2009 (11) TMI 520 - HC - Income Tax

Waiver interest - assessee aggrieved by the levy of interest - filed an appeal before the Commissioner - on the ground that the same was not chargeable without issuance of notice - Commissioner allowed the appeal - held that the assessing officer was not justified in charging interest and the same was ordered to be deleted - Held that - assessee s appeal was not maintainable as the same was filed only against the levy of interest payable under Section 215 pursuant to the orders passed under Sections 154/155 of the Act - question referred to us is answered in favour of the revenue and against the assessee

Summary

Issues:
1. Interpretation of provisions of Section 154/155 regarding charging interest under Sections 139(8) & 215.
2. Entitlement to appeal against charging of interest under Sections 139(8) & 215 without challenging enhancement of income.

Analysis:

Issue 1:
The case involved the interpretation of provisions of Section 154/155 concerning the charging of interest under Sections 139(8) & 215. The appellant, a partner in a firm, had his assessment provisionally completed under Section 143(1) of the Income Tax Act, 1961. Subsequently, the assessing officer issued notices under Section 154/155 to consider the appellant's income share from the firms. The fresh assessment was framed, adding the difference to the already assessed income, along with levying interest under Sections 139(8) and 215/217 of the Act. The appellant contested the levy of interest, arguing that it was not chargeable without proper notice issuance.

Issue 2:
The second issue revolved around the entitlement to appeal against the charging of interest under Sections 139(8) & 215 without challenging the enhancement of income. The appellant, being aggrieved by the interest levy, filed an appeal before the Commissioner of Income Tax (Appeals) Shimla solely on the grounds of interest imposition without challenging the income enhancement. The Commissioner allowed the appeal, ruling that the assessing officer was unjustified in charging interest without proper notice issuance, ordering the interest to be deleted. The revenue appealed to the Income Tax Appellate Tribunal, Chandigarh, where a difference of opinion among the Members led to a reference to a Third Member. The majority upheld the Commissioner's decision, leading the revenue to seek reference to the High Court.

The High Court, considering the law laid down by another Division Bench in a related case, emphasized the necessity for the assessee to demonstrate circumstances warranting a reduction or waiver of interest before invoking the revisional jurisdiction of the Commissioner Income Tax. It highlighted that if the jurisdictional fact attracting the levy is not disputed, the onus is on the assessee to show reasons for reducing or waiving interest. In this case, the appellant did not exercise the right under Section 155(4) of the Act, rendering the appeal against the levy of interest under Section 215 pursuant to the orders passed under Sections 154/155 not maintainable. Consequently, the High Court answered Question No.2 in favor of the revenue and against the assessee, rendering Question No.1 redundant. The reference was disposed of accordingly, with directions to send a copy of the judgment to the Income Tax Appellate Tribunal, Chandigarh Bench.