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TMI Blog1962 (6) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... eing in I.T.A. No. 5995 of 1956-57. As the facts in the two cases are not different in any material respects the facts only in the case of Keshardeo Shrinivas Morarka are set out. 3. The assessee, Sri Keshardeo Shrinivas Morarka, is a partner in a registered firm known as M/s. Dwarkadas Keshardeo Morarka. For the assessment year 1950-51 the assessee's total income was determined at a loss of ₹ 20,933. This was arrived at as follows: Rs. (i) Income under 'other sources' (section 12) including dividend, liable to be taxed ... 16,729 (ii) Share from an unregistered firm, M/s. Morarka Co., to be included for rate purposes as the firm itself was assessed to tax ... 11,860 (iii) Share from Alls. Bajranglal Co. (to be taxed) ... 2,414 (iv) Share from the registered firm of M/s. Dwarkadas Keshardeo Morarka (loss) ... 51,936 The net result of items (ii), (iii) and (iv) was a los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Income-tax Officer, Madras [1957] 31 I.T.R. 107). 5. After completing the assessment, the Income-tax Officer proceeded to compute the interest payable by the assessee under section 18A(6). The assessee took a ground of appeal before the Appellate Assistant Commissioner against the levy of penal interest on the petitioner . The Appellate Assistant Commissioner rejected that contention holding that no appeal lay to him on that point. Naturally, therefore, the contention of the assessee before the Tribunal was that the Appellate Assistant Commissioner erred in holding that no appeal lay against levy of penal interest . It was admitted before the Tribunal that the computation of interest was exactly in accordance with the provisions of section 18A(6). Hence, relying upon the judgment of the Bombay High Court in the case of Jagdish Prasad Ramnath [1955] 27 I.T.R. 192, the Tribunal rejected the assessee's contention. Alternatively, the assessee also submitted before the Tribunal that, in determining the quantum of penal interest to be charged, the Income- tax Officer should have taken into consideration, on the grounds of equity, the following two factors: (i) that the tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. For reasons set out in paragraph 8 we decline to refer the said question. B. A. Palkhivala with N. A. Palkhivala, for the assessee. G. N. Joshi with R. J. Joshi, for the Commissioner. JUDGMENT V.S. DESAI J.--In this reference under section 66(1) of the Income-tax Act, 1922, at the instance of the assessee, relating to his assessment for the year 1951-52, the following three questions are referred to this court by the Income-tax Appellate Tribunal: (1) Whether the amount of loss to be carried forward under section 24(2) for the assessment year 1950-51 is the sum of ₹ 20,933 or that sum increased by the sum of ₹ 11,860? (2) Whether section 23A of the Income-tax Act, 1922, is ultra vires the legislature? (3) Whether any appeal lies to the Appellate Assistant Commissioner against levy of penal interest correctly computed in accordance with the provisions of section 18A(6)? So far as question No. 2 is concerned, the challenge which it sets up against the vires of the provisions of section 23A of the Income-tax Act, 1922, is set at rest by the decision of the Madras High Court in C.W. Spencer v. Income-tax Officer, Madras [1957 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be paid by the assessee in respect of the share of profit in the unregistered firm, which he was not entitled to do. According to the assessee, the unregistered firm having been taxed, no tax was liable to be paid by the assessee in respect of the share of profit which he had received from the unregistered firm, and the only purpose for which the said share of profit could be taken into consideration in his assessment was for the purpose of arriving at the total income for determining the rate at which the tax was to be paid. Setting off of the loss against the profits could only be against those profits or income which were liable to be taxed in the hands of the assessee. This contention of the assessee was negatived by the Tribunal, and the Tribunal held that the Income-tax Officer had correctly determined the loss to be carried forward at ₹ 20,933. Mr. B.A. Palkhivala, learned counsel appearing for the assessee, has argued that the view taken by the Tribunal is not sustainable in view of the decision of the Supreme Court in Seth Jamnadas Daga v. Commissioner of Income-tax [1961] 41 I.T.R. 630; [1961] 3 S.C.R. 174 and Commissioner of Income-tax v. Khushal Chand Daga [1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 20,933. Now, it must be stated in the first place that the contention urged by Mr. Joshi has not been dealt with by the Tribunal in its order. Mr. Palkhivala has urged that the contention does not arise on the Tribunal's order and, since it has not been agitated before the Tribunal, Mr. Joshi is not entitled to urge it on this reference. Mr. Joshi says that the Tribunal having decided in his favour on a different ground has not dealt with this contention, but that does not mean that it had not been raised before the Tribunal. Mr. Joshi says that, as a matter of fact, in opposing the assessee's application for reference on this question, the department had urged before the Tribunal that the said question does not arise inasmuch as the assessee, not having appealed from the order under section 24(3), was not entitled to agitate the computation of the loss to be carried forward in the assessment proceedings for the assessment year 1951-52. Neither in the statement of the case nor in the appellate decision of the Tribunal is there any indication that the contention, the form in which it is sought to be raised by Mr. Joshi before us, was raised before the Tribunal. Since t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee by order in writing the amount of the loss as computed by him for the purposes of that section was not followed. No doubt, under section 30 an