1994 (11) TMI 55 - HC - Income Tax

Assessment Order, Assessment Proceedings, Delay In Filing Return, Original Assessment, Reassessment Proceedings

Summary

Issues:
1. Assessment under Income-tax Act, 1961 for the year 1973-74.
2. Reopening of assessment under section 147(a) to bring sales tax liability.
3. Levying of interest under sections 139(8) and 217 in reassessment.
4. Challenge to the order of the Commissioner under section 264 of the Act.
5. Interpretation of regular assessment under section 2(40).
6. Applicability of interest under section 139(8) in reassessment proceedings.
7. Discretion of the Commissioner in revising the assessment.

Analysis:
1. The appellant, an unregistered firm, did not file a return for assessment under the Income-tax Act, 1961 until a search was conducted in 1974. An assessment was completed in 1976, reducing the total income to Rs. 1,03,230. The appellant disclosed under the Voluntary Disclosure Scheme. Reassessment was done in 1981 to bring sales tax liability into account. Interest was levied under sections 139(8) and 217, which was later modified in appeal by the Commissioner.

2. The appellant sought waiver of interest charged, which was partially granted by the Inspecting Assistant Commissioner. The appellant challenged this in revision under section 264 of the Act. The Commissioner upheld the levy of interest under section 139(8) but canceled the levy under section 217. The appellant then filed a writ petition challenging this order.

3. The High Court noted that interest was levied on the tax due as per the original regular assessment, not on the reassessed amount. The court considered various decisions cited by both sides but focused on the interpretation of regular assessment under section 2(40) and the applicability of interest under section 139(8) in reassessment proceedings.

4. The court discussed previous judgments regarding the definition of regular assessment and whether reassessment qualifies as a regular assessment. It was noted that interest under section 139(8) is payable on the tax determined in the regular assessment, even if levied in subsequent proceedings.

5. The court analyzed the language of section 139(8) and the Explanation added in 1985, clarifying that even an assessment under section 147 qualifies as a regular assessment for the purpose of interest calculation. The court upheld the Commissioner's order, stating that the levy of interest in subsequent proceedings related to the tax determined in the original assessment is permissible.

6. Ultimately, the court dismissed the writ appeal, finding no error in the Commissioner's decision and upholding the discretion exercised against the appellant. The court concluded that since the levy itself was not challenged on its merits, no manifest injustice was caused to the appellant by sustaining the levy of interest under section 139(8) in the reassessment proceedings.