Income Tax Appellate Tribunal - Ahmedabad
Assistant Commissioner Of Income Tax vs Jayendra K. Doshi (Indl) on 6 December, 2001
Equivalent citations: (2003)79TTJ(AHD)482
ORDER
Jurisdiction of assessing officer--Mistake allegedly crept in the order giving effect to appellate order Catch Note:
In reassessment, assessing officer directed levy of interest under section 215--This reassessment was subjected to appellate proceedings before Commissioner (Appeals)--Commissioner (Appeals) allowed some relief to the assessee--Assessing officer while giving effect to the order of Commissioner (Appeals) modified the interest charged under section 215--Assessee filed applications under section 154 requesting the assessing officer to delete interest charged under section 215 as no such interest could be charged in the reassessment--Assessing officer rejected application of the assessee--However, on appeal the Commissioner (Appeals) directed the assessing officer to carry out rectification--Was not justified-- Commissioner (Appeals) decided the issue relating to levy of interest under section 215 in the appellate order and, therefore, the order of assessment had merged with the order of Commissioner (Appeals)--Since the assessing officer had levied interest under section 215, whether rightly or wrongly, the same could not be modified by an order under section 154 by him--Mistake, if any, could be rectified only by the Commissioner (Appeals)--Therefore, while deciding appeals of assessee against rejection of application under section 154 Commissioner (Appeals) was wrong in asking the assessing officer to delete interest charged under section 215 .
Ratio:
Commissioner (Appeals) decided issue relating to levy of interest under section 215 in the appellate order and, therefore, the order of assessment had merged with order of the Commissioner (Appeals)--Since the assessing officer had levied interest under section 215, whether rightly or wrongly, the same could not be modified by an order under section 154, by him--Mistake, if any, could be rectified only by Commissioner (Appeals)--Therefore, while deciding appeals of assessee against rejection of application under section 154, Commissioner (Appeals) was wrong in asking assessing officer to delete interest charged under section 215.
Held:
From the facts it becomes abundantly clear that the Commissioner (Appeals) decided the issue relating to levy of interest under section 215 in the appellate order and, therefore, the order of assessment had merged with the order of the Commissioner (Appeals). Since the assessing officer had levied the interest under section 215, whether rightly or wrongly, could not be modified by an order under section 154 by him. The mistake, if any, could be rectified by the Commissioner (Appeals) within a period of four years from the date of his decision. The assessee did not approach the Commissioner (Appeals) with application under section 154 for a decision on merits in regard to levy of interest under section 215 but approached the assessing officer seeking rectification in the orders of assessing officer. The Income Tax Officer had not committed any mistake insofar as he was bound to comply with the direction of the Commissioner (Appeals) of giving only consequential relief as a result of reduction in the assessed income and consequently the assessed tax. He had not committed any mistake which could be rectified under section 154 while giving effect to the order of the Commissioner (Appeals). As already pointed out, the mistake, if any, of charging interest under section 215 in the reassessment under section 147 could not be rectified by the assessing officer, his order having merged with the decision of the Commissioner (Appeals). Therefore, while deciding the appeals of the assessee against the rejection of application under section 154 by the assessee, the Commissioner (Appeals) was wrong in asking the assessing officer to delete the interest charged under section 215.
Application:
Principle enunciated herein is applicable also to current assessment year.
Decision:
In favour of assessee.
Income Tax Act 1961 s.154 ORDER M.A. Bakshi, Vice President
1. We find it convenient to dispose of these two appeals of the Revenue for asst. yrs. 1987-88 and 1988-89 involving common issue by this consolidated order.
