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TMI Blog1978 (7) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... alia, the following: (a) Disallowance of bad debts. (b) Disallowance of the losses following sale of shares. (c) Addition of amounts as income from undisclosed sources. (d) Disallowance of sums paid as donations and prospecting expenses. A ground was also taken against imposition of penal interest under s. 18A(6) of the Act as follows: " That the Income-tax Officer went wrong in imposing a penal interest, of Rs. 50,678.69." The AAC allowed the appeal in part allowing deduction of several amounts on account of loss incurred in sales of shares and deleting one amount which was added as the assessee's income from undisclosed sources. Interest paid on the last mentioned amount was allowed. As to the penal interest charged, the AAC held that an appeal did not lie against such imposition and did not entertain the ground. Being aggrieved, the assessee went up on further appeal to the Income-tax Appellate Tribunal. The Tribunal granted a further relief to the assessee and allowed deduction of certain expenses incurred on prospecting and remanded the proceedings to the AAC directing the latter to enquire farther on the addition of Rs. 1 lakh as income from undisclosed sources, cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the assessment it was contended by the assessee, inter alia, that the levy of interest was illegal and also further that the ITO should have exercised his discretion to reduce or waive the interest under the relevant rules. The AAC, while upholding the protective assessment, accepted the contentions of the assessee as to interest and directed the ITO to consider whether penal interest should be waived or reduced and to recompute the same. From this order, the revenue preferred an appeal to the Income-tax Appellate Tribunal, contending that the statute did not provide for an appeal against levy of interest. The Tribunal upheld the order and found that the AAC was justified in entertaining the appeal on the question of interest. At the instance of the revenue one of the questions referred for the opinion of this court was as follows : " Whether, on the facts and in the circumstances of the case, the appeal by the assessee to the Appellate Assistant Commissioner from the order of the Income-tax Officer, against the levy of interest under section 215/217 of the Income-tax Act, 1961, was competent ? " This court, after considering the relevant statutory provisions and a number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We may refer to the relevant sections of the statute. Material part of s.18A of the Indian I.T. Act, 1922, is as follows : " (1) In the case of income other than income chargeable under the head ' Salaries ', the Income-tax Officer may, on or after the 1st day of April, in any financial year, by order in writing, require an assessee to pay quarterly to the credit of the Central Government on the 15th day of June, 15th day of September, 15th day of December and 15th day of March in that year, respectively, an amount equal to one-quarter of the income-tax and super-tax payable on so much of such income as is included in his total income of the latest previous year in respect of which he has been assessed,.......... (2) If any assessee who is required to pay tax by an order under sub-section (1) estimates at any time before the last instalment is due that the part of his income to which that sub-section applies for the period which would be the previous year for an assessment for the year next following is less than the income on which he is required to pay tax and accordingly wishes to pay an amount less than the amount which he is so required to pay, he may send to the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31st day of March, 1952, interest shall be payable at the rate of four per cent. per annum : Provided further that where a provisional assessment is made under section 23B, interest shall be calculated in accordance with the foregoing provision up to the date on which the tax as provisionally assessed is paid, and thereafter interest shall be calculated at the rate aforesaid on the amount by which the tax as so assessed (in so far as it relates to income other than income chargeable under the head 'Salaries') falls short of the said eighty per cent. : Provided also that, where, as a result of an appeal under section 31 or section 33 or of a revision under section 33A or of a reference to the High Court under section 66, the amount on which interest was payable under this sub-section has been reduced the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded together with the amount of income-tax that is refundable :......... Provided further that in such cases and under such circumstances as may be prescribed, the Income-tax Officer may reduce or waive the interest payable by the assessee. (7) Where, on making the regular assessment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a reduction or waiver of the interest payable under section 18A(6) is justified." Section 30 of the Indian I.T. Act, 1922, reads as follows : " 30. (1) Any assessee objecting to the amount of income assessed under section 23 or section 27, or the amount of loss