995 (Refer Page. Nos. 88 to 98 of the Paper Book) has set aside the appeal effect order dated 19-5-1995 and further directed the assessing officer to give proper appeal effect to CIT(A) order dated 30-3-1995. It is against this order of the learned CIT(A) dated 9-11-1995, that the department filed another present appeal before the ITAT numbered as ITA No. 69/ALD/96. The order giving effect to the order of CIT(A) dated 9-11-1995 was passed on 12-3-1997 (Refer Page Nos. 99 to 106 of the Paper Book) revising the total income to Rs. 1,36,99,480 and an amount of Rs. 1,57,91,524 was refunded as per ITNS150. In this order no interest under any of the sections were charged.
(a) Appeal No. 1173/Ald./95
7. The first ground is "That the learned CIT(A) has erred in giving finding that the order of the learned CIT(A) dated 22-3-1993 has become final as department's appeal has been dismissed by ITAT. He has totally ignored the finding of ITAT that the assessing officer will be free to pass any order, which he deems proper according to law without any fetters and he will not be bound by any observations/directions made by learned CIT(A) in his orders. Thus, the order of learned CIT(A) is factually wrong and not maintainable."
8. This ground is against the observations of the CIT(A) contained in para 5.1 of his order dated 30-3-1995, which is enclosed at page No. 63 of APB. Against this the learned Departmental Representative submitted that the observations of learned CIT(A) that order dated 22-3-1993 passed by his predecessor is final is factually incorrect because of comments of Hon'ble ITAT in their order dated 10-8-1994 wherein it was observed as under:
"After hearing the parties at length on the point we feel that it is premature for us to interfere in the said orders, as the impugned Assessment Orders have been set aside and sent back to the assessing officer to re-frame them afresh on the point after giving assessee an opportunity of being heard. However, in the interest of justice, we direct that the assessing officer will be free to pass any order which he deems proper according to law without any fatter and he will not be bound by any observation/direction made by the learned CIT(A) in his orders."
9. After hearing the parties we are of the view that an order becomes final only, when not challenged by the parties or by operation of law, so long as the parties do not accept the verdict an order does not become final. Since the revenue has raised the point, we decide it in its favour in view of observations of ITAT as quoted above. In any case the issue is merely academic because main issue about interest is not obstructed by this point. It is allowed in favour of revenue.
10. The second ground is :
"That the learned CIT(A) has also erred in directing to adopt the income as per order of learned CIT(A) dated 22-3-1993 whereas this order was not final in view of ITAT's order dated 10-8-1994 giving directions, as reproduced in ground No. I above."
11. In view of the observations of ITAT in their order dated 10-8-1994 referred above, we decide the issue in favour of revenue. The income of the assessee cannot be treated as final as assessing officer was not bound by any observations of CIT(A). This ground is allowed.
12. Third ground is "That the learned CIT(A) was not justified in his observation that non-charging of interest in the earlier order amount to implied waiver because it is not supported by the provisions of Income Tax Act."
13. The submission of the department is that the reliance placed by the CIT(A) on the order dated 15-3-1985 is lopsided in view of the fact that, as per order dated 28-2-1981 there was a positive assessed income and also as per subsequent order dated 28-12-1992 (page Nos. 17 to 25 of Paper Book) the revised total income is a positive figure and stood at Rs. 2,79,75,560. Hence, provisions of sections 139(8), 217 and 220(2) are attracted.
14. Without prejudice to the above, it is submitted that omission to make a reference to interest payable under provisions of section 215 or section 217 in the order of regular assessment cannot amount to an order waiving it. This view has been taken in the following judicial decisions:
1 . Addl. CIT v. Saraya Distillery (1978) 115 ITR 34 (All.).
2. CIT v. Nanda Traders/Executors of the Estate of Late H.H. Rajkuverba Dowager Maharani Saheb of Gondal (1978) 115 ITR 301 (Kar.).
3. CIT v. City Palayacot Co. (1986) 122 ITR 430 (Mad.).
4. Ratanlal Dhondiram v. CIT (1983) 141 ITR 363 (Bom.).
5. R.R. Pictures v. CIT (1983) 143 ITR 429 (Mad.).
15. The submission of the learned Counsel of the assessee is as under :
"No interest was charged under sections 139(8) and 217 when the original order of assessment was passed and the notice of demand was issued. This will be evident from the notice of demand at pages 4 and 5 of the paper book. No ITNS 150 was ever served on the assessee. In any event as the notice of demand will show no interest has been charged. In this connection reliance is placed on the judgment of the Supreme Court reported in 247 ITR 209, Judgment of the Calcutta High Court, reported in 250 ITR 185 at page 187 and the judgment of the Rajasthan High Court reported in 263 ITR 650. It is, therefore, submitted that the charging of interest for the first time by the orders dated 12-10-1992 and 17-2-1995 was invalid and erroneous and not sustainable under the law."
16. We have heard the parties and considered the material placed on record. The decision of Hon'ble Supreme Court in CIT v. Ranchi Club Ltd. (2001) 247 ITR 209 (SC) confirming the decision of Hon'ble Patna High Court in Ranchi Club Ltd. v. CIT (1996) 217 ITR 72 (Pat) on merit was on the point that interest under section 234A has to be charged on the basis of returned income and not on the basis of assessed income. The head notes reads :
"Against the decision of the High Court (see (1996) 217 ITR 72), inter alia, that the object of section 234A of the Income Tax Act, 1961, was not to penalise the assessee, who had already filed a return under section 139, for not producing accounts or documents and so on pursuant to notice issued under clause (ii) or (iii) of section 142(1), and that no interest could be levied under section 234A for such failure, and that under explanation 4 to section 234A interest was to be levied with respect to the income declared in the return and not the income assessed, the department preferred an appeal to the Supreme Court. The Supreme Court dismissed the appeal.
Decision of the Patna High Court in Ranchi Club Ltd. v. CIT (1996) 217 ITR 72 (Pat) affirmed on this point."'
