1992 (2) TMI 121 - AT - Income Tax

Summary

Issues:
1. Challenge against imposition of interest under s. 139(8).
2. Legality of order levying interest under s. 139(8).
3. Compliance with directions given by Dy. Commissioner(A).
4. Applicability of time-limit under s. 153(2A) and 153(1)(a)(iii) for passing orders levying interest.

Analysis:
1. The assessee appealed against the imposition of interest under s. 139(8) for delayed filing of returns for the years 1982-83, 1983-84, and 1984-85. The Dy. Commissioner(A) dismissed the appeal stating it was incompetent unless the assessee contended not being liable to interest. The assessee challenged this decision, arguing that interest could not be imposed based on an illegal order and questioned the legality of the interest levy.

2. The ITAT considered the legality of the order levying interest under s. 139(8). The Supreme Court and Karnataka High Court established that the levy of interest is part of the assessment process. The time-limit under s. 153(2A) for making fresh assessments post-appeal was deemed applicable to orders levying interest. As the fresh order levying interest for 1982-83 was passed after the time-limit, it was deemed illegal and canceled. The same principle was applied to orders for 1983-84 and 1984-85, leading to their cancellation as well.

3. Regarding compliance with directions from Dy. Commissioner(A), the ITAT noted that the Assessing Officer failed to calculate interest for the assessee as a registered firm despite the directive. The Supreme Court overruled the basis for this directive, but since it was unchallenged and no appeal was made, the Assessing Officer was required to adhere to it. Consequently, the Assessing Officer was deemed unjustified in not treating the assessee as a registered firm for interest calculation.

4. The ITAT emphasized that the appeals challenging the legality of interest orders were competent, contrary to the Dy. Commissioner(A)'s view. The time-limits under s. 153(2A) and 153(1)(a)(iii) for passing orders levying interest were held applicable. As the interest orders for all three assessment years were passed after the prescribed time-limits, they were considered illegal and subsequently canceled. Therefore, the appeals of the assessee for all three years were allowed.