Income Tax Appellate Tribunal - Madras
Income-Tax Officer vs P. Thilagavathy on 26 June, 2001
Equivalent citations: [2002]80ITD239(CHENNAI)
ORDER
N. Barathvaja Sankar, Accountant Member
1. As these two appeals preferred by the revenue for the two consecutive assessment years 1987-88 and 1988-89 in the case of the assessee Smt. P. Thilakavathi of Shanmuganathapuram consist of identical grounds of appeal and arise out of the common appellate order, the same were clubbed together, heard together and are being disposed of by this common and consolidated order for the sake of convenience.
2. Briefly stated, the facts of the case are that for the assessment year 1987-88 the assessee originally filed the return of income on 9-2-1988 admitting income of Rs. 13,880. The assessment was completed under Section 143(1) accepting the return. Thereafter a survey under Section 133A was conducted by the AD (I) in the business premises of the assessee on 18-12-1990. During the course of the survey the assessee's husband had admitted that the assessee used to charge interest on pawn inams at 27 per cent per annum and she used to account for interest at 12 per cent per annum. The income that had been earned and kept outside the books of account had been invested in various securities and also utilised for meeting the household expenses etc. She had also given a statement in this regard that the assessee had undertaken to offer a sum of Rs. 6,25,000 as undisclosed income in the last five years returns and also agreed to pay the taxes thereon. Accordingly, the assessee had filed the returns for the assessment years 1987-88 to 1990-91 offering a total sum of Rs. 5 lakhs. For the assessment year 1987-88 the assessee had filed revised return on 15-4-1991 admitting total income of Rs. 1,38,880, i.e. income admitted in the original return being Rs. 13,880 and additional income of Rs. 1,25,000. After discussing with the assessee's representative the assessment was completed under Section 143(3) accepting the returned income of Rs. 1,38,880. While framing the assessment order interest under Section 139(8) of Rs. 4,872 and interest under Section 217 of Rs. 43,948 were charged. Similarly for the assessment year 1988-89 interest under Section 139(8) of Rs. 4,340 and interest under Section 217 of Rs. 37,200 were charged.
3. Aggrieved by this action of the Assessing Officer the assessee moved the matter in appeal before the first appellate authority. The first appellate authority after considering the contentions of the assessee's representative had observed as under :-
I have considered the facts of the case. For both assessment years 1987-88 and 1988-89, the original assessments were completed accepting the returned income. No interest was apparently levied either under Section 139(8) or under Section 217 at that stage. Thereafter, in the light of the survey conducted by the department and in pursuance of the statement given by her husband, the appellant offered Rs. 1,25,000 each for five assessment years from 1987-88 to 1991-92. The appellant voluntarily filed returns admitting Rs. 1,25,000 as additional income and the Assessing Officer issued notices under Section 148 just to legitimise those returns. The disputed levy of interest under Sections 139(8) and 217 is part of the reassessments. The appellant totally denies the liability. In my view the appellant is bound to succeed since it has been held that interest under Sections 139(8) and 217 can not be levied in a reassessment vide Karnataka High Court's decision in Charles D'Souza's case reported in 147 ITR 694. The Department's SLP against the decision has been rejected by the Supreme Court vide 186 ITR St. 28. In the light of this, the levy of interest is held unsustainable for both years. The Assessing Officer is directed to modify the tax liability by excluding the interest levied. In the result, appeals are allowed.
4. Now the revenue is aggrieved and is on second appeal before the Tribunal with the following grounds of appeal :
1. The Commissioner (Appeals) erred in deleting the interest levied under Sections 139(8) and 217 of the Income-tax Act.
2. The Appellate Authority ought not have deleted the interest when there was no original assessments made for the assessment years 1987-88 and 1988-89 and the returns were processed under Section 143(1)(a) and thereafter notice issued under Section 148 to bring to tax the income that had escaped and in that sense the assessment under Section 147 only was the regular assessment.
3. The Commissioner (Appeals) ought to have confirmed the levy of interest under Section 139(8) and under Section 217 following the decision of the Kerala High Court in the case of Lally Jacob 197 ITR 439 and the Thekkanatu Firms 202 ITR 389 particularly when it was not a case of reassessment but first assessment under Section 147. The appellate authority erred in not considering the fact that the decision of the Karnataka High Court in 141 ITR 694 does not apply to a case of assessment under Section 147 after processing the return under Section 143(1)(a).
