Karnataka High Court
K. Venkatesh Nayak vs Income-Tax Officer And Another on 4 February, 1993
Equivalent citations: ILR1993KAR1139, [1993]202ITR575(KAR), [1993]202ITR575(KARN)
JUDGMENT
K.A. Swami, Actg. C.J.
1. This appeal is preferred against the order dated October 12, 1992, passed by the learned single judge in Writ Petition No. 29666 of 1992. The learned single single has rejected the writ petition, therefore, the petitioner in the writ petition has come up in this appeal.
2. In the writ petition, the petitioner sought for the following reliefs :
"(A) (To) quash the prosecution proceedings instituted by respondent No. 1 under private complaint as per annexure 'A' on the strength of the order of sanction issued by respondent No. 2 as per annexure 'B' and registered as C. C. No. 97 of 1992 on the file of the Second Additional Chief Judicial Magistrate, Mangalore, by issue of a writ of certiorari or any other appropriate writ or order or direction. as the case may be, holding the same as not maintainable in law and ab initio void.
(B) (To) quash the levy of interest under section 215 and under section 217 of the Income-tax Act, 1961, levied by respondent No. 1, in the order of assessment dated September 25, 1985, as per annexure 'D' for the assessment year 1980-81 to the tune of Rs. 41,898 as being unauthorised and opposed to the judgment of this Hon'ble court in the case of Charles D'souza v. CIT [1984] 147 ITR 694 by issue of a writ of certiorari or any other appropriate writ or order or direction, as the case may be;
(C) (To) issue writ of mandamus or any other appropriate writ or order or direction, as the case may be, directing the respondents to refund a sum of Rs. 41,898 being the tax collected illegally by way of interest under sections 215 and 217 of the Income-tax Act, 1961."
3. The learned single judge has held that the appellant/petitioner can raise objections before the learned Magistrate and, therefore, it is not necessary to entertain the writ petition.
4. Sri Chander Kumar, learned counsel appearing for the appellant/petitioner, has advanced the following contentions :
That the assessment in question relates to the assessment year 1980-81, that the last date for filing the return for the year ending on June 30, 1979, was June 30, 1980, that the appellant filed Form No. 6 for extension of time on June 29, 1980, and thereafter the filed Form No. 6 for further extension of time; that time was granted up to December 12, 1984, and the return was filed only on December 12, 1984; that a notice was issued under section 148 of the Income-tax Act, 1961; that it was served on March 31, 1983, on some other person and not on the assessee; that, however, the assessment was completed under section 143(3) read with section 147 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"); that on May 29, 1985, the taxable income was determined as per the return filed by the assessee at Rs. 1,35,970 and on that penal interest under section 139(8) of the Act was levied in a sum of Rs. 17,998 and a further interest under section 215 of the Act was levied in a sum of Rs. 22,900.
5. On these facts, learned counsel contends that the assessment was made under section 147 and it was not a regular assessment; therefore, the assessing authority had no jurisdiction to levy interest either under section 139(8) or under section 215 of the Act in respect of the assessment year 1980-81, because up to April 1, 1985, the Act as it stood then did not cover the assessments not falling under the regular assessment category so as to attract section 139(8) or section 215 of the Act; that, therefore, the assessing authority acted without jurisdiction; hence it is not necessary for the assessee to avail of the remedy of revision under section 264 of the Act. It is also further submitted that there is no question of preferring against him.
6. Nextly, it is contended that prosecution has been launched after a period of seven years from the last date for filing of the return for the assessment year 1980-81, therefore, under the proviso to section 276CC of the Act, the prosecution is not maintainable.
7. On the contrary, it is contended by Sri Seshachala, learned junior counsel for the Income-tax Department, that as per the decision of a Division Bench of this court in Indian Telephone Industries Co-operative Society Ltd. v. ITO [1972] 86 ITR 566, even the assessment in question is also attracted for levy of penal interest under section 139(8) and interest under section 215 of the Act, that this decision has not been considered in Charles D'Souza v. CIT , therefore, the decision in Central Provinces Manganese Ore Co. Ltd. v. CIT governs the case.
