9911796707
TMI Blog1980 (3) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... f time on November 30, 1962, February 19, 1963, and September 30,1963, the application on the last date being for extension up to October 31, 1963. The return was, however, actually filed on November 20, 1963. While completing the assessment of the firm for the above assessment year under s. 143(3) of the 1961 Act, the ITO directed that interest should be charged under s. 139(1). The assessment form which was prepared as a consequence of this assessment order shows that the total income was determined at Rs. 4,93,557 and the tax payable thereon at Rs. 52,476.84 and interest of Rs. 21,392.52 under s. 139 was added raising the total amount to Rs. 73,869.36. From this the advance tax paid (Rs. 25,442.77) and the provisional tax paid (Rs. 22,691.51) were deducted and the net amount payable by the assessee was determined at Rs. 25,735.08. The notice of demand isssued on the same day showed the sum payable by the assessee as having been determined at Rs. 73,869.36 and clarifies that, after deduction of advance tax and provisional assessment tax, a balance of Rs. 25,735.08 was payable. The assesse had returned an income of Rs. 4,57,369 and the ITO had made certain additions to the retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 139(8) had been introduced by the Finance Act of 1963, but under certain departmental instructions this section was considered to have retrospective effect and this was the reason why the Tribunal gave the directions to the ITO in the manner aforesaid. At the request of the Commissioner the following question of law has been referred for our decision by the Tribunal: " Whether, on the facts and in the circumstances of the case, the assessee was entitled to object to the levy of interest under section 139(1), proviso, in the course of an appeal to the Appellate Assistant Commissioner of Income-tax under section 246 of the Income-tax Act, 1961 ?" and that is why the issue comes up before us now. It may be convenient here to set out the provisions of s. 246 to the extent relevant for our purposes: " 246. Appealable orders.-Any assessee aggrieved by any of the following orders of an Income-tax Officer may appeal to the Appellate Assistant Commissioner against such order ...... . (c) an order against the assessee, where the assessee denies his liability to be assessed under this Act or any order of assessment under sub-section (3) of section 143 or section 144, where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayable by him or refundable to him on the basis of such assessment. This indicates that the ITO while passing the assessment order does not merely determine the tax payable on the basis of the total income". Adjustments will have to be made involving both additions and deductions from the tax which may be determined with reference to the total income. Additions have to be made in the form of interest chargeable on advance tax payments as well as for delay in submission of return. Deductions will be as in this case for payments of advance tax and payment of tax on provisional assessment. It may also be for tax deduction at source and the interest payable by the Government. After making all these adjustments, the ITO raises a demand for the net sum found to be payable on the basis of the assessment. In other words, the charging of interest is an integral part of the process of assessment except where the ITO may choose to determine the liability for interest by an independent order. In any event, in the case presently under consideration, the interest charged is part of the assessment order. As already mentioned the assessment order contains a direction that interest will be charged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils regarding the basis of these decisions. A word, however, before referring to these decisions. Most of them refer to the interest charged, either under the advance tax provisions or for delay in filing the return, as " penal " interest. As pointed out by Balakrishna Ayyar J. in Nagappa Chettiar V. ITO [1958] 34 ITR 583 (Mad), it is not known how this phrase got into the dialect of income-tax law. There is no element of penalty in it and it is just interest for non-payment of an amount at the prescribed time. A large number of cases have arisen before the Allahabad High Court starting with the case of Pi. Deo Sharma [1953] 23 ITR 226. It, may be mentioned here that this was an appeal against a separate order charging interest. It was held by a short order that s. 30 of the 1922 Act gave no right of appeal against such an order. Subsequently, the Allahabad High Court has considered the same issue in the decisions in Seth Banarsi Das Gupta v. CIT [1977] 107 ITR 368, Vidyapat Singhania v. CIT [1977] 107 ITR 533, Ram Chand and Sons Sugar Mills (P.) Ltd. v. CIT [1977] 1107 ITR 539, Addl. CIT v. Allahabad Milling Co. [1978] 111 ITR 111 and Mewa Lal v. CIT [1979] 117 ITR 598. All thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two decisions was resolved in CIT v. Daimler Benz A. G. [1977]108 ITR 961 (Bom) [FB]. Her again it was held that there would be a right of appeal only in respect of matters implicit in resorting to the provision charging interest but not in regard to the computation, reduction or waiver thereof. A more recent decision of the Bombay High Court in CIT v. Gammon Dunkerley Co Ltd. [1979] 119 ITR 595 also reiterates the same view. The Andhra Pradesh High Court in Boddu Seetharamaswamy v. CIT [1955] 28 ITR 156 followed the view of the Allahabad High Court. The Gauhati High Court in K. B. Stores v. CIT [1976] 103 ITR 505 took the view that an order levying interest under s. 139(8) was not appealable because s. 246(c) provided for an appeal only against orders under ss. 201 and 216. The Calcutta High Court in CIT v. Lalit Prasad Rohini Kumar [1979] 117 ITR 603 has taken a wider view. It has agreed with the decisions of the Bombay High Court (CIT v. Daimler Benz A. G. [1977] 108 ITR 961 (Bom) [FB]) and the Karnataka High Court (National Products v. CIT[1977] 108 ITR 935). However, while holding that an appeal would lie where the very leviability of interest is challenged on the groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our of the revenue. It would, thus, appear from the review of the above decisions that the consensus of the opinion of various High Courts is in favour of a limited right of appeal on the question of interest. They appear to hold that if what the assessee is seeking is a reduction in the quantum of interest that would be a matter which could not be agitated in appeal but that if the assessee challenges some of the conditions precedent for the levy of interest, such grounds could be taken in the appeal preferred against the assessment. All these decisions have been rested on the first part of s. 246(c) of the I.T. Act, 1961. After a careful consideration of these various decisions and on a perusal of s. 246 of the I.T. Act, 1961, we think that the question at issue can be decided on a consideration not of the first limb of s. 246(c) but of the second limb of this clause. Section 246 starts by saying that any assessee aggrieved by any of the orders mentioned therein of an ITO may appeal to the AAC against such order. Clause (c) refers to two such orders. One is an order against the assessee, where the assessee denies his liability to be assessed under the Act. All the decisions h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the scope of the appeal is limited to these four subject-matters. We say this because what the clause envisages, where one of the four grievances exists, is an appeal against the order of assessment. In other words, once these grievances are there, what is before the AAC for consideration is the order of assessment. We are unable to see any word in this clause which limits the scope of the arguments of the petitioner or the grounds which he can take before the AAC only to these four matters. We shall only give a few illustrations. Suppose an assessment is made under s. 143(3) and the assessee has, in addition to various objections regarding the quantum, also raised a point in regard to a claim of bad debt that though the ITO may have been right in disallowing the debt in the particular year, his finding that it had become bad several years ago is incorrect and that if at all, it had become bad only in the immediately preceding assessment year. Or, again, suppose the assessee objects to a finding given by the officer that a cash credit was assessable, not in the previous year, but in some particular earlier year. Similarly, there could be a case where the ITO computes a loss but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vel over the entire range of the assessment order. He can bring in for assessment sources which have been considered or, processed by the ITO even though the ITO might have failed to bring them to tax. In other words, the powers of the AAC in disposing of an appeal are very wide and plenary, wider even than those of the Tribunal. It is open to him to consider every aspect of the assessment order and give appropriate relief or directions. In this view again there is, in our opinion, no restriction that can be placed on the powers of the AAC to deal with the question of interest. For example, suppose an ITO in a particular case has charged less interest than should have been charged under the section having applied, let us say, a smaller rate, by mistake, or taken a shorter period into account due to some oversight. There can be no doubt that the AAC is at complete liberty to consider these matters and to enhance the interest suitably when the matter goes up in appeal before him. This being so, it would not be correct, in our opinion, to restrict the grounds which could be raised by an assessee before the AAC particularly when the statutory language does not warrant any such restrict ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