17. The decision of Hon'ble Calcutta High Court in CIT v. I.O.L. Ltd. (2001) 250 ITR 185 (Pat) was on the point that if interest is not charged in regular assessment than it cannot be charged by way of rectification. The headnotes reads :
"Held, that the returns were filed before the completion of one month after the due dates, namely, 30-6-1984, and 30-6-1985. When the month was not completed, interest could not be charged under section 139(8). Also when the interest had not been charged in regular assessment it could not be charged under section 154."
18. In CIT v. Ghewar Chand Soni (2003) 263 ITR 650 (Raj.) it was held that if interest under section 139(8) is not charged in original assessment than same cannot be charged in reassessment made under section 147. The headnotes reads :
"Held accordingly, that the original assessment of the assessee for the assessment year 1988-89 was made and thereafter reassessment was made by resorting to section 148. No interest under section 139(8) was levied in the course of the original assessment. Interest under section 139(8) could not be levied when reassessment was made under section 147."
19. The issue raised by revenue is as to whether non-charging of interest tantamounts to waiver. The decisions are clearly in favour of revenue that by not charging the same in original assessment it would not mean that assessing officer has waived it. Following decisions support this proposition;
19.1 Addl. CIT v. Krishna Narayan Naik (1984) 150 ITR 513 (Bom.) The mere non-mention on the part of the Income Tax Officer in the assessment order, of penal interest under section 217(1) of the Income Tax Act, 1961, for failure by the assessee to file an estimate of advance tax and pay advance tax as required by section 212(3), cannot lead to the assumption that the Income Tax Officer had waived the levy of penal interest. CIT v. Executors of the Estate of Late H.H. Rajkuverba Dowager Maharani Saheb of Gondal (1978) 115 ITR 301 (Kar.) and CIT v. Lalit Prasad Rohini Kumar (1979) 117 ITR 603 (Cal.) followed.
19.2 R.R. Pictures v. CIT (1983) 143 ITR 429 (Mad.) The act of waiver is a conscious overt act on the part of the Income Tax Officer and a mere omission or inaction on his part to levy penal interest cannot be construed under any circumstances as an act of waiver. As the Income Tax Officer in his assessment order omitted to levy penal interest under section 217(1A) of the Income Tax Act, 1961, for the failure of the assessee to file an estimate of advance tax under section 212, the Commissioner exercising his powers under section 263, directed the Income Tax Officer to consider the levy of penal interest. The Tribunal confirmed this view. On a reference :
"Held, that the Commissioner was justified in directing the Income Tax Officer to consider the levy of penal interest."
19.3 CIT v. Ashok Trading Co. (1986) 160 ITR 663 (Pat.) "Held, that since the interest leviable exceeded a sum of Rs. 1,000, the Income Tax Officer did not have jurisdiction to waive the levy of interest without the prior approval of the Inspecting Assistant Commissioner. Waiver is a deliberate act. Omission or slip is not waiver. The Income Tax Officer had not secured the prior approval of the Inspecting Assistant Commissioner to waive the penal interest nor was such a prayer made by the assessee. The order of the Income Tax Officer which was silent on the question of charging penal interest could not amount to waiver, The Income Tax Officer was bound to levy interest and having not exercised that jurisdiction, there was clearly an error apparent on the face of the record. The rectification proceedings initiated under section 154 were valid."
19.4 CIT v. M.S.J. Engg. & Co. (1993) 203 ITR 1 (All.) "Held(i) that simply because discretion is vested in the Income Tax Officer by virtue of rule 40 of the Income Tax Rules, 1962, it will not be correct to draw the one and only inference that the interest was waived and, therefore, that was not charged in the regular assessment;"
From the above decisions we are of the view that interest not charged in original assessment cannot be deemed to have been waived, It is a conscious act of the assessing officer to waive the interest by giving a finding that conditions laid down for waiver have been satisfied. Since on the question that as to whether interest can be charged by way of rectification, there are two views one by Hon'ble Calcutta High Court in I.O.L. Ltd's case (supra) and other by Patna High Court in Ashok Trading Co.'s case (supra), we take a view favourable to the assessee that interest cannot be recovered by way of rectification if not originally charged by the assessing officer in the assessment. There is always a view possible that by not charging the interest in the original assessment the assessing officer may have waived it.
So far as interest under section 139(8) is concerned we are of the view that since delay in filing the return is less than a month and assessee has also filed Form No. 6 to get the time for filing the return extended, there is no default and no interest can be charged following I.O.L. Ltd.'s case (supra) and also the decision of Karnataka High Court in B.V. Aswathaiah & Bros. v. ITO (1985) 155 ITR 422 (Kar) relied on by learned Counsel of the assessee for the proposition that interest under section 139(8) can be charged only for a completed month of default and in present case the due date for filing of return is 30-6-1978 and the return was filed on 27-7-1978 and hence the default, if any, is for less than a completed month.
20. Regarding interest under section 217, we find that it is an admitted position that no estimate of income was filed. Hence, the assessee was liable to pay interest on the basis of assessed tax up to the date of regular assessment. Such interest can be recovered even where originally the assessed income was a loss or below taxable limit but on rectification a positive income is worked out to the extent that liability to interest under section 217 is workable on such assessed tax. In following case, this proposition is supported.
20.1 Bihar State Road Transport Corpn. v. CIT (1986) 162 ITR 114 (Pat.) 20.1-1 The power of rectification is confined to mistakes apparent from the record. The 'record' is not confined to the order of assessment. It comprises all proceedings on which the assessment order is based and the Income Tax Officer is entitled to look into the whole evidence and the law applicable to ascertain whether there was an error and if he doubts the written down value of the previous year, it is open to him to check up the previous calculations and if he finds any mistake, it is open to him to make fresh calculations in accordance with the law applicable including the rules made thereunder. If he discovers that the very basis of the different earlier assessments was erroneous because of an initial mistake in determining the written down value, it cannot be said that this mistake would not be a mistake apparent from the record and if in order to determine the correct written down value, the Income Tax Officer makes correct calculations, it cannot be said that that is not rectifying a mistake apparent from the record but is de hors it. The limit to which the Income Tax Officer can go does not stop at the written down value of the previous year but extends to the figure of the original cost.