computed under section 24 or the amount of tax determined under section 23 or section 27, or denying his liability to be assessed under this Act ......... may appeal to the Appellate Assistant Commissioner against the assessment or against such refusal or order." The corresponding sections and rules of the I.T. Act, 1961, are respectively as follows : " 139. (1) Every person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall furnish a return of his income or the income of such other person during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed-- (a) in the case of every person whose total income, or the total income of any other person in respect of which he is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) where the return relates to a previous year relevant to any other assessment year, two years from the end of such assessment year ......... (8)(a) Where the return under sub-section (1) or sub-section (2) or sub-section (4) for an assessment year is furnished after the specified date, or is not furnished, then (whether or not the Income-tax Officer has extended the date for furnishing the return under sub-section (1) or sub-section (2)], the assessee shall be liable to pay simple interest at twelve per cent. per annum, reckoned from the day immediately following the specified date to the date of the furnishing of the return or, where no return has been furnished, the date of completion of the assessment under section 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source : Provided that the Income-tax Officer may, in such cases and under such circumstances as may be prescribed, reduce or waive the interest payable by any assessee under this sub-section." Section 215. (1) Where, in any financial year, an assessee has paid advance tax under section 212 on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to in sub-section (3) of section 212 has not sent the estimate referred to therein, simple interest at the rate of twelve per cent. per annum from the 1st day of April next following the financial year in which the advance tax was payable in accordance with the said sub-section up to the date of the regular assessment shall be payable by the assessee upon the amount equal to the assessed tax as defined in sub-section (5) of section 215. (1A) Where, on making the regular assessment, the Income-tax Officer finds that any such person as is referred to in sub-section (3A) of section 212 has not sent the estimate referred to therein, simple interest at the rate of twelve per cent. per annum from the 1st day of April next following the financial year in which the advance tax was payable in accordance with the said sub-section up to the date of the regular assessment shall be payable by the assessee upon the amount by which the advance tax paid by him falls short of the assessed tax as defined in sub-section (5) of section 215 . (2) The provisions of sub-sections (2), (3) and (4) of section 215 shall apply to interest payable under this section as they apply to interest payable unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r according to law. There was a reference to the Bombay High Court and one of the questions referred was as follows : " Whether, on the facts and circumstances of the case, an appeal lies to the Appellate Assistant Commissioner from an order passed by the Income-tax Officer levying penal interest under section 18A(8) of the Income-tax Act ? " The High Court observed as follows : " To the extent that this appeal merely raises the question of his liability to pay penal interest, his appeal is clearly not maintainable, but if in this appeal he wants to urge that the income in respect of which tax is imposed and in respect of which interest is calculated for the purpose of section 18A(8) was not income which fell under the head covered by section 18A, then certainly it would be open to him to argue this in this very appeal. It would be equally open to him to argue that the income calculated by the Income-tax Officer as the income of the assessee for the relevant year was not the proper income and that there was either no income at all or the income was less than calculated. If the income is reduced by the Income-tax Officer then the tax would be reduced, and if the tax is reduced, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and following the same answered the question referred in the affirmative and in favour of the revenue. (c) Mathuradas B. Mohta v. CIT [1965] 56 ITR 269 (Bom). The facts in this case were that in an earlier assessment year, the assessee had claimed that he should be assessed as an individual but the income-tax authorities insisted on taxing him in the status of a HUF. The assessee had not paid advance tax not in his capacity as an individual but that of a HUF in the subsequent assessment year 1950-51. In the assessment for the said later year the ITO took the view that as the assessee in his status of an individual had not submitted an estimate and paid advance tax as required under 18A(3) of the Act of 1922 he was liable to pay interest under s. 18A(8) thereof and accordingly charged interest. In an appeal against the assessment, one of the grounds was that the ITO had erred in holding that penal interest was chargeable. The AAC accepted this