appeal lies, if the assessee objects to the amount of loss computed and notified under section 24; but inasmuch as the Income-tax Officer had not notified the loss computed by him by order in writing, an appeal could not be taken on that point. It appears from the facts stated in that case that the assessee had appealed from the assessment order, in which the loss to be carried forward in the following year had been determined, but had not questioned the said computation in that appeal, and had agitated the question of the loss to be carried forward during the assessment proceedings for the following year. The facts, therefore, which are on record are not sufficient to hold that there has been a notification to the assessee of the computed loss under section 24(3). In our opinion, therefore, the contention which has been raised by Mr. Joshi cannot be entertained and the answer to question No. 1, therefore, will be that the amount of loss to be carried forward under section 24(2) for the assessment year 1950-51 is the sum o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest under section 18A(6) or 18A(8). It was, however, urged by Mr. Palkhivala that the penal interest levied under the said provision would be appealable, because it forms part of the assessment, and the person denying his liability to be assessed is entitled to appeal under section 30, sub-section (1), of the Act. Now, the question whether an assessee who merely denies his liability to pay penal interest can be said to be denying his liability to be assessed under the Income-tax Act was considered by this court in the decision referred to by us, viz., Commissioner of Income-tax v. Jagdish Prasad Ramnath [1955] 27 I.T.R. 192, and the view taken by this court was that a challenge to the imposition of penal interest would not amount to a denial of the liability to be assessed. Mr. Palkhivala's argument is that, although the decision is directly in point and is against him, the reasoning on which the said decision is based has not been accepted by the Supreme Court in two later decisions and, therefore, the decision must be taken to have been impliedly overruled by the said decisions of the Supreme Court. Now in holding that an assessee who merely denies his liability to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny period not included in the previous year for the purposes of assessment under the Indian Income-tax Act, 1922 and the question which the Supreme Court had to consider was whether the saving was confined to only those provisions of the repealed Act which related to the imposition of liability to pay tax or whether it also included the provisions which related to the imposition of penalty. The argument advanced was that what was saved was the entire procedure for the imposition of liability to pay tax and for the collection of tax, but penalty not being tax, provisions relating to imposition and collection of penalty were not saved by the saving clause. The Supreme Court held that the true nature of penalty imposed on an assessee under a taxing statute for his dishonest or contumacious conduct was in the nature of an additional tax and the fact that under the Hyderabad Income-tax Act distinct provisions were made for the recovery of tax due and penalty did not alter the true character of penalty imposed under the Income-tax Acts of India and Hyderabad and that the expression assessment in its comprehensive connotation meant the entire procedure for the declaration and impositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion liability to be assessed under the Act used in the said section is capable of including the liability to pay a penalty. It is true that penalty when imposed under a taxing statute would be in the nature of an additional tax but that does not mean that there is no distinction between tax and penalty. It cannot be denied that the Indian Income-tax Act has made distinct provisions for tax and penalty and it cannot also be denied that the said distinction has been borne in mind in making provisions for appeals in section 30 of the Act. In our opinion, therefore, the decisions of the Supreme Court referred to by Mr. Palkhivala do not enable him to urge successfully that the said decisions have impliedly overruled the decision of this court in Commissioner of Income-tax v. Jagdish Prasad Ramnath*. Mr. Palkhivala has then argued that the absence of a specific provision providing for an appeal against an order levying penal interest under section 18A(6) or 18A(8) should not be regarded as an indication of the intention of the legislature not to provide an appeal against such order because there is a reason why such specific provision has not been made. The penal interest under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be had by the party to the proceeding. It may be that the circumstance that the imposition of penal interest was automatic was a circumstance which supplied a reason why the legislature might not have thought it necessary to give a right of appeal to the assessee in respect of imposition of penal interest. By an amendment in the Act, the said circumstance can no longer be put forward as a reason why no right of appeal has been given to the party in the matter of imposition of penal interest. But we are not concerned with the reasons why the legislature has not given a right of appeal to the party. What we have to decide is whether such a right is given by the provisions which provided for a right of appeal. The argument, therefore, that the amendment of the provisions of section 18A(6) since after 1st April, 1952, is indicative of a right of appeal being made available to the assessee against an order imposing penal interest, cannot be accepted. In our opinion, therefore, in view of the decision in Commissioner of Income-tax v. Jagdish Prasad Ramnath [1955] 27 I.T.R. 192, which is in no way affected by the decisions of the Supreme Court, to which Mr. Palkhivala has invited our a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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