1998 (1) TMI 56 - HC - Income Tax

Advance Tax, Appeal Before AAC, Appeal To AAC, Delay In Filing Return, Reduction Or Waiver, Waiver Of Interest, Waiver Or Reduction

Summary

Issues:
- Whether the order levying interest is also an order charging a tax from which an appeal to the Appellate Assistant Commissioner is permissible?

Analysis:
The judgment pertains to a reference under section 256(1) of the Income-tax Act, 1961, regarding the assessment year 1971-72. The primary issue was whether the order levying interest could be considered as an order charging tax, allowing an appeal to the Appellate Assistant Commissioner. The Income-tax Officer framed an assessment under section 143(3) and directed the charging of interest under sections 139(8) and 217(1)(a) due to delays in filing the return and statement of advance tax.

The assessee appealed before the Appellate Assistant Commissioner challenging the assessment, computation of income, and the levy of interest under sections 139(8) and 217(1)(a). The Appellate Assistant Commissioner found the appeal maintainable, citing a lack of notice to the assessee before levying interest as a violation of natural justice. The appeal was allowed, leading to a direction for the Income-tax Officer to provide the assessee with an opportunity to contest the interest levy.

Subsequently, the Department appealed to the Inspecting Assistant Commissioner, arguing that the appeal challenging the interest levy was not maintainable. The Tribunal upheld the Department's plea, setting aside the Appellate Assistant Commissioner's order that challenged the interest levy under sections 139(8) and 217(1)(a).

The High Court observed that the question referred by the Tribunal was narrowly focused on whether interest could be considered tax under section 246 of the Act. However, the broader issue was whether the levy of interest by the Assessing Officer could be appealed and under what circumstances. Citing a Supreme Court decision, it was noted that an appeal against an assessment order could include challenging penal interest, and the assessee could dispute liability for both tax and penal interest.

The High Court highlighted the distinction made by the Supreme Court between cases where liability to pay interest is denied and cases where a waiver or reduction of interest is sought. It emphasized that the appropriate remedy for seeking waiver or reduction of interest lies before the assessing authority, not in an appeal. In this case, as the assessee did not approach the Income-tax Officer for waiver or reduction of interest but directly filed an appeal, the appeal challenging the interest levy was deemed not maintainable.

In conclusion, the High Court held that the appeal before the Appellate Assistant Commissioner challenging the interest levy was not maintainable. The Tribunal's decision to set aside the Appellate Assistant Commissioner's order regarding the interest levy was upheld in favor of the Revenue.