8. In the light of these contentions, the points that arise for consideration are as follows :
"(1) Whether, in the facts and circumstances of the case, the penal interest levied under section 139(8) of the Act and the interest levied under section 215 of the Act are tenable ? and (2) Whether the prosecution launched in C. C. No. 97 of 1992 on the file of the First Additional Chief Judicial Magistrate, Mangalore, is maintainable ?"
Point No. 1 :
9. We have already stated the necessary facts. The penal interest under section 139(8) of the Act has been levied in a sum of Rs. 17,998 and the interest under section 215 of the Act has been levied to the tune of Rs. 22,900. The assessment cannot at all be considered to be a regular assessment because it has been made under section 147 of the Act. Assessments made under section 147 of the Act prior to April 1, 1985, did not attract the provisions contained in sub-section (8) of section 139 of the Act. This has been clearly held by a Division Bench of this court in Charles D'Souza v. CIT [1984] 147 ITR 694. The points that were raised for determination in that case were as follows (at page 696) :
"(i) What is the scope and meaning of the expression 'regular assessment' as defined under section 2(40) of the Act; and
(ii) Does it mean only assessments done under section 143 or section 144 or any assessment done under the Act, whether it is under section 143/144 or under section 147."
10. After discussing the relevant provisions of the Act and the various decisions, ultimately, the questions were answered thus (at page 702) :
"There is considerable force in the contention urged on behalf of the Department that 'regular assessment' if so construed, would cause lot of difficulty in reconciling and in effectively working out the various other provisions of the Act. Sri Srinivasan urged that all assessments done under the Act are assessments made under section 143/144, as the case may be, and in the case of a reopened assessment, it should be construed as an assessment done under section 143/144 read with section 147 and not independent of and de hors section 143. The learned counsel further submits that there can be a first assessment under section 147 also, if there was no assessment earlier done in a given case and the assessment is reopened by resort to section 148 and, therefore, the expression 'regular assessment' should mean and include all assessments done under the Act. But, Sri Srinivasan has been able to convince us why regular assessment is defined to mean only assessments made under section 143/144 and how the court could give a wider meaning to the definition in the context in which the expression 'regular assessment' occurs in section 139(8) and 217 of the Act.
We are left with no alternative except to go by the literal meaning of the expression 'regular assessment' as defined in section 2(40) for the purpose of answering the question referred to us. If any difficulty were to arise as is apprehended by the learned counsel for the Department, in giving effect to the other provisions of the Act, besides rendering section 139(8) and other similar provisions of the Act impossible of application in such cases, it would be for the Legislature to take note of it and make such amendments if deemed necessary.
In the result, our answer to the question is :
'No interest under section 139(8) and section 217 of the Act is leviable in a case of an assessment or reassessment made under section 147 of the Income-tax Act, 1961'."
11. This decision was affirmed by the Supreme Court in S. L. P. (Civil) No. 8215 of 1985 reported in [1990] 186 ITR (St.) 28, which reads thus :
"Interest :
Whether leviable on reassessment :
10-9-1990 : Their Lordships, M. N. VENKATACHALIAH and N. M. KASLIWAL JJ., dismissed the Department's special leave petition against the judgment dated January 27, 1984, of the Karnataka High Court in I. T. R. C. No. 36 of 1980, reported in 147 ITR 694, whereby the High Court answered against the Department the question whether interest under sections 139 and 217 of the Income-tax Act, 1961, was leviable in respect of an assessment under section 147 : CIT v. Charles D'Souza - S. L. P. (Civil) No. 8215 of 1985."
12. The decision relied upon by learned junior counsel for the Income-tax Department in Indian Telephone Industries Co-operative Society Ltd. v. ITO [1972] 86 ITR 566 (Mys), relates to a case wherein the petitioner applied to the Commissioner of Income-tax, Mysore, to waive the penalty in exercise of his power under section 271(4A) of the Act. In that application, the petitioner therein requested for an opportunity of hearing. The Commissioner of Income-tax, Mysore, without giving a hearing, rejected the application. The validity of the order of the Commissioner of Income-tax, Mysore, was challenged in the writ petition. The following contentions were urged (at page 568) :
"The first contention of Sri G. Chander Kumar, learned counsel for the petitioner, was that the levy of interest under section 139 is permissible only in cases where the assessee makes an application in the prescribed manner for extension of time to file the return and not in cases where the assessee files the return within the time fixed in the notice issued under section 148 or section 139(2). His second contention was that the Commissioner was bound to give a hearing before he rejected the application under section 271(4A) of the Act and he not having done so, his order is liable to be quashed."
