1984 (2) TMI 205 - AT - Income Tax

Summary

Issues Involved:
1. Justification of the AAC in holding that the ITO was legally correct in levying interest under sections 139(8) and 215 of the Income-tax Act, 1961.
2. Whether assessments under section 147(a) read with section 144 constitute 'regular assessments' as defined in section 2(40) of the Act.

Issue-wise Detailed Analysis:

1. Justification of the AAC in holding that the ITO was legally correct in levying interest under sections 139(8) and 215 of the Income-tax Act, 1961:

The primary question in these appeals was whether the AAC was justified in upholding the ITO's decision to levy interest under sections 139(8) and 215 for late submission of returns and shortfall in advance tax, respectively. The assessee argued that since the assessments were completed under section 147(a) read with section 144, they did not constitute 'regular assessments' as defined in section 2(40) of the Act. The AAC, however, dismissed the appeals, holding that the assessments, although initiated under section 147, were effectively regular assessments because the procedure followed was akin to assessments under sections 143(3) or 144.

2. Whether assessments under section 147(a) read with section 144 constitute 'regular assessments' as defined in section 2(40) of the Act:

The AAC's rationale was that section 147 is an enabling provision to assess escaped income, and once invoked, the assessment procedure follows the same steps as any other assessment under sections 143(3) or 144. The AAC cited judgments from the Bombay High Court and other High Courts to support the view that assessments under section 147 could be considered regular assessments.

However, the Tribunal noted that the Bombay High Court in Gammon India Ltd.'s case had specifically held that assessments under section 147 are different from 'regular assessments' as defined in section 2(40). The Tribunal emphasized that the words 'regular assessment' have been explicitly defined in section 2(40) to include only assessments under sections 143 and 144, thereby excluding assessments under section 147. The Tribunal also referenced a series of judgments from various High Courts, including the Kerala High Court in Gates Foam & Rubber Co. v. CIT and the Patna High Court in CIT v. Ram Chandra Singh, which supported this interpretation.

The Tribunal concluded that the AAC erred in equating assessments under section 147 with regular assessments under sections 143 or 144. It held that penal interest under sections 139(8) and 215 could not be levied on assessments made under section 147, as these sections specifically relate the levy to the completion of a regular assessment.

Conclusion:

The Tribunal allowed the appeals filed by the assessee, setting aside the AAC's orders and canceling the penalties levied under sections 139(8) and 215. The Tribunal's decision was based on the clear distinction between regular assessments under sections 143 or 144 and assessments under section 147, as defined in section 2(40) of the Act.