1985 (11) TMI 84 - AT - Income Tax

Summary

Issues:
- Interpretation of regular assessment under s. 139(8) of the IT Act.
- Application of s. 154 for rectification of mistakes of law apparent from the record.
- Effect of Explanation 2 below s. 139(8) on the definition of regular assessment.

Analysis:
1. The appeals by the Revenue concerned assessments for the years 1971-72, 1975-76, and 1976-77 under s. 147(a) of the IT Act, where interest under s. 139(8) was charged. The assessee contended that assessments under s. 147 were not regular assessments as defined in s. 2(40), thus interest was wrongly charged. The ITO dismissed rectification applications under s. 154, stating the judgments cited were not applicable to interest chargeability. The AAC allowed the appeals by the assessee, emphasizing s. 147 assessments were not regular assessments.

2. The Revenue appealed against the AAC's decision, citing the substitution of Explanation 2 below s. 139(8) by the Taxation Laws (Amendment) Act, 1984. The Revenue argued the Explanation clarified that assessments under s. 147 were regular assessments for interest purposes. The Departmental Representative contended that rectification under s. 154 was not warranted, referring to the decision in T. S. Balaram, ITO vs. Volkart Bros. (1971) 82 ITR 50 (SC).

3. The assessee's counsel argued that the interpretation of "regular assessment" in s. 273 was consistent with s. 139(8) and s. 2(40). Referring to the judgment in CIT vs. Mohan Lal Kansal (1978) 114 ITR 583 (P&H), it was asserted that the Punjab & Haryana High Court's decisions were binding on IT authorities. The counsel contended that the Explanation was prospective from April 1, 1985, and did not apply to the relevant assessment years.

4. After considering the submissions, the Member observed that the Punjab & Haryana High Court's judgment in Smt. Kamlavati vs. CIT was applicable to the case, and rectification under s. 154 was justified. The Member analyzed the retrospective nature of Explanation 2, concluding it was prospective from April 1, 1985. Consequently, the AAC's decision was upheld, dismissing the Revenue's appeals.

5. The judgment confirmed that assessments under s. 147 were not regular assessments as defined in s. 2(40) during the relevant years. The Explanation 2 below s. 139(8) was deemed prospective from April 1, 1985, and not applicable retrospectively. The Member upheld the AAC's decision, emphasizing the mistake of law apparent from the record that warranted rectification under s. 154.

6. In conclusion, all three appeals by the Revenue were dismissed, affirming the AAC's decision that rectification under s. 154 was justified due to mistakes of law apparent from the record regarding the interpretation of regular assessments and the prospective nature of Explanation 2 below s. 139(8).