2002 (11) TMI 735 - AT - Income Tax

Summary

Issues:
Appeals against orders of CIT(A) regarding levy of interest under sections 215/217 and 139(8) in orders under section 154/155.

Analysis:
1. The appeals were consolidated as they involved common issues with identical facts. The assessees contested the levy of interest under sections 215/217 and 139(8) in the orders passed under section 154/155 by the Assessing Officer.

2. The Assessing Officer initially did not charge interest under sections 139(8) or 215/217 in the assessments under section 143(1). Subsequently, interest was levied under these sections in orders under section 154/155. The assessees argued that no specific directions were given in the original orders to charge interest, making the subsequent levy unjustified.

3. The assessees further contended that interest should only be charged during regular assessments, not rectification proceedings. They cited relevant case laws to support their argument. The CIT(A) upheld the Assessing Officer's orders, stating that the interest was compensatory and automatic upon tax liability enhancement.

4. The assessees' counsel reiterated their arguments before the appellate authorities, supported by additional case laws. The Departmental Representative (D.R.) supported the lower authorities' decisions.

5. The Tribunal noted that interest was first levied in rectification proceedings, not during regular assessments as required by law. Citing a Rajasthan High Court case, the Tribunal held that interest cannot be levied if not specified in the assessment order.

6. Referring to an ITAT Chennai decision, the Tribunal emphasized that interest cannot be charged for the first time in reassessments under section 147. Sections 215(3) and 139(8)(b) allow adjustments based on subsequent proceedings but do not permit initial interest levy.

7. Based on legal precedents, the Tribunal concluded that interest should not have been charged under sections 139(8) or 215/217 in the orders under section 154/155 without prior levy during regular assessments. Consequently, the Tribunal allowed all appeals, deleting the interest charged by the Assessing Officer and upheld by the CIT(A).