2. The relevant facts in this case are that the assessee had filed returns of income for asst. yrs, 1987-88 and 1988-89 which were accepted under Section 143(1). Interest under Section 215 was not charged at the time of making the assessments under Section 143(1) in respect of both the assessment years. Subsequently, the assessments were reopened under Section 147 r/w Section 148 and reassessments made under Section 143(3) r/w Section 147. In the reassessment, the AO directed to levy interest under Section 215, This reassessment was subjected to appellate proceedings before the CIT(A). The CIT(A) allowed some relief to the assessee. The AQ while giving effect to the order of the CIT(A) modified the interest charged under Section 215, The assessee filed applications under Section 154 requesting the AO to delete the interest charged under Section 215 as no such interest could be charged in the reassessment. The AO rejected the applications of the assessee. However, on appeal the CIT{A) directed the AO to carry out the rectification and he has also held that the AO can charge interest only upto the date of first assessment and on the tax determined in tha first assessment stage only. The CIT(A) has followed the decision of the Hon'ble Supreme Court in the case of Modi Industries Ltd. v. CIT (1995) 216 ITR 759 (SC).
3. The learned Departmental Representative contended that the decision of the CIT(A) is not in order. It was contended that Section 216(6) was inserted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1st April, 1985, which permits levy of interest in an assessment under Section 147 made for the first time. Reference was made to the comments in Sampath Iyengar's Income-tax Law. It was, accordingly, contended that the order of the CIT(A) may be set aside and that of the AO restored. It was further contended that Section 215(3) permits levy of interest on the reassessed income and that the decision of the Hon'ble Supreme Court in Modi Industries Ltd. (supra) does not debar such levy.
4. The learned counsel for the assessee contended that the issue is squarely covered by the decision of the Hon'ble Supreme Court in the case of Modi Industries Ltd. (supra) and that the amendment in Section 215 does not make any difference insofar as the first assessment in this case had been made under Section 143(1). The learned counsel pointed out that upto 31st March, 1989, assessments were made under Section 143(1} and w.e.f. 1st April, 1989, the procedure had been changed to issue intimation in place of assessment order under Section 143(1). It was, accordingly, contended that the appeals of the Revenue may be dismissed.
5. We have given our careful consideration to the rival contentions. If one goes by the contentions advanced on behalf of the assessee before us, the matter seems to be quite simple. However, when one peeps deep into the facts of this case, the issue is slightly complicated. The facts found by us during the course of arguments and after obtaining the orders of the CIT(A) in quantum appeal are indicated as under :
6. Assessments for asst. yrs. 1987-88 and 1988-89 had been made under Section 143(1). Since the advance tax paid by the assessee was more than the assessed tax under Section 143(1), interest under Section 215 was not chargeable. Accordingly, the AO did not charge any interest under Section 215. Subsequently, the assessments were reopened under Section 147 for both the assessment years mentioned above and reassessments made. At the time of making the reassessments, the AO found that the interest under Section 215 was chargeable. He, accordingly, levied the interest on the basis of the assessed tax under Section 147 less the advance tax paid. The assessee filed appeals against the reassessment orders to the CIT(A). The CIT(A)-VI, Ahmedabad decided the appeal of the assessee for asst. yr. 1987-88 vide order dt. 31st March, 1995. Some relief was granted to the assessee. The assessee had also raised the ground relating to the levy of interest under Section 215 before the CIT(A). It had been claimed that in reassessments, interest under Section 215 was not chargeable. The CIT(A) disposed of the ground of appeal relating to levy of interest under Section 139(8)/215/217 in para 10 of his order which is reproduced hereunder for the sake of ready reference :
"10. The next ground of appeal pertaining to charging of interest under Section 139(8)/215/217 of the IT Act is consequential and, therefore, the AO will recalculate interest while giving effect to this order."
7. Similarly, for asst. yr. 1988-89, the CIT(A) decided the appeal of the assessee vide order dt. 31st March, 1995 and allowed some relief. The ground relating to levy of interest under Section 217 was decided by the CIT(A) vide para 9 of the said order which is reproduced hereunder for the sake of ready reference :
"9. The next ground of appeal pertaining to charging of interest under Section 139(8)/215/217 of the IT Act is consequential and, therefore, the AO will recalculate interest while giving effect to this order."