20.1-2 Rectification orders are part of the proceedings for assessment and rectification has the effect of making the original assessment order the correct or regular assessment order.
20.1-3 (i) That the Tribunal was correct in holding that the Income Tax Officer could rectify under section 154 of the Act the orders of assessment for the assessment years 1960-61 and 1961-62 by re-determining the written down value of the various assets.
Maharana Mills (P.) Ltd. v. ITO (1959) 36 ITR 350 (SC) followed.
(ii) That the rectification order dated 17-8-1966, was also a proceeding in the assessment and so limitation for a fresh rectification order had to be counted from that date. The second order of rectification had been passed within four years from 17-8-1966, and so was not barred by limitation.
(iii) That after the rectification under section 154 of the Act, a positive income was determined on 14-11-1969, and so the Income Tax Officer was justified in charging interest under section 217 of the Act, 20.2 CIT v. Arunachal Saw & Veneer Mills (P.) Ltd. (1997) 225 ITR 363 (Gau) :
"Although the assessee did not file its return in time, as the income was below the taxable limit, the assessing officer did not charge interest under section 139(8) and section 217 of the Income Tax Act, 1961, in the original assessment. However, after giving due notice, he commenced rectification proceedings and he found that the assessee had taxable income and he charged interest under sections 139(8) and 217. The CIT(A) allowed the appeal on the ground that interest could not be charged in rectification proceedings. The Tribunal upheld the order of the CIT(A). On a reference :
Held that interest under sections 139(8) and 217 could be charged at the time of rectification of the assessment order."
21. Thus, one view is that if interest under section 217 can be charged in an order of rectification, wherein income of assessee is increased. Such interest can also be charged when appeal effect is given, that is in an order passed under section 250. The case of assessee is that the assessing officer has forgotten to charge interest under section 217 in the original order where there was a positive income, that is, in the present case the original assessed income was Rs. 4,12,42,430 and the assessing officer did not charge any interest, while passing the assessment order. Then, he cannot charge this interest at any time in future even though there may be subsequent rectification or appeal effect. As held in Bihar State Road Transport Corpn.'s case (supra) that rectification orders are part of the proceedings for assessment and rectification has the effect of making the original assessment order correct the regular assessment order. Similarly, the orders passed under section 250 for giving appeal effect are also meant to correct original order. The other view is that the assessing officer can charge interest under section 217 in rectification if for the first time after rectification there is a positive income, tax on which will make the assessee liable for interest and at that point of time the assessing officer gets an opportunity to decide as to whether the assessee is liable for interest. If he decides to charge interest than it would be in accordance with the decisions of the Hon'ble High Court in Bihar State Road Transport Corpn.'s case (supra) and Arunachal Saw & Veneer Mills (P.) Ltd.'s case (supra). But where the assessing officer at the time of making regular assessment as in the present case assesses the assessee on an income which clearly determines the liability to interest under section 217 but he does not charge it by mentioning either in the assessment order or in the demand notice or in the computation of income then it can be inferred that he had applied his mind and not charged interest. There are, other conditions for charging interest under section 217. It has to be ensured that the assessee has failed to furnish estimate of advance tax. The assessee had filed return income at loss figure. On his own estimate he is not liable to pay advance tax. Also, there is no finding by the assessing officer that the assessee is required to file estimate of advance tax, which has not been filed by him. Further, if in the original assessment order the charge about levy of interest has not been specifically stated than subsequently in the rectification order or in giving appeal effect order it may not be possible to do so. Support is derived from the decision in CIT v. Autolite (India) (P.) Ltd. (2002) 256 ITR 303 (Raj.). Thus there are two views possible on the subject. We therefore adopt a view favourable to the assessee and hold that as there was no finding in the original assessment order determining positive income, about chargeability of interest under section 217, basic conditions for charging interest are not satisfied. Also in subsequent orders either under section 154 or passed for giving appeal effect, no such finding has been given. No interest under section 217, therefore, could be charged through subsequent orders either under section 154 or under section 250.
22. Thus, we hold that though not charging interest in the original assessment order does not amount to waiver but it does not lead to the conclusion that conditions for charging the interest are satisfied and therefore interest can be charged subsequently through an order under section 154 or 250. In our view, where assessing officer has not charged interest under section 217 in the original assessment order he was satisfied that conditions for charging interest do not exist. If he wants to charge interest subsequently, he has to give a finding that there was a failure of the nature described in section 217 after giving an opportunity of being heard to the assessee. This opportunity is necessary in the interest of justice because in the original order the assessing officer was silent about charging of interest leading to a prima facie belief that circumstances for charging of interest did not exist. Hence, this ground is partly decided in favour of revenue.
23. The fourth ground is :
"That the learned CIT(A) was not justified in holding that interest under section 220(2) cannot be charged because there was negative income on 15-3-1985, ignoring the fact that as per original order dated 28-2-1982 there was demand."
24. In favour of this ground the revenue has, made following submissions :
This ground is dependent on ground No. 3 above, and comments offered therein holds good even for this ground. Further there is a factual mistake in this Ground to the extent that the original order is dated 28-2-1981 and not 28-2-1982 which may be brought to the notice of the Hon'ble Members.
Thus, the revenue wants to contend that interest under section 220(2) can be charged on the basis of final demand raised after appeal effect etc. for the period from the date of original demand fallen due. That is, the interest under section 220(2) can be charged on the final amount of tax for the period from the date of demand fallen due as per original assessment order irrespective of whether the demand has been taken into minus due to appeal effect or the assessee has squared up the demand or obtained a refund in between. The logic behind this argument is that the final assessment merges into original assessment and final demand relates back to original demand.
