1987 (8) TMI 75 - HC - Income Tax

Summary

Issues Involved:
1. Whether the initial assessment made in pursuance of proceedings initiated u/s 147 is a regular assessment for the purpose of charging interest u/s 139 and u/s 217.
2. Whether an appeal against charging of interest u/s 139 and u/s 217 is maintainable.

Summary:

Issue 1: Regular Assessment under Section 147 for Charging Interest

The court examined whether the assessment made under section 143(3) read with section 147 could be considered a "regular assessment" for the purposes of charging interest under sections 139(8) and 217. The Income-tax Officer had initiated proceedings under section 148, treating the return filed by the assessee as invalid because it was filed beyond the time limit specified in section 139(4). The court held that the assessment made under section 143(3) read with section 147 was not a "regular assessment" as defined in section 2(40) of the Act, which only includes assessments made under section 143 or section 144. Therefore, the levy of interest under sections 139(8) and 217 was unauthorized. The court rejected the Revenue's contention that the assessment should be regarded as one made under section 143(3) alone, notwithstanding the issuance of a notice under section 148.

Issue 2: Maintainability of Appeal Against Charging of Interest

The court referred to the Supreme Court's decision in Central Provinces Manganese Ore Co. Ltd. v. CIT, which held that the levy of interest is part of the process of assessment. Therefore, it is open to an assessee to dispute the levy in an appeal if the ground is that he is not liable to the levy at all. In this case, the assessee claimed that he was not liable to the levy of interest under sections 139(8) and 217. The court concluded that the appeal against the charging of interest was maintainable, answering the second question in the affirmative, in favor of the assessee and against the Revenue.

Conclusion:

The court answered the first question in the negative, stating that the assessment made under section 143(3) read with section 147 is not a "regular assessment" for the purpose of charging interest under sections 139(8) and 217. The second question was answered in the affirmative, confirming that an appeal against the charging of interest under sections 139 and 217 is maintainable.