8. The AO gave effect to the orders of the CIT(A) and recalculated interest under Section 215 as per the directions of the CIT(A). The assessee filed an application under Section 154 for asst. yr. 1987-88. Similar application was filed for asst. yr. 1988-89 claiming that there was a mistake in the order giving effect to the order of the CIT(A) insofar as interest under Section 215 which was not chargeable had been charged by the AO. The AO rejected the application under Section 154 for both the assessment years against which the assessee filed appeals to the CIT(A). The CIT(A) vide order dt. 9th Feb., 1996, decided the appeals for asst. yrs. 1987-88 and 1988-89 holding that the AO was wrong in not entertaining the applications under Section 154 and he was, accordingly, directed to effect the rectification and not to charge interest on the tax determined at the reassessment stage. It was further held by the CIT(A) that the AO can charge interest only upto the date of first assessment and on the tax determined in the first assessment stage. The Revenue being aggrieved is in appeal before us.
9. From the facts stated above, it becomes abundantly clear that the CIT(A) had earlier decided the issue relating to levy of interest under Section 215 in the appellate order and, therefore, the order of assessment had merged with the order of the CIT(A). Since the AO had levied the interest under Section 215, whether rightly or wrongly, could not be modified by an order under Section 154 by him. The mistake, if any, could be rectified by the C!T(A) within a period of four years from the date of his decision. The assessee did not approach the CIT(A) with application under Section 154 for a decision on merits in regard to levy of interest under Section 215 but approached the AO seeking rectification in the orders of AO. The ITO had not committed any mistake insofar as he was bound to comply with the direction of the CIT(A) of giving only consequential relief as a result of reduction in the assessed income and consequently the assessed tax. He had not committed any mistake which could be rectified under Section 154 while giving effect to the order of the CIT(A). As already pointed out, the mistake, if any, of charging interest under Section 215 in the reassessment under Section 147 could not be rectified by the AO, his order having merged with the decision of the CIT(A). Therefore, while deciding the appeals of the assessee against the rejection of application under Section 154 by the assessee, the CIT(A) was wrong in asking the AO to delete the interest charged under Section 215.
10. In view of this legal position, the assessee though entitled to relief in separate proceedings is likely to suffer because of technical hiccup. We being conscious of the fact that the income-tax law was so complicated that the majority of the taxpayers are unable to appreciate the niceties of law and the proper remedies to be taken against the decisions of the Revenue authorities. Instead of approaching the AO with an application under Section 154, the assessee could have approached the CIT(A) with the same application with slight modification and if the CIT(A) had allowed the claim of the assessee in deciding the said application, no fault could be found with such decision. We are, therefore, faced with a situation where the assessee is entitled to relief but is pitied against the technicalities of law. Since we are satisfied that the assessee is entitled to some relief, we would, therefore, deem the appeal of the assessee against the order of AO under Section 154 as an application under Section 154 before the CIT(A) and the decision of the CIT(A) to be an order under Section 154 and consider its correctness and validity in that context.
