1980 (3) TMI 64 - HC - Income Tax

Summary

Issues Involved:
1. Appealability of an order charging interest under Section 139(1) of the Income-tax Act, 1961.
2. Scope of the Appellate Assistant Commissioner's (AAC) powers in an appeal against an assessment order.
3. Interpretation of Section 246(c) of the Income-tax Act, 1961.

Detailed Analysis:

1. Appealability of an Order Charging Interest under Section 139(1):

The primary issue is whether an assessee can object to the levy of interest under Section 139(1) in an appeal to the AAC under Section 246 of the Income-tax Act, 1961. The Tribunal concluded that it was permissible for the assessee to challenge the levy of penal interest as part of the appeal against the assessment order. This is because the levy of interest is considered an integral part of the assessment process. The Tribunal cited a decision of the Bombay High Court, which supported the view that an appeal against a regular assessment could include objections to the quantum of penal interest.

The High Court agreed with the Tribunal's view, stating that the charging of interest is an integral part of the assessment process unless the Income-tax Officer (ITO) chooses to determine the liability for interest by an independent order. Since in this case, the interest charged was part of the assessment order, an appeal against this order could include objections to the interest levied.

2. Scope of the AAC's Powers in an Appeal Against an Assessment Order:

The High Court examined the scope of the AAC's powers and concluded that the AAC could consider every aspect of the assessment order. This includes the power to enhance the interest if it is found that the ITO has charged less interest than should have been charged. Therefore, the AAC is not restricted to only the four categories mentioned in Section 246(c) (amount of income assessed, amount of tax determined, amount of loss computed, or the status under which the assessee is assessed). The AAC has the authority to address all findings, observations, and directions of the ITO contained in the assessment order.

3. Interpretation of Section 246(c) of the Income-tax Act, 1961:

The High Court provided a detailed interpretation of Section 246(c). It clarified that this section allows an appeal against an order of assessment where the assessee is aggrieved by the determination in respect of income, tax, loss, or status. However, this does not mean that the grounds for consideration in such appeals are limited to these four matters. The clause is intended to ensure that the appeal is not purely academic or frivolous. Once a valid appeal is preferred, the scope of the appeal is co-extensive with the scope of the assessment order. The High Court emphasized that the language of the second part of Section 246(c) is wide enough to permit the agitation of the issue of interest in a valid and competent appeal from the order of assessment.

Conclusion:

The High Court concluded that the Tribunal's view was correct and that the assessee was entitled to object to the levy of interest under Section 139(1) in the course of an appeal to the AAC under Section 246. The question referred to the High Court was answered in the affirmative and in favor of the assessee. The judgment emphasized the broad scope of the AAC's powers and the liberal interpretation of the appeal provisions under Section 246(c).