1999 (1) TMI 18 - HC - Income Tax

Summary

Issues:
1. Competence of Commissioner of Income-tax (Appeals) to cancel interest under section 139(8) of the Income-tax Act.

Analysis:
The High Court of PATNA addressed the issue of whether the Commissioner of Income-tax (Appeals) has the authority to cancel interest charged under section 139(8) of the Income-tax Act. The references under section 256(1) were made by the Income-tax Appellate Tribunal at the instance of the Commissioner of Income-tax, Bihar II, Ranchi. The central question raised was whether the Commissioner of Income-tax (Appeals) can cancel the interest after considering the provisions of rule 117A. Both references involved the same assessee, with different assessment years, and were heard together. The Revenue Department contended that interest could only be challenged if the assessment order is also under dispute. On the other hand, the respondent-assessee's counsel argued that an appeal solely against the interest is maintainable. The court noted conflicting views by different High Courts but referred to a Supreme Court decision in Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961, which clarified that appeal against interest in isolation is permissible only if the appellant claims not to be liable for the levy at all.

The apex court's ruling in Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961 established that the charge of interest in isolation is not appealable unless the assessee proves non-liability for the levy. The court also cited National Products v. CIT [1977] 108 ITR 935 (Kar) and Bhikhoobhai N. Shah v. CIT [1978] 114 ITR 197 (Guj), agreeing that the question of waiving or reducing interest under section 139(8) or section 215 is not appealable under section 246(c) of the Income-tax Act. Such matters are more appropriately handled through the Commissioner's revisional jurisdiction. The Income-tax Officer and Inspecting Assistant Commissioner have the authority to consider reducing or waiving interest before imposing a levy under relevant sections. If the assessee fails to apply for reduction or waiver of interest, there is no basis for a revision petition before the Commissioner of Income-tax.

The court concluded that no appeal is maintainable against interest in isolation, as it is part of the process of assessing the tax liability. An assessee can dispute the levy in appeal only by asserting non-liability for the interest. Since the assessee did not apply for reduction or waiver of interest, there was no improper denial by the relevant authority, making a revision petition before the Commissioner of Income-tax untenable. The judgment aligned with the apex court's decision in Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961, emphasizing that appeal against interest is viable only if the assessee claims non-liability for the levy.