Madhya Pradesh High Court
Commissioner Of Income-Tax vs Mangal Brothers on 22 July, 1982
Equivalent citations: [1984]146ITR125(MP)
JUDGMENT Sohani, J.
1. By this reference under Section 256(1) of the I.T. Act, 1961 (hereinafter referred to as "the Act"), the Income-tax Appellate Tribunal, Indore Bench, has referred the following question of law to this court for its opinion :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the CIT (Appeals) had jurisdiction to entertain an appeal against charging of interest under Section 217 of the Income-tax Act, 1961 ?"
2. The material facts giving rise to this reference, as set out in the statement of the case, briefly are as follows:
The assessee is a registered firm deriving income from manufacture and sale of urad, mogar, dal, etc. The assessment year in question is 1974-75, and the relevant accounting year ended on October 26, 1973. The said firm was a new assessee and was, therefore, required to file an estimate of advance tax under Sub-section (3) of Section 212 of the Act, The ITO, while passing the assessment order, held that the assessee was liable to pay interest under Section 217 of the Act. The question as to whether the assessee had failed to file an estimate of advance tax under Section 212(3) of the Act was, however, not dealt with in the assessment order. Aggrieved by the order of assessment, the assessee preferred an appeal assailing the order of assessment in so far as the ITO had disallowed the sum of Rs. 7,500 on account of Hawali charges, had made an addition of Rs. 27,311 and had held the assessee liable to pay interest under Section 217 of the Act. The Commissioner (Appeals) held that the additions made by the ITO were justified but as the assessee had filed an estimate of advance tax interest could not be charged by the ITO under Section 217 of the Act. Aggrieved by the order passed by the appellate authority, the Department preferred an appeal before the Appellate Tribunal and urged that the Commissioner (Appeals) had exceeded his jurisdiction by entertaining an appeal against levy of interest under Section 217 of the Act. The Tribunal, however, overruled the contention urged on behalf of the Department and held that as the assessee had filed an estimate of advance tax, the appellate authority was justified in holding that the assessee was not liable to pay interest under Section 217 of the Act. In this view of the matter, the Tribunal dismissed the appeal. Hence, at the instance of the Department, the aforesaid question of law has been referred to this court for its opinion.
3. Shri Mukati, learned counsel for the Department, contended that no right of appeal was provided by Section 246 of the Act against an order passed under Section 217 of the Act and the Tribunal erred in holding that the appellate authority had jurisdiction to give relief to the assessee in that behalf. In reply, Shri Chaphekar, learned counsel for the assessee, contended that in the instant case, the assessee had not raised in the appeal merely the question of his liability to pay interest under Section 217 of the Act. It was con tended that Section 246(c) of the Act conferred a right on an assessee to prefer an appeal, where the assessee objected to the amount of income assessed and as there was a valid and competent appeal before the appellate authority, that authority had jurisdiction to determine the validity of the entire order of assessment, which included the levy of interest under Section 217 of the Act.
4. Now, in the instant case, the assessee preferred an appeal assailing certain additions made by the ITO and the levy of interest under Section 217 of the Act. Therefore, the appeal preferred by the assessee did not merely raise the question of the liability of the assessee "to pay interest under Section 217 of the Act. Had it been so, it would have been necessary for us to decide the question as to whether such an appeal was competent. We, therefore, refrain from expressing any opinion on the question as to whether an appeal would lie where the only subject-matter of appeal is the order levying interest. In the instant case, there was a valid and competent appeal before the appellate authority. It is now well settled that if there is a valid and competent appeal before the AAC, then no restriction can be placed on the powers of the AAC to deal with the order of assessment. The question of liability of the assessee to pay interest under Section 217 of the Act forms part of the order of assessment. Hence, in our opinion, the appellate authority was was competent to deal with the question of levy of interest under Section 217 of the Act. In this connection, we may usefully refer to the following observations of the Delhi High Court in CIT v. Mahabir Parshad and Sons [1980] 125 ITR 165 at p. 176:
" In a case, where an assessee is aggrieved by the order of assessment in one of the four ways set out in Clause (c) and prefers an appeal to the AAC, it is well settled that the powers of the AAC are not restricted to the grounds taken by the assessee in appeal before him. It has now been settled by several decisions starting with Narrondas Manordass [1957] 31 ITR 909 (Bom) and including the decisions of the Supreme Court in McMillan & Co. [1958] 33 ITR 182 (SC), Shapoorji Pallonji [1962] 44 ITR 891 (SC), Kanpur Coal Syndicate [1964] 53 ITR 225 (SC) and Hardutroy Chamaria [1967] 66 ITR 443 (SC), that in disposing of an appeal before him, the AAC Can travel over the entire range of the assessment order. He can bring in for assessment sources which have been considered or processed by the ITO even though the ITO might have failed to bring them to tax. In other words, the powers of the AAC in disposing of an appeal are very wide and plenary, wider even than those of the Tribunal. It is open to him to consider every aspect of the assessment order and give appropriate relief or directions. In this view again there is, in our opinion, no restriction that can be placed on the powers of the AAC to deal with the question of interest."
We respectfully agree with the aforesaid observations.
5. For all these reasons, our answer to the question referred to this court is in the affirmative and against the Revenue.
6. In the circumstances of the case, parties shall bear their own costs of this reference.