1984 (12) TMI 102 - AT - Income Tax

Assessment Order, Late Filing, Mistake Apparent From Record, Original Assessment, Registered Firm, Regular Assessment, Unregistered Firm

Issues Involved:
1. Legality of charging interest under section 139(8) treating a registered firm as an unregistered firm.
2. Applicability of section 154 for rectification of the omission to charge interest.
3. Whether the issue of charging interest is debatable and thus not rectifiable under section 154.
4. Impact of the appellate order and the resulting tax liability on the charging of interest.

Detailed Analysis:

1. Legality of Charging Interest under Section 139(8):
The Income Tax Officer (ITO) initially charged interest under section 139(8) during the regular assessment under section 143(3). However, while giving effect to the appellate order under section 251, the interest was not charged, which the ITO later rectified under section 154. The assessee contended that charging interest under section 139(8) by treating a registered firm as an unregistered one was unconstitutional and debatable, citing various High Court decisions. The Commissioner (Appeals) noted that the provision of section 139(8) was mandatory and upheld the ITO's action, stating that the income-tax authorities and the Tribunal have no jurisdiction on the legality or constitutionality of the Act's provisions. The Tribunal agreed with the Commissioner (Appeals), referring to the Supreme Court's decision in Jain Bros. v. Union of India, which upheld the imposition of penalties on registered firms treated as unregistered firms for defaults.

2. Applicability of Section 154 for Rectification:
The ITO's omission to charge interest while giving effect to the appellate order was considered a "mistake apparent from the record." The assessee argued that since the issue was debatable, it could not be rectified under section 154. The Commissioner (Appeals) and the Tribunal, however, concluded that the omission was a clear mistake, justifying rectification under section 154. The Tribunal referred to the Supreme Court's decision in Maharana Mills (P.) Ltd. v. ITO, which allowed the ITO to consider all evidence and applicable laws to ascertain errors for rectification purposes.

3. Debatable Issue and Rectification under Section 154:
The assessee argued that the issue of charging interest was highly debatable, citing various High Court decisions. The Tribunal referred to the Calcutta High Court's decision in V.R. Sonti v. CIT, which stated that when different High Courts have expressed divergent opinions, action under section 154 is not warranted. However, the Tribunal found that the Supreme Court's decision in Jain Bros. resolved the issue, making it not debatable and thus rectifiable under section 154.

4. Impact of Appellate Order and Resulting Tax Liability:
The assessee contended that after giving effect to the appellate order and adjusting advance tax, the net tax payable was nil, and thus no interest should be charged. The Commissioner (Appeals) and the Tribunal disagreed, stating that the tax payable should be calculated as if the firm were an unregistered firm, as mandated by Explanation 2 to section 139(8). The Tribunal noted that the ITO had initially charged interest under section 139(8) in the original assessment, and the omission in the subsequent order was a rectifiable mistake.

Conclusion:
The Tribunal upheld the Commissioner (Appeals)'s decision, agreeing that the ITO's action under section 154 was justified. The appeal by the assessee was dismissed, affirming that the charging of interest under section 139(8) treating a registered firm as an unregistered firm was mandatory and not debatable, and the omission to charge interest was a mistake apparent from the record.

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