2002 (5) TMI 34 - HC - Income Tax

Summary

Issues:
1. Interpretation of the term "regular assessment" under the Income-tax Act, 1961.
2. Application of Explanation 2 to section 139(8) in determining a "regular assessment."
3. Assessment under section 147 of the Act and its classification as a regular assessment.
4. Levying of interest under sections 139(8) and 217 during reassessment.

Analysis:
1. The primary issue in this case revolves around interpreting the term "regular assessment" as defined in section 2(40) of the Income-tax Act, 1961. The Supreme Court in Modi Industries Ltd. v. CIT clarified that "regular assessment" refers to the first assessment made under section 143 or section 144, and any subsequent modified or revised assessment constitutes a fresh order.

2. The insertion of Explanation 2 to section 139(8) by the Taxation Laws (Amendment) Act, 1984, introduced a provision where an assessment made for the first time under section 147 is considered a "regular assessment." This Explanation expanded the scope of "regular assessment" to include assessments under section 147, previously not categorized as such.

3. Section 147 of the Act empowers the Assessing Officer to conduct assessments or reassessments in cases where income has escaped assessment. The distinction between initial assessments and reassessments is crucial in determining whether an assessment falls under the purview of a "regular assessment." In this case, the assessment under section 147 on November 30, 1990, was a reassessment following an initial assessment under section 143(1) in 1986, thus not meeting the criteria for a regular assessment as per the law.

4. The controversy surrounding the levying of interest under sections 139(8) and 217 during reassessment stems from the classification of the assessment as a regular or non-regular assessment. The cancellation of interest by the Commissioner of Income-tax (Appeals) and subsequent affirmation by the Tribunal was based on the finding that the reassessment under section 147 did not qualify as a regular assessment, hence the interest levied was not justified.

In conclusion, the court dismissed the Revenue's petition seeking a reference to the High Court, as the reassessment under section 147 did not meet the criteria of a "regular assessment" despite the insertion of Explanation 2 to section 139(8). The judgment underscores the importance of distinguishing between initial assessments and reassessments in determining the applicability of interest charges under the Income-tax Act.