Income Tax Appellate Tribunal - Ahmedabad
Assistant Commissioner Of Income-Tax vs Manmohan D. Mehta on 27 December, 1995
Equivalent citations: [1996]57ITD461(AHD)
ORDER
B.M. Kothari, Accountant Member
1. This appeal by the revenue is directed against the order passed by Shri G.B. Parida - learned Commissioner of Income-tax (Appeals) cancelling the interest levied under Sections 139(8) and 217 for assessment year 1986-87.
2. The assessee submitted a return declaring total income of Rs. 23,940 on 4-8-1986. The assessment was completed under Section 143(1) on 30-6-1988. Since the return of income was filed in time, no interest under Section 139(8) was charged. No interest under Section 217 was also charged. Thereafter, notice under Section 148 was issued and served on 2-12-1988. The assessee did not submit any return in compliance of notice under Section 148. He, however, furnished the copy of the assessment order and acknowledgement receipt. The search operation was carried out in this case on 4-8-1988. The re-assessment has been made under Section 144 pursuant to aforesaid notice issued under Section 148. At the time of making such re-assessment the Assessing Officer directed that interest should be charged under Sections 139(8) and 215/216 and also initiated penalty proceedings under different sections.
3. Before the CIT(A), it was argued on behalf of the assessee that no interest could be charged under Sections 139(8) and 217 of the Act, as the re-assessment made under Section 147 could not be regarded as "regular assessment". It was pointed out that with effect from 1-4-1985 in the Explanation 2 to Section 139(8) inserted by the Taxation Laws (Amendment) Act, 1984, it has been provided that 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. Similarly, Section 215(6) inserted by the same amending Act with effect from 1-4-85 provided that 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 Sections 215, 216, 217 & 2 /3. Similarly, the provisions of the aforesaid sections were also amended with effect from 1 -4-85 to provide that if any tax payable on the total income determined in an order passed under Sections 147, 154, 250, 263, 260, etc., is increased or reduced, the interest shall be increased or reduced accordingly. But since no interest was charged in the present case, in the original regular assessment made under Section 143(1), there is no question of any increase or decrease of any interest in view of the provisions of Sections 139(8)(b) and 215(3) r.w.s. 217. It was also argued that a re-assessment made under Section 148 cannot be treated as regular assessment. The learned CIT(A), after considering the arguments made on behalf of the appellant held that the assessee's contention is perfectly tenable being in conformity with the legal provisions and therefore, he is not at all liable to levy of interest under Sections 139(8) and 217. He, therefore, deleted the levy of interest charged under Sections 139(8) and 217.
4. The learned departmental representative argued that since there was no delay in filing of the original return, question of charging interest under Section 139(8) did not arise at the time when the original assessment was made under Section 143(1). It does not mean that no interest can be validly charged when the assessment is being made for the first time under Section 147 for default of compliance with the notice issued under Section 148. He submitted that once the notice has been issued under Section 148, it will be treated as a notice under Section 139(2) for all subsequent purposes and therefore, interest could be validly charged under Section 139(8). Likewise, the learned departmental representative submitted that interest could he validly charged under Section 217. He submitted that if even a petty amount of say Rs. 100 would have been levied by way of interest under Section 217 at the time of original assessment, the same could be increased if amount of tax payable would have been increased on re-assessment made under Section 147. Merely because Nil interest was charged under Section 217 at the time of original assessment made under Section 143(1), it cannot dis-entitle the department to increase the amount of Nil interest to the correct amount of interest leviable under Section 217 at the time of completing the assessment under Section 147.
5. We have carefully considered the submissions made by the learned representatives and have also given a very thoughtful consideration to the relevant provisions of law.
6. It will be worthwhile to reproduce the provisions of Section 215(6) and the Explanation 2 to Section 139(8) which were inserted by the Taxation Laws (Amendment) Act, 1984 with effect from 1 -4-85 :
215(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.
139(8). Explanation 2 - Where, in relation to an assessment year 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.
6.1. It will also be relevant to reproduce the provisions of Section 148(1):
(1) Before making the assessment, reassessment or recomputation under Section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under Section 139.
[Emphasis supplied] A perusal of Section 148 clearly indicates that a notice under Section 148 can be issued in three different situations where income has escaped assessment. It can be issued for making the assessment under Section 147, for making re-assessment, or for making re-computation of income. However, in Section 215(6) and in Explanation 2 to Section 139(8), it has been specifically confined to only one of those situations contemplated in Section 148. Section 215(6) as well as Explanation 2 to Section 139(8) provides that 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 Sections 139(8), 215, 217, etc. These provisions which have been inserted with effect from 1 -4-85 do not include any re-assessment made under Section 147 or any order for re-computation of income made under Section 147. It is only the first assessment for that particular year, whether made under Section 143(1) or 143(3) or 144 or under Section 147, which will be regarded as regular assessment. The re-assessment made in relation to an assessment year where originally a regular assessment whether under Section 143(1) or 143(3) or 144 had already been made, cannot be treated an assessment in relation to that assessment year which is made for the first time under Section 147. On the basis of a plain reading of the aforesaid clear provisions contained in Section 215(6) and Explanation 2 to Section 139(8), it is abundantly clear that no interest can be charged for the first time in case of a re-assessment made under Section 147. What cannot be done directly under the specific provision inserted in Section 215(6) and Explanation 2 to Section 139(8) providing for levy of interest in case of assessment made for the first time under Section 147, it cannot be levied under the shelter of Section 215(3) or under Section 139(8)(b) providing for increasing or reducing the interest depending on variation in the amount of demand as a result of an order under Sections 147, 154, 155, 250, 254, 260, 263, etc. That is a provision which only enables the revenue authorities to appropriately reduce or increase the amount of interest in view of the variations in the amount of tax as a result of subsequent proceedings by way of appeals, revisions, rectifications, re-assessments, etc. However, these provisions do not authorise the levy of interest under Section 139(8) or 217 for the first time where no such interest was charged in the original assessment made for that particular year.
7. In view of the aforesaid discussions, we are of the considered opinion that the learned CIT(A) has rightly deleted the interest levied under Sections 139(8) and 217.
8. In the result, the revenue's appeal is dismissed.