25. The assessee has contended as under :
"It is submitted that the subsequent order supersedes the earlier order and the fresh order requires fresh determination of the tax liability of the assessee and requires issuance of a fresh demand notice. Interest can only be charged from the last order and in respect of the fresh demand notice and the assessee cannot be treated as an assessee in default on the basis of the earlier demand notices and no interest can be charged in respect of the same from any earlier date. Reliance is placed on the judgment of the Supreme Court reported in 52 ITR 538, 247 ITR 821, 136 Sales Tax Cases 636, judgment of Andhra Pradesh High Court reported in 250 ITR 97, judgment of the Calcutta High Court reported in 211 ITR 610 and the latest judgment of the Kerala High Court reported in 271 ITR 570 in which it was held by the Kerala High Court as follows :
'In a taxation statute one has to look at what is clearly stated. There is no room for any intendment. There is no equity or presumption about tax. Nothing is to be read in and nothing is to be implied. In view of the clear language used in section 220(2) of the Income Tax Act, 1961, when a fresh demand notice is issued in pursuance of a fresh assessment order passed as a result of the, appellate order, interest is payable only when the amount is not paid as per the fresh demand.' The Supreme Court in the case of Philips India Ltd v. Asstt. CCT 136 STC page 636 held as follows :
'Where an assessment is made under the Bengal Finance (Sales Tax) Act, 1941 or the West Bengal Sales Tax Act, 1954, and, on appeal, an order is made directing recomputation on the basis set out in the appellate order, or the amount of tax is reduced, and a fresh notice of demand is issued, the earlier assessment order ceases to exist, and liability to pay can arise only from the date of the fresh demand notice. The assessee can be considered to be a defaulter and liable to pay only if payment is not made from the date specified in the fresh demand notice and interest cannot be demanded for an earlier period. (See paras 7 and 9).' The principles laid down by the Supreme Court will squarely apply in the instant case also."
26. We have considered the rival submissions.
27. Section 220 reads as under :
"220. When tax payable and when assessee deemed in default.(I) Any amount, otherwise than by way of advance tax, specified as payable in a notice of demand under section 156 shall be paid within thirty-five days of the service of the notice at the place and to the person mentioned in the notice : "
28. Thus, for charging interest under section 220(2), the assessee must be found to be in default. Following decisions are also relevant for deciding the issue :
28.1 New United Construction Co. v. CIT (No. 2) (2004) 270 ITR 224 (Jharkhand).
"Interest under section 220(2) would not be payable for the period during which penalty did not subsist."
28.2 SMS Schloemann Siemag, A.G. v. Dy. CIT (2001) 250 ITR 97 (AP) (FB).
"Recovery of tax Interest Notice of demand Entire demand satisfied within time-Appeal from assessment order allowed - Refund with interest order of Commissioner set aside by Tribunal - Original demand notice does not survive-Interest cannot be charged from date of original demand notice-Income Tax Act, 1961, section 220(2).
Interest is payable if a sum is due. Where the assessee is in default in making payment of the assessed amount demanded from him he is liable to pay interest. Though interest is payable by an assessee in terms of section 220 of the Income Tax Act, 1961, by way of compensation, the same would not mean that, though there does not exist any demand, interest would become payable.
The assessee paid the entire amount of tax pursuant to the notice of demand under section 156 of the Income Tax Act, 1961, forthe assessment year 1984-85. The assessee filed an appeal which was allowed. Consequently, the department made refund with interest. Against the order in first appeal, the revenue preferred an appeal which was allowed by the Tribunal. As a consequence, a demand was raised wherein interest was charged under section 220(2) from the date of the original demand. The assessee, in a writ petition, contended that it had already paid the entire amount of tax, and the entire amount of demand having been wiped out, the question of charging interest from the original date of demand would not arise :
Held, that interest could not be charged from the date of the original demand notice."
28.3 Vikrant Tyres Ltd. v. First ITO (2001) 247 ITR 821 (SC) "In respect of certain assessment years assessment orders were served on the assessee and demand notices were issued and the assessee complied with the demands by paying the tax due thereunder within time. The appellate authority allowed the assessee's appeals against the assessment orders and the taxes paid by the assessee were refunded. The Appellate Tribunal dismissed the appeals of the department; but, on a reference, the High Court upheld the assessment orders. Thereafter, the department made fresh demands and the assessee repaid within time the taxes as assessed and demanded. The department demanded interest under section 220(2) of the Income Tax Act, 1961, on the tax assessed for the period commencing from the date of refund of the tax upon the appellate order till the date the taxes were finally paid after disposal of the reference. The assessee filed writ petitions in the High Court challenging the demand of interest, contending that it was not in default because it had paid the taxes in compliance with the original notices of demand and it had not failed to comply with the demand made under section 156. The High Court dismissed the writ petitions holding that section 3(2) of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, kept alive the earlier demand notices even though payment in full had been made pursuant thereto and treated those earlier notices as having been kept alive till the assessment orders were upheld by the higher forum. On appeals to the Supreme Court :
Held, reversing the decision of the High Court, (i) that the condition precedent under section 220 was that there should be a demand notice and there should be a default in paying the amount so demanded within the time stipulated in the notice. The assessee satisfied the demands under the notices issued under section 156 and nothing was due pursuant to the notices of demand. After the judgment of the High Court on a reference fresh demand notices were issued and in satisfaction of those demands the assessee had paid the amounts as demanded within the time stipulated therein. In such a situation, on a literal meaning of section 220(2), the department had no right to demand interest for the period commencing from the date of refund of the tax upon the appellate order till the taxes were finally paid after disposal of the reference.
(ii) That section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, did not apply. That section only revived a notice of demand which had never been satisfied by the assessee and which notice got quashed during some stage of the challenge and finally the quashed notice got restored by an order of a higher forum. In such a situation, section 3 restored the original notice of demand which was never satisfied by the assessee and did away with the need to issue a fresh notice. That section could not be resorted to for reviving a demand notice which was already fully satisfied.
