1986 (1) TMI 191 - AT - Income Tax

Summary

Issues Involved:
1. Maintainability of the appeal by the assessee.
2. Liability of the assessee to be assessed to penal interest under section 217 of the Income-tax Act, 1961.
3. Compliance with section 209A(1)(b) of the Income-tax Act, 1961.
4. Interpretation and applicability of section 292B of the Income-tax Act, 1961.
5. Appealability of the levy of interest under section 217.

Detailed Analysis:

1. Maintainability of the Appeal by the Assessee:
The primary issue was whether the appeal filed by the assessee was maintainable. The AAC had initially held that the appeal was not maintainable. However, the appellate tribunal considered the grounds of appeal, which included the denial of liability to be assessed to penal interest under section 217. It was noted that the appeal would be maintainable if the assessee denies his liability to be assessed, as per section 246(1)(c) of the Income-tax Act, 1961. The tribunal concluded that the appeal was maintainable since the assessee denied the liability to be assessed to penal interest.

2. Liability of the Assessee to be Assessed to Penal Interest Under Section 217:
The assessee argued that there was no default in filing the estimate of income and paying the advance tax, hence no liability to pay interest under section 217. The tribunal examined whether the assessee had complied with section 209A(1)(b) and found that the estimate was filed on 16-3-1981 due to intervening holidays on 14-3-1981 and 15-3-1981, and the advance tax was paid before 15-3-1981. Therefore, it was determined that there was no default, and the assessee was not liable to be assessed to penal interest under section 217.

3. Compliance with Section 209A(1)(b) of the Income-tax Act, 1961:
The tribunal reviewed the compliance with section 209A(1)(b), which mandates that an estimate of current income and the advance tax payable should be sent to the ITO on or before the due date. The tribunal found that the assessee had complied with this requirement by filing the estimate on 16-3-1981 due to holidays and paying the advance tax before the due date. Thus, there was no default in terms of section 209A(1)(b).

4. Interpretation and Applicability of Section 292B of the Income-tax Act, 1961:
The department's representative argued that any omission in the assessment order regarding the levy of interest under section 217 could be cured under section 292B. However, the tribunal rejected this argument, stating that section 292B is intended to protect procedural errors and not to validate an omission in the assessment order. The tribunal emphasized that the assessment order and the demand notice are integral parts of the assessment process, and the omission could not be cured under section 292B.

5. Appealability of the Levy of Interest Under Section 217:
The tribunal considered whether the levy of interest under section 217 was appealable. It was noted that section 246 of the Act provides for appeals against specific orders, but does not explicitly mention section 217. However, judicial precedents indicated that an appeal is maintainable when the assessee denies the liability to be assessed. The tribunal concluded that since the assessee denied the liability to pay interest under section 217 and had complied with section 209A, the appeal was maintainable.

Conclusion:
The tribunal held that the appeal by the assessee was maintainable, as the assessee denied the liability to be assessed to penal interest under section 217. It was determined that there was no default on the part of the assessee in complying with section 209A(1)(b), and therefore, the assessee was not liable to pay interest under section 217. The tribunal rejected the department's contention regarding the applicability of section 292B and concluded that the appeal was maintainable. The AAC's order was set aside, and the assessee's appeal was allowed.