contention. On further appeal, the Tribunal held that the AAC was not justified in enter- staining the appeal against the levy of interest. On a reference, the Bombay High Court without considering its earlier decision in Keshardeo Shrinivas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 and held that no appeal lay against the order charging interest under that section. (f) Vidyapat Singhania v. CIT [1977] 107 ITR 533 (All). Here in a revised assessment for the relevant assessment year the assessee was charged interest under s. 18A(6) and/or a. 18A(8) of the Act of 1922. An appeal against the levy of interest, was dismissed by the AAC as incompetent. This order was confirmed by, the Tribunal. On a reference, the Allahabad High Court expressed its dissent from the decision in Mathuradas B. Mohta [1965] 56 ITR 269 (Bom) on the ground that the Bombay High Court had not considered its earlier decision in Keshardeo Shrinivas Morarka [1963] 48 ITR 404. The High Court considered the effect of s. 30 of the Act of 1922 and held, inter alia, as follows : " The scheme of section 30 appears to be to provide an appeal first against the computation of income or loss, then against the determination of tax and finally in a case where even if there is no dispute about the computation of income or the amount of tax, the assessee disputes his liability to be assessed under the Act. This means a total denial. The denial, of course, may be either absolute or conditional but the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly or partially, to be assessed. Similarly, where interest is levied under section 139 of the Act, the assessee may deny, his liability to pay such interest on the ground that the return was not belated or that the penal provision was not attracted at all to his case. In such a case also he denies his liability to be assessed to interest. But where the assessee does not deny his liability to be assessed to interest, but his objection relates to the question of waiver or reduction of interest under rule 117A or rule 40 of the Income-tax Rules, 1962, as the case may be, such objection does not amount to denial of liability to pay interest under section 139 or section 215 of the Act. Waiver or reduction of interest presupposes that the liability has been incurred by the assessee. If no liability has been incurred, then there is no question of exercise of discretion of waiver or reduction of interest. In those cases, the assessee admits his liability but contends that in the proper exercise of discretion, the Income-tax Officers should have waived or reduced the interest; that objection does not amount to denial of liability to be assessed. The assessee in an appeal against the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bt that the assessee had preferred an appeal to the Appellate Assistant Commissioner in which the principal ground of attack against the charge of penal interest levied against it was that the assessee-company being a non-resident company was not liable to be assessed to advance tax at all inasmuch as its income was under one or the other head falling under section 18 of the Act and was outside the purview of section 18A of the Act. In other words, it was a clear case of an assessee 'denying its liability to be assessed under this Act and as such the appeal to the Appellate Assistant Commissioner was competent under section 30(1) of the 1922 Act." Considering the corresponding provisions of the I.T. Act, 1961, the Full Bench held that s. 246(c) of the later Act was in pari materia with s. 30(1) of the 1922 Act, and the position was the same. (i) Addl. CIT v. Allahabad Milling Co. [1978] 111 ITR 111 (All). In this case, following its earlier decision in Vidyapat Singhania [1977] 107 ITR 533, the Allahabad High Court reiterated that as no appeal had been provided in the statute against levy of penal interest, such appeal could not be allowed indirectly and in an appeal against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reduced and the excess amount charged would be refunded.
Keeping in view the above principles, it appears to us that in the instant case it is not clear from the particular ground of appeal urged against the imposition of interest in the instant case, whether the assessee is denying its liability to be charged interest at all or is only challenging the quantum of interest charged. From the other grounds in the appeal, it is clear that the assessee does not deny its liability to be assessed at all. The assessee also does not deny its liability to pay advance tax. The only question which has to be gone into by the AAC is whether the assessee is denying its liability to pay interest at all. If this is so, then the AAC will consider the matter further. If not, the appeal should be rejected in limine. We would like to observe that unless a proper ground is clearly made out on the lines as indicated earlier the assessee may be shut out from agitating a ground against imposition of interest in its appeal.
To the limited extent as we have indicated above, the question referred is answered in the affirmative. There will be no order as to costs.
C. K. BANERJI J.--I agree. X X X X Extracts X X X X X X X X Extracts X X X X
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