It is a settled principle that while construing revenue Acts courts have to give a fair and reasonable construction to the language of the statute without leaning to one side or the other, meaning thereby that no tax or levy can be imposed on a subject by an Act of Parliament without the words of the statute clearly showing an intention to lay the burden on the subject. In this process courts must adhere to the words of the statute and the so-called equitable construction of those words of the statute is not permissible. The task of the court is to construe the provisions of taxing enactments according to the ordinary and natural meaning of the language used and then to apply that meaning to the facts of the case and in that process if the taxpayer is brought within the net he is caught, otherwise he has to go free."
29. The following principles can be derived from the decision of the Supreme Court :
(i) A notice of demand under section 156 issued to the assessee for recovery of the tax payable pursuant to an assessment order spends itself as soon as the assessee has complied with it by paying the tax demanded within the time specified in the notice.
(ii) Such a notice of demand does not survive after the assessee pays the demand within the time allowed therein.
(iii) Nor can such a notice of demand be resurrected thereafter, e.g., as in this case, when the High Court restored the assessment order after it had been set aside on appeal before an appellate authority.
(iv) Section 220(2) does not grant the department a right to demand interest for the interregnum, viz., the period from the date the tax paid by the assessee is refunded to the assessee to give effect to the order of the appellate authority to the date the assessee pays pursuant to fresh notices of demand to give effect to the order of the High Court on a reference restoring the assessment orders.
(v) Section 3(2) of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, is applicable only in cases where the assessee does not pay the amount of tax specified in the notice of demand and challenges it, and the court or other authority holds the notice to be invalid, but later the notice is held to be valid. In such a case section 3 dispenses with the issue of fresh notice and treats that original notice as revived.
(vi) That section will not apply to a case where a notice of demand is satisfied by full payment of the demand within the time allowed.
30. Thus, respectfully following above decision of Hon'ble Supreme Court and also the decisions relied by learned Counsel for the assessee we hold in the case of the assessee that:
(I) He will not be an assessee in default if the assessment has been set aside by the appellate authority for being made de novo. Hence no interest under section 220(2) can be charged till the period when fresh assessment is made, fresh demand notice is issued, and statutory time period for making the payment has expired. The assessee has to be in default for charging interest under section 220(2). For default there should be a demand pending and not paid within the statutory period given for payment. After the assessment order is set aside there is no demand pending against the assessee. When fresh assessment is made it may relate back to the original assessment but the default cannot relate back to the original default. If the demand does not survive in the register of the department when the assessment order is set aside, the assessee cannot be compelled to make the payment and hence he will not be in default.
(II) If the assessment is set aside on a limited issue/s and some issues are confirmed against the assessee then the original demand notice does not cease to exist. While giving appeal effect the demand relating to the set aside issues should be taken into minus and the assessee would continue to be in default in respect of balance of demand from the date of original default. In the fresh demand notice issued on making the fresh assessment after deciding the issues set aside the assessee will be in default for only balance of demand raised and fallen due as he is in continuous default for the demand in respect of issues confirmed in appeal.
(III) Wherever the demand has been paid, the assessee will not be treated as in default and no interest for that amount thereafter will be charged. Similarly where the total income is reduced to nil or to a minus figure then again the assessee cannot be treated as in default.
(IV) Thus when the assessment becomes final and so the demand after all the litigation then the default has to be analyzed. The final demand has to be divided according to the default. The period of default may vary for different portion of final demand. Interest has to be charged on the amount of tax in default for the period for which that default existed. Entire final demand cannot be subjected to interest and entire period from the date of original default cannot be considered for the charge of interest.
We set aside this issue to the file of assessing officer to work out the interest in accordance with the principles laid down by Hon'ble Supreme Court in Vikrant Tyres Ltd's case (supra) and further guidelines given hereinabove based thereon.
31. The fifth ground is :
"That the learned CIT(A) was also not justified in giving direction with regard to charging of interest, whereas under section 246, no appeal lies before him against charging of interest under sections 139(8), 217 and 220(2). Reliance is placed on (1978) 111 ITR 111 (All.)."
32. The department submits as under :
The above ground emerges from para 9 of CIT(A)'s order dated 30-3-1995 on page No. 67 of Paper Book. It is further submitted that levy of interest under section 215 or 217 is not appealable as has been held in the following judicial decisions :
1. CIT v. Geeta Ram Kali Ram/Sushil Kumar v. CIT/CIT v. Suresh Chandra (1980) 121 ITR 708 (All.)(FB)
2. CIT v. Hind Lamps Ltd. (1980) 122 ITR 451 (All.)
3. Chandra Kantha Industries v. CIT (1982) 138 ITR 168 (All.)
4. Addl. CIT v. Allahabad Milling Co. (1978) 111 ITR 111 (All.).
33. As regards charging of interest under section 220 also, no appeal lies against charging of such interest. Liability of interest under section 220 is automatic, statutory and absolute. Reliance is placed on Delhi High Court's decision in Orissa Cement Ltd. v. CBDT (1972) 84 ITR 451 and also on the commentary of Chaturvedi and Pithisaria (IVth Edition) 4th Vol. Page 4772.
34. Whereas the assessee submits as under :
The chargeability of interest is appealable as the assessee had filed appeal both against various disallowances and additions and against charging of interest. The appeal filed before the CIT(A) was not against charging of interest only. In this connection reliance is placed on the judgment of Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. CIT (1986) 160 ITR 961 (SC). It has been held in the said judgment by the Supreme Court that the levy of interest is part of the process of assessment. Although sections 143 and 144 do not specifically provide for the levy of interest it is nevertheless a part of the process of assessing the tax liability of the assessee. Inasmuch as the levy of interest is the part of the process of assessment, it is open to an assessee to dispute the levy of interest in appeal.
