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TMI Blog1996 (6) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... m had earned capital gains on sale of agricultural lands held by it. The firm did not offer these gains for taxation under the belief that they were agricultural income within the meaning of section 10(1) and hence exempt from tax. Accordingly, the partners (i.e., the assessee in the present appeals) also did not include their respective shares from the firm in their total income. Excluding this share income, the total income returned by each assessee was below the maximum amount not chargeable to tax. The assessments were also completed in each of the cases under section 143(1). Though the returns were undisputedly filed late, no interest under section 139(8) was levied as the income was not taxable. Interest under any other provision of the Act was not levied. 4. Subsequently, the aforementioned capital gains were subjected to tax in the hands of the firm and accordingly, the respective share incomes were also allocated to the assessees. Since the assessments in the cases of the partners were completed, the Assessing Officer passed orders under section 155 in each case for both the years to include the share income from M/s. Mahavir Enterprises. As a result of this inclusion, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees were under a bona fide belief that the impugned income was not taxable, the share income was not included in the total income and hence no interest could be levied at the time of regular assessment also. The said income became taxable, he submitted, only on account of a retrospective amendment in section 2(14) by Finance Act, 1970 with effect from 1-4-1970. The belief, therefore, according to him, was bona fide. Thus Shri Kothari vehemently urged to uphold the order of the Deputy Commissioner (Appeals). 10. We have thoughtfully considered the rival submissions and the material before us, particularly in the light of the Supreme Court decisions cited supra. 11. It is not disputed by the learned counsel for the assessee that the return was in fact filed late, that is, beyond the specified date as mentioned in Explanation 1 to clause (a) of sub-section (8) of section 139. Before proceeding further it would be advantageous to understand the nature of levy under section 139(8) and under section 215. In this regard, we can do no better than quote the Hon'ble Supreme Court in the case of Central Provinces Manganese Ore Co. Ltd.. At pages 965 and 966, it held as follows :---- "At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the whole procedure laid down in the Act for imposing liability upon the taxpayer. The Indian Income-tax Act is no exception in this respect . . . .' This observation was cited with approval and applied by this court in the case of C.A. Abraham v. ITO [1961] 41 ITR 425. It must be presumed that the Legislature was aware of the wide interpretation of the word 'assessment' given under the Indian Income-tax Act. A restricted meaning to the phrase 'regular assessment' was given in the case of Sarangpur Cotton Manufacturing Co. Ltd. v. CIT [1957] 31 ITR 698 (Bom.) 'Assessment' has been given an inclusive meaning in sub-section (8) of section 2. It includes reassessment. 'Regular assessment' has been defined in section 2(40) to mean the assessment made under section 143 or section 144." 13. Then, the Supreme Court, in the case of Modi Industries Ltd. went on to examine the meaning of "regular assessment" occuring in the various provisions of the Act. It had to deal with the issue at length as there were diverse opinions amongst the various High Courts of the land. A large number of High Courts including Bombay, Kerala, Allahabad, Punjab Haryana, Andhra Pradesh and Gauhati had taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssu with the increase or reduction of the amount on which such interest was payable in consequence of an order of rectification or an order passed by a higher authority. In other words, section 214 and section 215, with effect from April 1, 1985, have brought about important changes in the scheme of payment of interest by the Central Government or the assessee, as the case may be. The period, therefore, for which the interest has to be paid remains the same, i.e., the first day of the relevant assessment year to the date of the regular assessment (first assessment). But, the quantum of interest payable will depend upon the amount of refund payable after the quantum of tax payable is finally determined in appeal, revision or any other proceeding." 15. Now we revert to the case before us. Assessees' grievance is restricted to the interest being charged for the first time at the time of passing the order under section 155. He denies his liability because the same was not charged at the time of the original assessment. Interest was not charged at the time of the original assessment because there was no taxable income. It is an admitted fact that, had there been a taxable income at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not denied (per ratio in Central Provinces' case), as in the present case. Simultaneously, the ratio in the case of Modi Industries shall also apply, in so much as that, interest shall be levied only upto the date of the original assessment and not upto the date of the order made under section 155. This, in sum-total is the effect of the two Supreme Court decisions on the assessee's case. We, therefore, uphold the levy of interest under section 139(8) and under section 215 and also hold that the interest under both the sections shall be calculated only upto the date of original assessment and not upto the date of the order under section 155. 20. Now, what remains to be seen is as to whether there was a bona fide belief regarding the taxability of capital gains on sale of agricultural lands held by the firm in which the assessee was a partner. It was submitted by Shri Kothari that it was only as a result of the retrospective amendment with effect from 1-4-1970 in section 2(14) by the Finance Act, 1989 that the said capital gains became taxable beyond any doubt and hence there existed the bona fide belief that the impugned capital gains were exempt. 21. Here we would like to c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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