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TMI Blog1979 (8) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 143 or section 144, where the assessee objects to the amount of income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed ; ...... (m) an order under section 216. " Section 30 of the Indian I.T. Act, 1922, provided for appeals in similar terms. Under cl. (c) of s. 246, there is a right of appeal against the regular assessment under s.143(3) or s. 144 where the objection is to the amount of income assessed or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed. In this context, the phrase " where the assessee denies his liability to be assessed under this Act " should not be construed to include the grounds of attack covered by the other part of the clause, because that will render the aforesaid part of cl. (c) otiose or superfluous. Legislative history is an admissible aid to interpretation of statutes. Clause (c) has a peculiar legislative history. Under s. 18A of the Indian I.T. Act, 1922, the levy of interest was automatic. The ITO had no discretion. He had merely to calculate the amount. By Act No. 25 of 1953 which was enacted with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Privy Council in CIT v. Khemchand Ramdas [1938] 6 ITR 414 (PC), it is settled that the word " assessment " as used in the I.T. Act is used as meaning sometimes the computation of income, sometimes determination of the amount of tax payable, and sometimes the whole procedure laid down in the Act for imposing liability upon the taxpayer. [Abraham (C.A.) v. ITO [1961] 41 ITR 425 (SC), Kalawati Devi Harlalka v. CIT [1967] 66 ITR 680 (SC) and S. Sankappa v. ITO [1968] 68 ITR 760 (SC)]. In the context of cl. (c), the word " assessed " cannot mean computation of income or determination of tax, because such things are already provided for in the latter part of the same clause. Obviously, it is used in the comprehensive sense to mean " subjected to the whole procedure for ascertaining and imposing liability on the taxpayer " ; and the liability is under the Act and not under any particular provision or individual section of the Act. The phrase " denying his liability to be assessed under this Act " came up for consideration before the Gujarat High Court in Mandal Ginning and Pressing Co. Ltd. v. CIT [1973] 90 ITR 332 (Guj). Bhagwati C.J. (as his Lordship then was) spoke f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1), is, therefore, denial of liability to be charged with tax under the Act, which is the game thing as saying that the assessee is not liable to be assessed at all under any provision of the Act or to be subjected to any part of the procedure laid down in the Act for imposing liability to tax. " The Supreme Court decision in Kanpur Coal Syndicate's case [1964] 53 ITR 225 is in point. In that case, the Supreme Court affirmed the decision of this court. In that case the assessee, which was an association of persons, contended that as an assessable entity it was not liable to be taxed, but its individual members as separate assessable entities alone were liable. The Supreme Court held that the assessee denied his liability to be assessed under the Act in the circumstances of the case. It was held : " The expression ' denial of liability ' is comprehensive enough to take in not only the total denial of liability but also the liability to tax under particular circumstances. In either case the denial is a denial of liability to be assessed under the provisions of the Act. In one case the assessee says that he is not liable to be assessed to tax under the Act, and in the other case t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is liability to be assessed under the Act. In fact, he has never been assessed. In fact, no liability to pay advance tax has ever been imposed upon him. In fact, he has never been called upon to pay advance tax. It is only on his being assessed under the regular assessment that it has found that he should have made an estimate under sub-section (3) of section 18A and paid advance tax and, therefore, he is liable to pay penalty. " It was held that there was no right of appeal against the imposition of penal interest under the denial clause. This decision makes a distinction between appealability on the grounds which legitimately are covered by the clause " assessment of income or computation of tax ". An appeal would lie under that clause against the regular assessment on the ground that the income was assessed under a wrong head or source, but on these grounds an appeal is not permissible under the denial clause. In Daimler Benz's case [1977] 108 ITR 961, a Full Bench of the Bombay High Court held (p. 983) that when the ITO while resorting to s. 18A, impliedly decides that the assessee is liable to be assessed to advance tax and if the assessee feels aggrieved by such a decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be said to deny his liability to be assessed. For instance, when a person objects to the levy of tax on agricultural income, his denial is absolute. Agricultural income is not taxable under any circumstance. But when a person objects to the levy of tax on him on the ground that the income sought to be assessed belongs to him in the capacity of a Hindu undivided family and not in his capacity as an individual, he denies his liability to be assessed under certain circumstances. The denial is complete even though not absolute. " Referring to the argument that interest was part of tax, the Bench observed (p. 538) : " Even if penal interest is a part of tax, it cannot be said that the assessee denies his liability to be assessed under the Act, because he objects to the levy of penal interest only and not to the amount of tax determined under section 23. So it is not possible to spell out a right of appeal even by virtue of the clause ' denying his liability to be assessed under the Act ' occurring in section 30 of the Act. " This view has prevailed in this court consistently [See Pt. Deo Sharma v. CIT [1953] 23 ITR 226 (All), Ram Chand and Sons Sugar Mills P. Ltd. v. CIT [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the maintainability of an appeal. The substance of the matter counts. All the aforesaid grounds of objection can be taken in an appeal. But none of these categories cover the ground relating to the quantum of penal interest whether it be for the reason that the ITO ought to have waived or reduced the penal interest or that the provisions like in s. 139 or s. 217 are not attracted. Such grounds cannot be entertained by the appellate authority merely because they have been taken in the appeal filed against the regular assessment order. On these grounds, the remedy is by way of applying for rectification under s. 154 or revision to the Commissioner (s. 264). Since October 1, 1975, the assessee has a more specific remedy under s. 273A in case his grievance is in respect of waiving or reducing the amount of interest,vide cl. (3) of sub-s. (1) of s. 273A. Last but not least, the assessee has a remedy of filing a writ petition under art. 226 of the Constitution in the High Court. Coming to the individual cases, the position is that in I.T. Reference No. 52 of 1976 (CIT v. Suresh Chandra) the ITO charged penal interest under s. 139 as well as under s. 215 for the assessment year 1970- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Is of mere academic interest and is returned unanswered. The Commissioner will be entitled to costs which are assessed at Rs. 200.In Income-tax Reference No. 39 of 1976 (Sushil Kumar v. CIT) the assessee filed an appeal against the assessment order challenging the merits of the order as well as the liability to interest under s. 139 (late filing of the return) and under s. 217 (not filing the estimate and paying the advance tax) of the Act. The levy of interest under s. 139 was challenged on the ground that there was no delay in filing the return because the assessee had never applied for extension of time and also because the return filed earlier as an individual could be treated as a return filed by the assessee-HUF. It was also urged that the ITO should have waived or reduced the interest. The AAC entered into the merits of these pleas. He rejected the first two arguments but he held that in view of r. 117A, it was a fit case in which levy of interest under s. 139 was liable to be waived. In respect of the levy of interest under s. 217, it was held that no appeal lies. The Tribunal held that the charge of penal interest under ss. 139 and 217 was not appealable on either of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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