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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 ..... peals) erred in holding that once interest is not charged either under section 139(8) or under section 215/217 on regular assessment, the same cannot be charged afresh while passing order under section 155. 3. All the three assessees, besides being partners in other firms, are also partners in a firm called M/s. Mahavir Enterprises. During the assessment years under appeal, the said firm 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i submitted that it provided only for increase or reduction of the interest on the passing of the order under section 155. In the instant case, as there was no interest at the base itself, there was no question of either increase or reduction. 9. Finally, it was submitted by Shri Kothari that he was contesting the very levy of interest and not the quantum thereof. Since the assessees 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 ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Income-tax Act, 1922, in a very wide sense. In the celebrated case of CIT v. Khemchand Ramdas [1938] 6 ITR 414, the Judicial Committee of the Privy Council observed : 'One of the peculiarities of most Income-tax Acts is that the word "assessment" is used as meaning sometimes the computation of income, sometimes the determination of the amount of tax payable and sometimes 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... increase, but also reduction of the amount on which interest was paid under section 214. Simultaneously with this, section 215 was amended and sub-section (3) was recast on the lines of newly introduced sub-section (1A) of section 214 with effect from April 1, 1985. Under this provision, the amount of interest payable by an assessee had to be increased or reduced pari passu 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 res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of assessment of the partner with a view to the inclusion of the share in the assessment of the correction thereof, as the case may be ......" 19. Thus, once when order under section 155 is passed to include the share income in the partner's income, clause (b) of section 159(8) will be pressed into operation, provided the jurisdictional fact of levy 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 ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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