1984 (1) TMI 56 - HC - Income Tax

Change Of Law Jurisdiction To Impose Penalty Law Amending Procedure Law Applicable To Assessment Penalty

Issues Involved:
1. Scope and meaning of the expression 'regular assessment' as defined under section 2(40) of the Income-tax Act.
2. Applicability of interest under sections 139(8) and 217 in cases of assessment or reassessment under section 147.

Issue-wise Detailed Analysis:

1. Scope and Meaning of 'Regular Assessment' under Section 2(40):

The primary issue revolves around the interpretation of the term 'regular assessment' as defined in section 2(40) of the Income-tax Act. This definition is crucial because it determines the applicability of interest under sections 139(8) and 217. Section 2(40) defines 'regular assessment' as an assessment made under section 143 or section 144. The court examined the scheme of the Act, particularly the provisions in Chapter XIV, which detail the procedures for assessment.

The court noted that sections 139 to 158 provide a comprehensive framework for assessments, including the filing of returns (section 139), payment of tax on admitted income (section 140A), and the procedures for enquiry and assessment (sections 142 and 143). The term 'assessment' includes reassessment, as per section 2(8), and encompasses all steps and proceedings for determining tax liability.

The court emphasized that assessments under sections 143 and 144 are distinct from those under section 147, which deals with income that has escaped assessment. Section 148, which precedes assessments under section 147, requires a notice similar to that under section 139(2), and the provisions of the Act apply 'as far as may be' to such assessments. This phrase indicates that the procedures for regular assessments under sections 143 and 144 also apply to reassessments under section 147, but it does not extend the definition of 'regular assessment' to include assessments under section 147.

2. Applicability of Interest under Sections 139(8) and 217 in Cases of Assessment or Reassessment under Section 147:

The court examined whether interest under sections 139(8) and 217 could be levied in cases of assessment or reassessment under section 147. The assessee contended that assessments under section 147 do not qualify as 'regular assessments' and, therefore, should not attract interest under these sections.

The court reviewed various provisions and judicial precedents, including decisions from multiple High Courts, which consistently held that 'regular assessment' refers only to assessments under sections 143 and 144. These precedents supported the view that reassessments under section 147 are not 'regular assessments' and, thus, do not attract interest under sections 139(8) and 217.

The court also considered the contrary view from the Kerala High Court in P. A. Abdul Muthalif Rowther v. CIT, which held that interest under section 139(8) is leviable in reassessment cases. However, the court found this interpretation unpersuasive, emphasizing the explicit definition of 'regular assessment' in section 2(40) and the legislative intent behind it.

Ultimately, the court concluded that the definition of 'regular assessment' in section 2(40) should be strictly applied. Therefore, interest under sections 139(8) and 217 is not leviable in cases of assessment or reassessment under section 147. The court acknowledged potential difficulties in reconciling this interpretation with other provisions of the Act but stated that it is the Legislature's responsibility to address such issues through amendments if necessary.

Conclusion:

The court answered the question in the negative, holding that no interest under sections 139(8) and 217 of the Income-tax Act is leviable in cases of assessment or reassessment made under section 147. The judgment underscores the importance of adhering to the specific definitions and legislative intent within the Income-tax Act.

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