1993 (2) TMI 77 - HC - Income Tax

Summary

Issues Involved:

1. Whether the penal interest levied under section 139(8) of the Income-tax Act, 1961, and the interest levied under section 215 of the Act are tenable.
2. Whether the prosecution launched in C.C. No. 97 of 1992 on the file of the First Additional Chief Judicial Magistrate, Mangalore, is maintainable.

Issue-wise Detailed Analysis:

Issue 1: Penal Interest and Interest Levy

The primary contention of the appellant was that the assessment for the year 1980-81, completed under section 143(3) read with section 147 of the Income-tax Act, 1961, was not a regular assessment. Consequently, the assessing authority lacked jurisdiction to levy interest under section 139(8) and section 215 of the Act. The appellant argued that, as per the law before April 1, 1985, assessments under section 147 did not attract these interest provisions. This position was supported by the Division Bench decision in Charles D'Souza v. CIT [1984] 147 ITR 694, which held that "no interest under section 139(8) and section 217 of the Act is leviable in a case of an assessment or reassessment made under section 147 of the Income-tax Act, 1961."

The court affirmed that the assessment in question was not a regular assessment and, thus, the interest levied under sections 139(8) and 215 was not tenable. The court noted that the decision in Charles D'Souza's case was upheld by the Supreme Court, and the lacuna identified in the Act was subsequently addressed by the Taxation Laws (Amendment) Act, 1984, effective from April 1, 1985. The amendments included Explanation 2 to section 139(8) and sub-section (6) to section 215, which clarified that assessments made for the first time under section 147 would be regarded as regular assessments for the purposes of these sections.

The court rejected the Department's reliance on Indian Telephone Industries Co-operative Society Ltd. v. ITO [1972] 86 ITR 566 and Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961 (SC), as these cases did not address the specific issue of interest levy on non-regular assessments. The court concluded that the interest levied under sections 139(8) and 215 for the assessment year 1980-81 was without jurisdiction and quashed the same.

Issue 2: Maintainability of Prosecution

The appellant contended that the prosecution initiated in C.C. No. 97 of 1992 was not maintainable as it was launched seven years after the due date for filing the return for the assessment year 1980-81, invoking the proviso to section 276CC of the Act. The court clarified that section 276CC does not prescribe a period for launching prosecution but allows it if a person wilfully fails to file the return in due time. The proviso to section 276CC exempts certain cases from prosecution, but the court did not delve into these contentions, leaving them open for the appellant to argue before the learned Magistrate.

Conclusion:

The court allowed the writ appeal, setting aside the order dated October 12, 1992, and partly allowed Writ Petition No. 29666 of 1992. The court quashed the penal interest of Rs. 17,998 under section 139(8) and the interest of Rs. 22,900 under section 215 levied in the assessment order dated September 25, 1985, for the assessment year 1980-81. The court ordered the refund of these amounts if already recovered, within three months. The prosecution's maintainability was left for determination by the Magistrate. No costs were ordered.