(i) Under section 246(i)(a) of the Act any assessee aggrieved by the following orders may appeal against such orders; (a) an order against the assessee, where the assessee denies his liability to be assessed under the Act. Section 2(7) of the Act defines 'Assessee' to mean a person by whom any tax or any other sum is payable under the Act. Interest is a sum payable under the Act and the order for payment of interest has been made against the assessee. The assessee in respect of the said interest denies his liability to be assessed in relation thereto under the Act. The assessee says that the interest is not leviable. It is, therefore, submitted that the appeal is competent under section 246(1)(a) of the Act. Reliance is placed on the decisions in CIT v. Balkrishna Malhotra (1971) 81 ITR 759, 762 (SC), ITO v. Delhi Development Authority (2001) 252 ITR 772, 776 (SC), CIT v. Dalmia Cement (Bharat) Ltd. (1995) 216 ITR 79, 101 (SC).
(ii) It is further submitted that the word 'assess' is a word of wide comprehensive meaning. In taxing statute it often means the computation of the income of the assessee, the determination of the tax payable by him and the procedure for calculating or recovering of tax. Interest is a part of the recovery as has been held by the Supreme Court in Khazan Chandv. State of J&K (1984) 56 STC 214 at page 222. In the case of Bhopal Sugar Industries Ltd. v. State of Madhya Pradesh AIR 1979 SC 537 the Supreme Court held at page 540 as follows :
"It has to be appreciated that the purpose of an assessment is to compute the amount of the cash payable by the person concerned. 'Assessee' is a comprehensive word, and in a taxing statute it often means the computation of the income of the assessee, the determination of the tax payable by him, and the procedure for collecting or recovering the tax. In a case where there is a dispute about the identity of the assessee, the order of assessment serves the purpose of establishing that identity and naming the person from whom the tax has to be recovered."
It is, therefore, submitted that the appeal filed by the assessee before the CIT(A) along with the other grounds of disallowance is competent and maintainable.
(iii) For the first time the appeal against chargeability of interest was filed by the assessee before the CIT(A) against the order of the assessing officer dated 28-12-1992 charging interest. The said appeal was disposed of by the CIT(A) by his order dated 22-3-1993. Against the said order of the CIT(A) the department preferred an appeal before the Tribunal which was disposed of by an order of the Tribunal dated 10-8-1994. The grounds of appeal taken by the department before the Tribunal are at page 36 of the paper book. It can be seen from the said grounds of appeal that the department did not raise any objection in respect of maintainability of the appeal on the ground of appealability. It is, therefore, submitted that in respect of the subsequent orders passed by the assessing officer pursuant to the direction of the CIT(A) given in his order dated 22-3-1993 the department cannot raise the ground on maintainability of the appeal.
35. On maintainability of appeal before CIT(A), our view is that where assessee disputes the liability of interest as a whole, then he can file appeal before the CIT(A). But he cannot file an appeal merely for quantification thereof. Appeal against charging of interest under section 139(8) alone cannot be entertained [ref-K.B. Stores v. CIT (1976) 103 ITR 505 (Gauhati) which was followed in CIT v. Associated Stone Industries (Kotah) Ltd. (1981) 130 ITR 868 (Raj.)] but where assessee denies his liability to be assessed to tax, he can raise the ground of charging of interest [re-CIT v. Devichand Pan Mal (1986) 160 ITR 545 (Raj.)]. Also where appeal is filed against regular assessment on other grounds, it will be open to the assessee to take all points including the objections to the interest levy as in appeal not only the income and tax thereon may be reduced but also the interest payable [re-CIT v. Sharma Construction Co. (1975) 100 ITR 603 (Guj.)]. Similar views expressed in National Products v. CIT (1977) 108 ITR 935 (Kar.) and in Bhikhoobhai N. Shah v. CIT (1978) 114 ITR 197 (Guj.) were approved by Hon'ble Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. CIT (1986) 160 ITR 961 (SC) wherein it is held that levy of interest is part of the process of assessment and it is open to an assessee to dispute the levy in appeal provided he objects on the ground that he is not liable to the levy at all. It was also held that a person, who denies his liability to be chargeable to interest at all under any of the above sections, would be a person, who denies his liability to be assessed under the Act as per the provisions of section 246(i)(a) (upto 31-3-1989).
36. The decisions, on which revenue has relied in Addl. CIT v. Allahabad Milling Co. (1978) 111 ITR 111 (All.), the question was about appealability against charging of interest under section 215. In Sushil Kumar v. CIT (1980) 121 ITR 708 (All.), it was held that no appeal is provided against charging of interest under sections 139, 215 and 217 but the assessee can deny his liability to be assessed under the Act ie. denial should be against being subject to the whole procedure for ascertaining and imposing liability on the tax payer and not mere denial against particular section.
In CIT v. Hind Lamps Ltd. (1980) 122 ITR 451 (All.), it was held that no appeal lies against mere charging of interest under section 217(1A). Similarly in Chandra Kantha Industries v. CIT (1982) 138 ITR 168 (All.), it was held that no appeal lies against the levy of interest under section 215. All these decisions are now academic in view of the decision of Hon'ble Supreme Court in Central Provinces Manganese Ore Co. Ltd's case (supra). For the assessment year 1978-79, the assessee had denied his liability to be assessed for interest under section 139(8) as he had filed Form No. 6 for extension of time to file the-return. Therefore, the appeal to CIT(A), that he is not liable to pay interest under section 139(8) at all in view of Form No. 6 filed, will be competent. Similarly, when the assessing officer did not charge interest under section 217 in the original assessment order, and charged it subsequently while giving appeal effect then, certainly the assessee has a right to deny to the assessability to interest under section 217 as according to him, the assessing officer did not charge interest because the conditions laid down for charging interest were not satisfied. Therefore, he is not liable to pay interest under section 217 at all. In view of the matter, appeal against charging of interest under section 217 in subsequent orders is also maintainable.
