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2021 (12) TMI 882 - HC - Income TaxRegular assessment or not - Waiver of levy of interest u/s 215 - delay in finalisation of the assessment was not attributable to the Appellant - whether tribunal was right in holding that a fresh assessment which has been made by the Assessing Officer to give effect to the directions of the Commissioner of Income Tax under Section 263 of the Act setting aside the original assessment, would constitute a regular assessment for purposes of section 215 of the Act ? - HELD THAT - For assessment year 1985-86, returned total income of Appellant was ₹ 1,63,41,650/-. In the regular assessment proceeding completed on 28/03/1988, the total income was determined at ₹ 2,74,47,780/- and interest under Section 215 of the said Act amounting to ₹ 13,67,999/- was charged. In the Appeal filed by the Assessee, the amount of interest was reduced to ₹ 8,53,650/-. In the facts of the case, since the interest under Section 215 was charged in the regular assessment order, the Assessing Officer had the power to charge interest under Section 215 of the Act, while carrying out reassessment. Section 215(4) empowers the Assessing Officer to waive or reduce the amount of interest chargeable under section 215 under circumstances prescribed in rule 40 of the Income Tax Rules, 1962. Deputy Commissioner of Income Tax, Bombay, by order dated 20/03/1989 in the exercise of power under Rule 40 of Income Tax Rules, held that delay in finalization of assessment is not attributable to Assessee and therefore the Assessee is not liable to pay interest under Section 215 of the Act beyond the period of one year from the date of filing of return. Accordingly, the Appellant was held to be liable to pay an amount of ₹ 4,40,020/-. The order of Dy.CIT, Bombay, dated 20/03/1989, has not been challenged by Revenue or Appellant, with the result said order attained finality. In the absence of challenge to the order under Rule 40(1) of IT Rules, the Appellant is not entitled to the benefit of Judgment of Division Bench of this Court in the case of CIT Vs. Bennett Coleman Co. Ltd. 1993 (6) TMI 3 - BOMBAY HIGH COURT Therefore Appellant is not entitled to waiver of interest for a period of one year. Appellant is entitled to the benefit of order dated 20/03/1989 passed under Rule 40(1) only to the extent stated therein. Appellant was liable to pay an amount of ₹ 4,13,630/-as per order dated 20/03/1989 annexed to this Appeal at Exh.C. The questions are answered accordingly.
Issues:
1. Interpretation of "regular assessment" under Section 215 of the Income Tax Act. 2. Entitlement of Assessing Officer to charge interest under Section 215 despite the absence of a specific direction. 3. Justification of Assessing Officer's decision regarding waiver of interest chargeable. Issue 1: Interpretation of "regular assessment" under Section 215: The case involved an appeal under Section 260-A of the Income Tax Act, 1961, regarding the interpretation of a "regular assessment" under Section 215. The questions of law revolved around whether a fresh assessment made to comply with the directions of the Commissioner of Income Tax under Section 263 constitutes a "regular assessment" for the purposes of Section 215. The Supreme Court precedent in Modi Industries Ltd. was cited, emphasizing that the term "regular assessment" pertains to the original assessment under Section 143 or 144, and subsequent orders to give effect to higher authority's directions do not qualify as regular assessments. Issue 2: Entitlement to charge interest under Section 215: The Assessing Officer had initially charged interest under Section 215 in the original assessment order for the assessment year 1985-86. When a fresh assessment was conducted following the Commissioner's directions under Section 263, the Assessing Officer did not include a specific direction to charge interest under Section 215 in the new order. However, interest was charged in the computation sheet attached to the fresh assessment order. The debate centered on whether the Assessing Officer had the authority to charge interest under Section 215 without a specific direction in the reassessment order. Issue 3: Justification of Assessing Officer's decision on interest waiver: The Deputy Commissioner of Income Tax had previously waived a portion of the interest under Section 215 beyond one year from the filing of the return, citing that the delay in finalizing the assessment was not the appellant's fault. However, when a fresh assessment was made following the Commissioner's directions under Section 263, the Assessing Officer reinstated the interest chargeable under Section 215. The appellant contested this decision, arguing that the waiver granted earlier should apply to the reassessment as well. The court held that the appellant was not entitled to a complete waiver of interest as per the earlier order, and the Assessing Officer's decision to charge a reduced amount of interest was justified. In conclusion, the court upheld the Assessing Officer's decision to charge interest under Section 215 in the fresh assessment order, emphasizing the distinction between a regular assessment and subsequent orders. The court also clarified the applicability of interest waiver provisions under Section 215(4) and Rule 40 of the Income Tax Rules, 1962, in determining the liability of the appellant for interest payment.
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