At the time of hearing the learned departmental representative contended that the decision of the Karnataka High Court in Charles D'Souza v. CIT [1984] 147 ITR 694, relied upon by the first appellate authority is no more good law in view of the amendments made to Sections 139(8) and 215(3) of the Income-tax Act with effect from 1-4-1985. Specifically he drew our attention to the Explanation 2 to Section 139(8), which reads as under :-
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 purpose of this sub-section.
Also Section 215(3) was relied upon by the learned departmental representative.
5. On the other hand the learned counsel for the assessee submitted that the original assessments for the assessment years 1987-88 and 1988-89 were completed on the basis of the returns filed by the assessee under Section 143(1)(a). These assessments were reopened in order to assess further income of Rs. 1,25,000 each admitted by the assessee in the wake of survey under Section 133A carried out by the Investigation Wing of the Income-tax Department and in pursuance of the statement given by the assessee's husband. It was contended that the later returns were voluntarily filed on 15-4-1991 whereas notices under Section 148 were issued on 16-4-1991 to make the returns regular and, therefore, there was no delay in filing the return. It was further contended that since no interest under Sections 139(8) and 217 had been levied at the original assessment stage, the levy of interest in the reassessment was erroneous. He strongly contended that the assessments made under Section 147 were only reassessments and the original returns had already been processed under Section 143(1)(a) of the Act and the intimation issued under Section 143(1)(a) is nothing but an assessment order. Hence he strongly contended that the orders passed under Section 143(3), read with Section 147, wherein for the first time interest under Sections 139(8) and 217 had been levied, are only orders of reassessments and not the first assessments.
6. In his rejoinder the learned departmental representative submitted that the returns were filed only after the survey. The original return and the revised return were different and not one and the same. The learned departmental representative also relied on the Kerala High Court decision in the case of Mrs. Lally Jacob v. ITO [1992] 197 ITR 439 (FB) and also the same High Court decision in the case of Thekkanatu Firms v. CIT [1993] 202 ITR 389 : 70 Taxman 278.
7. We have heard the rival submissions and considered the facts and the materials on record including the decisions relied upon. The undisputed fact is that the originally returned incomes of the assessee were accepted under Section 143(1)(a) and later on as a result of survey under Section 133A the assessee had voluntarily filed revised returns which were regularised by issue of notice under Section 148 as a consequence of which assessments were made under Section 143(3) read with Section 147. The only point for our consideration in this case is whether the assessments made under Section 143(3) read with Section 147 consequent upon the filing of the revised returns by the assessee would amount to regular assessments made under Section 147 or revised assessments made under Section 147. In our considered opinion it is only reassessment and not the first assessment made for the first time under Section 147. The assessment years under consideration are 1987-88 and 1988-89, i.e. beyond the assessment year 1984-85 during which year the Explanation 2 to Section 139(8)(a) was inserted making it effective from 1-4-1985. So there is force in the contention of the learned departmental representative that the decision of the Karnataka High Court in Charles D'Souza's case (supra), relied upon by the first appellate authority is no more a good law. Adverting to the decisions of the Kerala High Court in Lally Jacob's case (supra) and Thekkanatu Firm's case (supra), relied upon by the learned departmental representative, we find that both the decisions relate to the assessment years prior to the assessment year 1985-86. Hence in our opinion these decisions may not be of much help for deciding a case relating to the assessment years 1987-88 and 1988-89, more specifically after the insertion of Explanation 2 to Section 139(8).
8.1 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 reassessment or for making recomputation 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 regular assessment for the purpose of Sections 139(8), 215 and 217, etc. These provisions, which have been inserted with effect from 1-4-1985, do not include any reassessment made under Section 147 or any order for recomputation of income 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 the regular assessment. The assessment made in relation to an assessment year where originally a regular assessment, whether under Section 143(1) or 143(3) or 144, has already been made, cannot be treated as 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 reassessment 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 done 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, reassessments, 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. This view of ours is fortified by the decision of the Ahemdabad Bench-C of the Tribunal in the case of Asstt. CIT v. Harikrishna Family Trust [1996] 57 ITD 353.
8.2 In view of the totality of the facts and the circumstances of the case in the light of the above discussion we are inclined to hold that interest under Sections 139(8) and 217 levied by the Assessing Officer on making assessments under Section 143, read with Section 147 are to be deleted. Thus the orders of the first appellate authority are confirmed for different reasonings as narrated above.
8.3 In the result the appeals filed by the Revenue are dismissed.