37. So far as appeal against charging of interest under section 220(2) is concerned, the Hon'ble Madhya Pradesh High Court in Princess Usha Trust v. CIT (1989) 176 ITR 227 (MP), distinguished the Central Provinces Manganese Ore Co. Ltd's case (supra). It is held therein that the levy of interest under section 220(2) is not a part of process of assessment. Thus, by denying the liability to pay interest under section 220(2) of the Act, the assessee cannot be held to be denying its liability to be assessed under the Act. Section 246(c) was therefore not attracted. Thus, assessee had no right to prefer an appeal from the order levying interest under section 220(2) of the Act. Hon'ble Supreme Court held that charging of interest under section 220(2) is not appealable. Similar views are expressed in CIT v. Suresh Gokuldas (1998) 229 ITR 721 (Mad.), in ANZ Grindlays bank PLC v. CIT (2000) 241 ITR 269 (Cal.), Biru Mal Gauri Shankar Jain & Co. v. CIT (2000) 243 ITR 234 (Punj. & Har.) and Princess Usha Trust v. ITO (2001) 247 ITR 546 (MP). But after the decision of Hon'ble Supreme Court in Vikrant Tyres Ltd.'s case (supra), there is a duty on the assessing officer to correctly charge interest under section 220(2). There will not be any interest for the intervening period when there was no demand. From this, it follows that if demand is reduced then the assessee will be deemed to be in default only in respect of reduced sum. Therefore, though no appeal lies directly against the levy of interest under section 220(2), following the above decisions in Suresh Gokuldas' case (supra) and Princess Usha Trust's case (supra) and others, we are of the view that the assessing officer cannot levy interest arbitrarily and has to calculate interest by following the decision of Hon'ble Supreme Court in Vikrant Tyres Ltd.'s case (supra). In view of this, this ground of the revenue is partly allowed as indicated above.
(b) Appeal No. 69/ALD/96
38. Ground Nos. 1 to 5 in this appeal are similar/identical to Ground Nos. 1 to 5 of Appeal No. 1173/ALD/95 and emerge from para 5.3 of order dated 9-11-1995.
39. In view of our above decision in respect of first five grounds in appeal No. 1173/Ald./95, will hold good in respect of the first five grounds in this appeal. Accordingly, ground No. 1 is allowed in favour of revenue.
Ground No. 2 is allowed in favour of revenue.
Ground No. 3 is partly allowed in favour of revenue.
Ground No. 4 is set aside to the assessing officer.
Ground No. 5 is allowed as indicated in the relevant discussion.
Ground No. 6 : That the learned CIT(A) was not justified in setting aside the order dated 19-5-1995 of DC (Asstt.), Spl. Range, Allahabad passed under section 143(3)/251/154 of the Income Tax Act as the assessing officer, in his order has considered all legal claims of the assessee. Therefore, the order passed by the learned CIT(A) vide A. Nos. 107, 108, 109/DCIT (Asstt.)/Alld./1995-96 dated 9-11-1995 is not acceptable.
We do not find any infirmity in the order of CIT(A) dated 9-11-1995 in setting aside the order of assessing officer. We, therefore, decline to interfere. This ground of revenue is, therefore, rejected.
(II) A.Y. 1979-80-Appeal Nos. 1174/ALD/95 and 70/ALD/1996
40. Both the aforesaid appeals filed by the department. In the instant case the only point in dispute is regarding chargeability of interest under sections 217 and 220(2) of the Act. The interest under section 217 was charged in the original assessment itself.
(a) Appeal No. 1174/ALD/95
41. The first Ground is similar to ground No. 1 in appeal No. 1173/Ald./95, which emerges from Paras 5.1, 12 and 13 of CIT(A)'s order dated 303-1995 on Page Nos. 63, 69 and 70 of Paper Book. The facts and circumstances are similar to ground No. I in ITA No. 1173/Ald./95 and the comments/decision offered for ground No. 1 in that Appeal also hold good here. This ground of revenue is, therefore, allowed.
42. Ground No. 2 is similar to ground No. 2 in appeal No. 1173/Ald./95. The facts and circumstances are identical with ground No. 2 in ITA No. 1173/Ald./95. Therefore, the comments/decision offered therein also hold good in respect of this ground. This ground of revenue is, therefore, allowed.
43. Ground No. 3 is similar to ground No. 3 in appeal No. 1173/Ald./95 and emerges from Para 15 of CIT(A)'s order dated 30-3-1995 on Page No. 70 of Paper Book for assessment year 1997-98. In the said para 15, the learned CIT(A) has observed as under :
"In respect of interest etc., what I have decided for the year 1978-79, as written above, the same is given for this year also. Accordingly, the assessing officer is directed that he will make the necessary rectification in income and tax immediately and will allow the relief to the assessee."
44. In view of the above observation of the learned CIT(A), the revenue contended that the learned CIT(A) erred in giving the same finding for assessment year 1979-80 as has been given for assessment year 1978-79, in view of the fact that in the said order ie., for assessment year 1978-79 the assessing officer has not directed to charge interest in the original assessment order dated 28-2-1981, whereas, in assessment year 1979-80 the assessing officer has specifically directed to charge interest as per law in the order'passed under section 143(3) on 30-3-1982. Hence the directions of the learned CIT(A) for assessment year 1979-80 based on the facts of assessment year 1978-79 is misplaced.
45. We find that the assessing officer has specifically directed to charge interest as per law in the order passed by him under section 143 (3) for the assessment year 1979-80. Hence, the direction of CIT(A) based on the facts of the assessment year 1978-79 are not applicable for this assessment year. The assessing officer will charge interest under section 217 for the assessment year up to the date of regular assessment on the finally assessed income.
46. Ground No. (4) : That the learned CIT(A) was also not justified in giving direction with regard to charging of interest, whereas under section 246, no appeal lies before him against charging of interest under sections 139(8),217 and 220(2). Reliance is placed on Addl. CIT v. Allahabad Milling Co. (1978) 111 ITR 111 (All.).
47. This ground emerges from para 15 of CIT(A)'s order dated 30-3-1995 on Page No. 70 of Paper Book for assessment year 1997-98. Further, this ground is identical to ground No. 5 of Appeal No. 1173/ALD/95.