13. It was held that the extension of time for furnishing of the return either under sub-section (1) of section 139 or under sub-section (2) of section 139 may be granted up to September 30, or December 31, of the assessment year, as the case may be, without charging interest. Extension of time beyond the said dates can be granted only on condition that the assessee pays interest at the rates provided under the provisions of sub-clause (iii) of the proviso to sub-section (1) of section 139. If the date originally fixed for filing the return in the notice issued under section 139(2) or section 148 falls beyond the date mentioned in the proviso to sub-section (1) of section 139 or, if the extension granted on the application of the assessee falls beyond the said date, interest at the rates provided shall be payable from the first day of October or the first day of January, as the case may be, of the assessment year, to the date of the furnishing of the return. The liability to pay interest arises not only where the assessee, on an application, obtains an extension of time beyond the dates mentioned in the relevant provision, but also where the date fixed originally in the notice under section 139(2) or section 148, as the case may be, falls beyond the said date. Therefore, it is clear that the question as to whether interest under section 139 of the Act would be levied only in a case where the regular assessment is made did not arise for our consideration, whereas, such a question was raised in Charles D'Souza's case , and the lacuna in the Act was noticed. In fact, the lacuna in the Act was removed pursuant to the decision in Charles D'Souza's case , by the Taxation Laws (Amendment) Act, 1984 (for short, "Amendment Act, 1984"), with effect from April 1, 1985. Sub-section (8) of section 139 of the Act came to be amended by the new Explanation, which was numbered as Explanation 2. Similarly, sub-section (6) came to be inserted in section 215 of the Act, by the Amendment Act, 1984, with effect from April 1, 1985. Explanation 2 to section 139, as introduced by the Amendment Act, 1984, in section 139(8) of the Act, reads thus :
"Explanation 2. - Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this sub-section."
14. Similarly, sub-section (6) in section 215 of the Act, as inserted by the very same Amendment Act, 1984, also reads thus :
"(6) Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this section and sections 216, 217 and 273."
15. Therefore, it is clear that the decision in Indian Telephone Industries Co-operative Society Ltd.'s case [1972] 86 ITR 566 (Mys.), cannot be applied to the case on hand. Similarly, the decision in Central Provinces Manganese Ore Co. Ltd. v. CIT , is not applicable to the case on hand. That was a case in which interest was levied under section 139(8) and section 215 of the Act, in the course of the regular assessment. The question that arose for consideration was as to whether the orders levying interest under sub-section (8) of section 139 and under section 215 of the Act were appealable under section 246 of the Act. It was held that levy of interest was a part of the process of assessment; therefore, it was open to the assessee to dispute the levy in appeal provided that he limits himself too the grounds that he was not liable to the levy at all. Therefore, in that case, the question as to whether interest under sub-section (8) of section 139 and under section 215 of the Act could be levied in an assessment other than the regular assessment, did not arise for consideration. Hence, the said decision also is not applicable to the case on hand.
16. What applies to section 139(8) of the Act would also apply too section 215 of the Act, inasmuch as, both the provisions, as they stood prior to the amendment by the Taxation Laws (Amendment) Act, 1984, with effect from April 1, 1985, used the expression "regular assessment". Therefore, it is not necessary to discuss the validity of the interest levied under section 215 of the Act. As the assessment in question is not a regular assessment and is related to the period prior to April 1, 1984, the interest under section 139(8) and section 215 of the Act could not have been levied.