11. Now we deal with the merits of the case. In an application under Section 154 before the AO, the assessee claimed that they had paid excess tax by way of advance tax. That as against the tax on the returned income, there was no shortfall as per provisions of Section 215 of the Act. That, therefore, the question of levy of interest under Section 215 does not arise. The AO rejected the contention of the assessee on 28th July, 1995. It is relevant to point out that on the date the AO passed the order under Section 154, the Hon'ble Supreme Court had not rendered the decision in the case of Modi Industries Ltd. and Ors. (supra). The said decision is dt, 15th Sept., 1995, i.e., after the decision of the AO under Section 154. The CIT(A) decided the appeal of the assessee against the order under Section 154 of the AO on 9th Feb., 1996. On that date, the decision of the Hon'ble Supreme Court in the case of Modi Industries Ltd, and Ors. (supra) was available. Since it is well-settled law that the decision of the Hon'ble Supreme Court relates back to the date of assessment Walchand Nagar Industries v. V.S. Gaitonde, ITO and Anr. (1962) 44 ITR 260 (SC), the CIT(A) was justified in taking cognizance of that decision in deciding the issue. It may, however, be relevant to point out that their Lordships of the Hon'ble Supreme Court in the case of Modi Industries Ltd. and Ors. (supra) on the basis of the law as applicable to the assessment year involved in that case, held that interest under Section 214/215 is payable/chargeable upto the date of regular assessment and the income determined on regular assessment, Their Lordships of the Hon'ble Supreme Court also referred to Section 215(3) and pointed out that there was no provision in the Section 215 for enhancement of interest, as a result of any subsequent order after the regular assessment. Their Lordships of the Hon'ble Supreme Court have reproduced Section 215 as applicable in that case as under :
"215(3) Where as a result of an order under Section 154 or Section 155 or Section 250 or Section 254 or Section 260 or Section 262 or Section 264, the amount on which interest was payable under this section has been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded."
On the basis of the aforementioned Section 215(3), Their Lordships rejected the contention on behalf of the Revenue that the interest could be enhanced as per the revision of income on the basis of the subsequent orders passed under various sections of the IT Act, 1961. The law has undergone an amendment insofar as the provision has been subsequently made for enhancement of interest also as a result of subsequent orders after the passing of regular assessment. It is, therefore, necessary to reproduce Section 215(3) enabling the enhancement of interest as well as reduction as a result of subsequent orders passed after the date of regular assessment which is as under :
"215(3) Where as a result of an order under Section 147 or Section 154 or Section 155 or Section 250 or Section 254 or Section 260 or Section 262 or Section 263 or Section 264 or on order of the Settlement Commission under Sub-section (4) of Section 245D, the amount on which interest was payable under Sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and-
(i) in a case where the interest is increased, the AO shall serve on the assessee, a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be a notice under Section 156 and the provisions of this Act shall apply accordingly;
(ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded,"
As is evident from the language of Section 215(3) quoted above, Section 147 has also been incorporated for the purpose of enhancement of interest chargeable under Section 215. In this case, there has been a revision of income as a result of assessment under Section 147. Therefore, the interest under Section 215 is chargeable with reference to the income as determined under Section 147. To that extent, the decision of the Hon'ble Supreme Court in the case of Modi' Industries Ltd. and Ors. (supra) is not applicable. However, there is no change in regard to the decision of the Hon'ble Supreme Court to the effect that the interest under Section 215 shall be charged only upto the date of regular assessment. The CIT(A) in the impugned order has held that interest under Section 215 is chargeable upto the date of regular assessment and on the income assessed as per the regular assessment. Whereas the first portion of the order is perfectly in order in view of the decision of the Hon'ble Supreme Court in the case of Modi Industries Ltd. and Ors. (supra), the subsequent portion of the order is not in consonance with the provisions of Sub-section (3) of Section 215 as applicable to the asst. yrs. 1987-88 and 1988-89. The decision of the CIT(A) is thus modified accordingly and the AO is directed to levy interest under Section 215 on the finally determined reassessed income but only upto the date of regular assessment.
12. We may clarify that we have not gone into the question as to whether the interest under Section 215 could be increased from zero when as a result of reassessment under Section 147 the income has been enhanced and interest under Section 215(3) becomes chargeable. This is so because such issued is a debatable issue and cannot be considered in proceedings under Section 154. The CIT(A) in the first ground having upheld the validity of the levy of interest in reassessment proceedings and the assessee not having appealed against that order, that issue could no longer be considered in proceedings under Section 154. However, the assessee is entitled to the relief as per the decision of the Hon'ble Supreme Court in the case of Modi Industries Ltd. and Ors. (supra) read with modified Section 215(3). We have directed accordingly.
13. The appeals of the Revenue are partly allowed.