48. It has been held in respect of ground Nos. 3 and 4 for the assessment year 1978-79 in appeal No. 1173/Ald./95 that in general no appeal lies against charging of interest under sections 217, 220, but where the assessee challenges his liability to pay interest or assessability to tax then he can raise the issue in respect of interest under sections 139(8) and 217. However, we hold that there is no right of appeal against levy of interest under section 220(2) following the decision in Central Provinces Manganese Ore Co. Ltd.'s case (supra) and Princess Usha Trust's case (supra). In view of this, this ground of the revenue is partly allowed.
49. In the result, the appeal of revenue is partly allowed.
(b) Appeal No. 70/ALD/96
50. The Ground Nos. 1 to 5 are similar/identical to Ground Nos. I to 5 of Appeal No. 1173/ALD/95, and are emerging from para 5.3 of order dated 9-11-1995. Further, the Ground No. 6 is identical to Ground No. 6 of Appeal No. 69/ALD/95.
51. As the grounds in this appeal are similar to grounds taken in appeal No. 69/Ald./96, our decision is, therefore, the same as we have taken earlier in respect of appeal No. 69/Ald./96.
Ground No. I is allowed in favour of revenue.
Ground No. 2 is allowed in favour of revenue.
Ground No. 3 is partly allowed in favour of revenue.' Ground No. 4 is set aside to the file of assessing officer.
Ground No. 5 is allowed as indicated in the relevant paragraphs while deciding the appeal in ITA No. 1173/Ald./95.
Ground No. 6 is rejected in view of the fact that CIT(A) has set aside the order and no prejudice is caused to the revenue.
(III) A.Y. 1980-81-Appeal Nos. 1175/ALD/95 and 71/ALD/1996
(a) Appeal No. 1175/ALD/95
52.Ground No. 1 is similar to ground No. 1 in appeal No. 1173/Ald./95 and emerges from Paras 5.1, 17 to 20 of CIT(A)'s order dated 30-3-1995 on Page Nos. 63, 70 and 73 of Paper Book. Therefore, our decision in respect of it is the same as taken in appeal No. 1173/Ald./95. This ground is, therefore, allowed in favour of revenue.
53. Ground No. 2 is similar to ground No. 2 in appeal No. 1173/Ald./95. This ground is dependent on Ground No. I above. The discussion in respect of this ground is same as per appeal No. 1173/Ald./95. Therefore, second ground is allowed in favour of revenue.
54. Ground No. 3 is similar to ground No. 3 in appeal No. 1173/Ald./95 and emerges from para 21 of CIT(A)'s order dated 30-3-1995 on Page No. 73 of Paper Book for assessment year 1997-98. In the said para 21, the learned CIT(A) has observed as under :
"Regarding charging of interest what is directed in respect of assessment years 1978-79 and 1979-80, the same will apply for this year also. The assessing officer will allow the proper relief to the assessee."
In view of the above observation of the learned CIT(A), it was contended that the learned CIT(A) erred in giving the same finding for assessment year 1980-81 as has been given for assessment years 1978-79 and 1979-80, in view of the fact that in the said order i.e. for assessment year 1978-79 the assessing officer has not directed to charge interest in the original assessment order dated 28-2-1981, whereas, in assessment year 1980-81 the assessing officer had specifically directed to charge interest under section 217 in the order passed under section 143(3) on 13-9-1982. Hence the directions of the learned CIT(A) for assessment year 1980-81 based on the facts of assessment year 1978-79 are misplaced. The assessing officer will charge interest under section 217 on the basis of aforesaid income as finally determined but up to the date of regular assessment. This ground of revenue is partly allowed.
55. Ground No. (4) : That the learned CIT(A) was also not justified in giving direction with regard to charging of interest, whereas under section 246, no appeal lies before him against charging of interest under sections 139(8),217 and 220(2). Reliance is placed on Addl. CIT v. Allahabad Milling Co. (1978) 111 ITR 111 (All.).
56. This ground emerges from para 21 of CIT(A)'s order dated 30-3-1995 on Page No. 73 of Paper Book of assessment year 1978-79. Further, this ground is identical to ground No. 5 of Appeal No. 1173/ALD/95. Therefore, our comments and decision given therein will also hold good for this ground. This ground of revenue is, therefore, partly allowed.
(b) Appeal No. 71/ALD/96
57. The Ground Nos. 1 to 5 are similar/identical to Ground Nos. 1 to 5 of Appeal No. 1173/ALD/95 and emerges from para 5.3 of order dated 9-11-1995, hence comments offered therein, equally holds good for these grounds. Further, the Ground No. 6 is identical to Ground No. 6 of Appeal No. 69/ALD/95 and ground No. 7 is general. The appeal is allowed in part as for assessment year 1978-79 in appeal No. 69/Ald./95.
Re : ITA No. 1308/Ald./97 and ITA No. 1309/Ald./97 Assessment years 1979-80 and 1980-81 (Appeals by assessee) 58.1 Both the aforesaid appeals have been filed by the assessee against the orders of CIT(A) for the assessment years 1979-80 and 1980-81.
58.2 As far as grounds relating to chargeability of interest under sections 217 and 220(2) of the Act are concerned detailed arguments have already been made in the department's appeal. This ground is, therefore, partly allowed.
58.3 As far as the grounds relating to depreciation are concerned it is submitted by learned counsel for assessee that in the immediately preceding assessment year 1978-79 the Tribunal, Allahabad Bench by its order dated 20-12-2001 (at pages 119 to 129 of the paper book of assessment year 1978-79) set aside the matter to the CIT(A) for re-deciding the matter afresh. The said matter is still pending before the CIT(A). It is, therefore, submitted that the points relating to depreciation may kindly be set aside to the file of the CIT(A) so that all the appeals may be decided together.
58.4 In view of the submissions of the learned counsel for assessee and after considering the arguments of the learned Departmental Representative, we restore this issue into the file of CIT(A). He will decide the issue as per assessment year 197879. This ground of assessee is, therefore, allowed for statistical purposes only.
58.5 In the result, the appeals of the assessee and that of revenue are allowed in part.