17. The contention of junior counsel for the Income-tax Department that a remedy under section 246 of the Act is available to the appellant-petitioner because there is a right of revision provided under the Act, cannot also be accepted. What is challenged is the very jurisdiction of the authority to levy penal interest and interest under sections 139(8) and 215 of the Act; therefore, the contention as to the availability of an alternative remedy cannot be made a ground to refuse relief as the very jurisdiction of the authority is in question. Such a contention has also been considered by us in W. A. Nos. 1977 and 1978 of 1992 - Smt. S. Mageshwari v. Asst. CIT , decided on November 4, 1992. In this connection, we have held as follows (at page 476) :
"It is a settled position of law that revision is not a right and it cannot at all be equated to the right of appeal, therefore, failure to invoke revisional jurisdiction or avail of the remedy of revision, by itself, would not disentitle a party aggrieved to invoke the jurisdiction of this court under articles 226 and 227 of the Constitution; nor is such failure a bar to the exercise of jurisdiction under articles 226 and 227 of the Constitution. The delay in approaching this court, in a matter where there is no authority vested in the assessing authority to levy penal interest, by itself, is not a ground to deny relief under articles 226 and 227. No doubt, the assessee has approached this court after a lapse of about two years, but the delay of two years in the facts and circumstances of the case, when the authority has no jurisdiction at all to levy penal interest to the tune of Rs. 3,88,509, would not be a ground to deny relief. Similarly, the conduct of the assessee in not co-operating with the Department in the matter of reassessment also cannot be made a ground to deny the relief, because the unacceptable or unreasonable conduct of the assessee will not in any way confer jurisdiction upon the authority to pass an order levying penal interest. Therefore, we are of the view that the contention urged on behalf of the Department that the assessee is guilty of laches and has not availed of the remedy of revision and her conduct has not been worthy of acceptance during the period of reassessment proceedings as she failed to co-operate with the Department, would not be sufficient to deny the relief to the assessee, as the assessing authority has exercised jurisdiction, not vested in it, in imposing penal interest."
18. Therefore, this contention also cannot be accepted. Accordingly, point No. 1 is answered in the negative.
Point No. 2 :
19. It is not possible to agree with the contention of Sri Chander Kumar, learned counsel appearing for the appellant, that the prosecution launched in C. C. No. 97 of 1992 and pending before the First Additional Chief Judicial Magistrate, Mangalore, is not maintainable on the ground that it has been instituted after a lapse of seven years of non-filing of the return for the assessment year 1980-81 and also having regard to the provisions contained in section 276CC of the Act. Section 276CC of the Act does not prescribe any period for launching a prosecution. Production is permissible under section 276CC of the Act, if a person wilfully fails to furnish in due time the return of income which he is required to furnish under sub-section (1) of section 139 or by notice given under clause (i) of sub-section (1) of section 142 or section 148. However, a proviso to the said section states certain exceptions. If the case falls within these exceptions, a person cannot be proceeded against. The said proviso reads thus :
"Provided that a person shall not be proceeded against under this section for failure to furnish in due time the return of income under sub-section (1) of section 139 -
(i) for any assessment year commencing prior to the 1st day of April 1975; or
(ii) for any assessment year commencing on or after the 1st day of April, 1975, if -
(a) the return is furnished by him before the expiry of the assessment year; or
(b) the tax payable by him on the total income determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source, does not exceed three thousand rupees."
20. We do not consider it necessary to determine any one of the contentions having a bearing on this point as it is open to the appellant to urge the same before the learned Magistrate before whom the criminal case is pending. Accordingly, consideration of the contentions having a bearing on this point is left open.
21. For the reasons stated above, the writ appeal is allowed. The order dated December 12, 1992, passed in Writ Petition No. 29666 of 1992 is set aside.
22. Writ petition No. 29666 of 1992 is partly allowed. Penal interest levied under section 139(8) of a sum of Rs. 1,35,970 and the interest under section 215 of the Act to the tune of Rs. 22,900 in the assessment order dated September 25, 1985, for the assessment year 1980-81 are quashed. The order of assessment in respect of other matters is not disturbed. If the respondents have recovered the penal interest levied under section 139(8) amounting to Rs. 17,998 and also the interest levied under section 215 of the Act amounting to Rs. 22,900, the same shall be refunded within a period of three months from today.
23. In the facts and circumstances of the case, there will be no order as to costs.