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TMI Blog1982 (3) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 9-6-1971 3. It appears that the business and the residential premises of the assessee were searched under section 132 of the Income-tax Act, 1961 ('the Act') on10-2-1974. Thereafter, the assessee on 20-3-1974, filed the original return for the accounting period relevant to the assessment year 1965-66 and revised returns for the assessment years 1966-67 to 1971-72 and 1973-74 detailing the following income, compared to the income as per the original returns: Assessment Income as per original Income as per revised return year return 1965-66 6,300 31,900 1966-67 400 29,800 1967-68 400 34,000 1968-69 4,870 32,900 1969-70 6,800 39,500 1970-71 7,000 34,400 1971-72 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er revised returns, as brought out above, was covered by the aforesaid disclosure by the assessee under section 14(1) of the aforesaid Ordinance and so gave the assessee immunity against the charging of interest and the initiation of the aforesaid penalty proceedings. This belief of the ITO for the said years was later on considered by him, the ITO, as tantamount to mistake apparent on record, inasmuch as the immunity in section 14 in this behalf was not available, the assessee having already disclosed in the returns filed prior to 8-10-1975, the income purported to have been declared under section 14(1) of the aforesaid Ordinance. The said declaration, according to the ITO, was not valid. He, therefore, issued show cause notices to the assessee as to why the above mistake be not rectified. In reply, the stand taken by the assessee was that there was no mistake apparent on the face of the record for any of the years, i.e., 1966-67 to 1970-71 and 1973-74, that there was no mention of the penalty or charging of interest in the assessment orders for those years and that the conclusion by him, in this behalf, was arrived at after detailed discussion in the assessment orders. These argu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he third category of persons the scheme could apply only if the appellant was to declare something in addition to what had already been disclosed by him in the returns already filed before the department. The immunity from penal action and interest was to apply exclusively to the amounts so disclosed. The scheme of the Act did not provide that a person could simply wish that the returns already filed by him and pending for assessments before the ITO/WTO should be taken to have been filed under the V.D. Scheme, on performance of the mere formality of filing the same returns again. This would defy the very purpose of this scheme. Thus, if any assessee ever sought immunity under the scheme in the above manner and even if the ITO allowed it, it would remain ab initio void. It would have no legal force as it is legally impossible to grant immunity in above circumstances. Nothing could be done by the ITO which had not been provided in the law. Still if the ITO allows immunity in the above specified circumstances it would merely constitute a mistake apparent from records, the patent mistake of law which could be rectified suo moto or on the attention of the ITO being drawn by the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r passed by him; (3) An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this section unless the authority concerned has given notice to the assessee of its intention so to do and has allowed the assessee a reasonable opportunity of being heard." "Any assessee aggrieved by any of the following orders of an Income-tax Officer may appeal to the Appellate Assistant Commissioner against such order--- (f) an order under section 154 or section 155 having the effect of enhancing the assessment or reducing a refund or an order refusing to allow the claim made by the assessee under either of the said section: (o) an order imposing a penalty under--- (i) section 140A, or (ia) section 221, or (ii) section 270, or (iii) section 271, or (iiia) section 271A, or (iv) section 272, or (iva) section 272B, or (v) section 273;" The first controversy before the revenue, on one hand, and the assessee on the other hand, centres round the meaning to be given to the words 'having the effect of enhancing the assessment or reducing a refund' appearing in section 246(f). It m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .. It is more so in this case where the proviso to section 35 itself makes it incumbent upon the Income-tax Officer to give notice and a hearing to an assessee when the effect of the rectification would be the enhancement of the assessment. The learned counsel for the department raised the forlorn argument that the addition of penal interest is not enhancement of assessment as stated in the proviso. We do not see what else it could be. The word 'assessment' is used in the proviso not as an equivalent of the tax calculated at the rate given in the Finance Act but the total amount which the assessee is required to pay. The proviso applies whenever the effect of the order is to touch the pocket of the assessee and in our opinion this was such a case." 10. The ratio of the above decision of the Supreme Court is on all four in the present case. By the impugned orders, notices of demand charging interest under section 139(8)/217 have been issued, there is no other order by the ITO in this behalf. These orders of the ITO under section 154, are the orders levying interest under section 139(8)/217. Since, by the said orders, the total amount which the assessee in the present case was requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --- (a) in the case of a person referred to in sub-section (4A) of section 139, where the total income in respect of which he is assessable as a representative assessee does not exceed the maximum amount which is not chargeable to income-tax a sum not exceeding one per cent of the total income computed under this Act without giving effect to the provisions of sections 11 and 12, for each year or part thereof during which the default continued; (b) in any other case, in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent of the assessed tax for every month during which the default continued ;" "273. If the Income-tax Officer, in the course of any proceedings in connection with the regular assessment for assessment year commencing on the 1st day of April, 1970 or any subsequent assessment year, is satisfied that any assessee--- (b) has without reasonable cause failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of sub-section (3) of section 212, or (c) has without reasonable cause failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of sub-section (3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r delay in filing of the return, and the notices were served separately only after the service of the assessment order and notice of demand as in the present cases. And the ITO levied penalties. The Tribunal held that the ITO in the assessment order, did not direct the office to issue any notice for penalty, the notices were not even served upon the assessee along with the assessment order and notice of demand, and that, therefore, the penalty proceedings had not been initiated during the pendency of the assessment proceedings, and the levy of the penalties had to be set aside. The said decision was affirmed by the Delhi High Court. It agreed with the Tribunal that the action for imposition of penalty must be initiated in the course of the assessment proceedings. 12. Keeping in view the above decision, let us come to the facts of the present case. Admittedly, the ITO did not initiate penalty proceedings under section 271(1)(a)/(c)/273(b)/(c) of the Act, in the course of the original assessment orders of the assessee for each of the years under consideration. Having not done so, a right had come to be vested in the assessee, whereby the ITO was debarred from initiating those penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no dispute between the parties), section 139(8) which has been invoked by the ITO for charging interest will not be available to the ITO for charging that interest because section 139(8) which is sought to be made use of by the ITO was substituted by the Taxation Laws (Amendment) Act, 1970 w.e.f. 1-4-1972. The present case is a case of wrong labelling. The interest charged by the ITO is that one under section 139(1) read with section 139(8) as it stood in each of the years under consideration to the following effect: "139. (1) Every person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall furnish a return of his income or the income of such other person during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed--- (a) in the case of every person whose total income, or the total income of any other person in respect of which he is assessable under this Act, includes any income from business or profession, before the expiry of fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with effect from 1-10-1976.] We would, therefore, treat the aforesaid impugned orders of the ITO under section 154, in the matter of charging of interest under section 139(8), to read as ones under section 139(1) read with section 139(8) as the said provisions stood in each of the years under consideration, prior to their amendments by the Taxation Laws (Amendment) Act, 1970 with effect from 1-4-1971. This view of ourselves finds support from the ratio of the decision of the Supreme Court in the case of L. Hazari mal Kuthiala v. ITO [1961] 41 ITR 12. 14. Having come to the above conclusion, the next point for our consideration is as to whether the mistake in the matter of non-charging of interest under section 139(1) read with section 139(8) of the Act as reproduced in para 13 above by the ITO in the original assessments for the years under consideration, is a mistake apparent from record. We after hearing both the learned counsel for the assessee, Shri O.P. Vaish, and the departmental representative, find that a similar question had come up for consideration of the Allahabad High Court in the case of Raja Hari Chand Raj Singh v. CIT [1978] 114 ITR 727, as is the position in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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