1992 (4) TMI 39 - HC - Income Tax

Summary

Issues Involved:

1. Whether an assessment made for the first time by resort to section 147 of the Income-tax Act, 1961, is a "regular assessment" for the purpose of charging interest under section 217 of the Act.

Summary:

1. Definition and Scope of "Regular Assessment":
The primary issue is whether an assessment made for the first time under section 147 of the Income-tax Act, 1961, qualifies as a "regular assessment" for the purpose of levying interest u/s 217. The petitioner argued that an assessment under section 147 does not fall under the definition of "regular assessment" as per section 2(40) of the Act, which defines "regular assessment" as an assessment made under section 143 or section 144.

2. Petitioner's Argument:
The petitioner, an assessee, contended that since the assessment for the year 1980-81 was made under section 147, it does not qualify as a "regular assessment," and therefore, interest u/s 217 should not be levied. The petitioner relied on the Division Bench decision in Gates Foam and Rubber Co. v. CIT [1973] 90 ITR 422, which supported this view.

3. Revenue's Argument:
The Revenue argued that any assessment made for the first time, whether under section 143, 144, or 147, is a "regular assessment." They contended that section 148 deems a notice under section 147 as a notice under section 139(2), and thus, the subsequent assessment should be considered a "regular assessment." They also referenced section 140A, which treats tax paid under section 140A(1) towards a return filed under section 148 as payment towards a regular assessment.

4. Judicial Precedents:
The court examined various judicial precedents. Some High Courts, including the Kerala High Court in Gates Foam and Rubber Co.'s case, held that an assessment under section 147 is not a "regular assessment." However, other High Courts, such as the Madras High Court in Gopalaswami Mudaliar v. Fifth Addl. ITO [1963] 49 ITR 322 and the Delhi High Court in National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India [1981] 130 ITR 928, held that an assessment made for the first time under section 147 is a "regular assessment."

5. Court's Decision:
The court concluded that an assessment made for the first time by resort to section 147 is indeed a "regular assessment." They reasoned that section 148's provision, which treats a notice under section 147 as a notice under section 139(2), implies that the assessment made pursuant to such notice should be considered a "regular assessment." The court also noted that section 140A supports this interpretation by treating tax payments under section 148 as payments towards a regular assessment.

6. Clarification and Amendment:
The court clarified that their interpretation applies only to assessments made for the first time under section 147 and not to reassessments. They also addressed the Taxation Laws (Amendment) Act, 1984, which added sub-section (6) to section 215, stating that assessments made for the first time under section 147 shall be regarded as regular assessments for sections 215, 216, 217, and 273. The court viewed this amendment as a clarification of existing law rather than a change, reinforcing their decision.

Conclusion:
The original petition challenging the levy of interest u/s 217 was dismissed, affirming that an assessment made for the first time under section 147 is a "regular assessment" for the purposes of section 217 of the Income-tax Act, 1961.