1987 (12) TMI 22 - HC - Income Tax

Summary

Issues:
- Challenge against the imposition of interest under section 139(8) of the Income-tax Act without prior notice to the appellant.
- Interpretation of section 139(8)(a) of the Income-tax Act and rule 117A of the Income-tax Rules, 1962 regarding the levy, reduction, or waiver of interest payable by the assessee.
- Comparison of legal positions from Karnataka High Court and Supreme Court decisions on the necessity of serving notice before the levy of interest.
- Determination of whether it is mandatory for the Income-tax Officer to issue notice and provide an opportunity to the assessee before the levy of interest under section 139(8)(a) of the Act.

Analysis:
The case involved a challenge against the imposition of interest under section 139(8) of the Income-tax Act without prior notice to the appellant for the assessment years 1973-74 and 1974-75. The appellant contended that the levy of interest without notice was illegal. The proviso to section 139(8)(a) allows the Income-tax Officer to reduce or waive the interest payable by the assessee under certain circumstances, as prescribed in rule 117A of the Income-tax Rules, 1962. The court analyzed the provisions and held that while it may be open for the Income-tax Officer to intimate the assessee before the levy of interest, the assessee can still request the waiver or reduction of interest after the levy is made.

The appellant's counsel relied on a Karnataka High Court decision, emphasizing the need for the Income-tax Officer to propose the imposition of interest before assessment. However, the court distinguished this view, stating that the assessee has the right to seek reduction or waiver of interest payable and must provide reasons for the relief requested. The court further referred to a Supreme Court decision, Central Provinces Manganese Ore Co. Ltd. v. CIT, which clarified that interest under section 139(8)(a) is part of the assessment process and can be waived or reduced even after the levy is made.

Based on the Supreme Court decision and previous court rulings, the High Court concluded that it is not mandatory for the Income-tax Officer to issue a notice and provide an opportunity to the assessee before the levy of interest. Instead, the assessee can apply for waiver or reduction of interest after the assessment is completed. The court dismissed the writ appeal, upholding the legality of the interest levy without prior notice to the appellant.