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TMI Blog1998 (5) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed share of the assessee from Kailash Nath and Associates as assessment had been completed in that case at New Delhi. After consent to that effect was obtained from the assessee, the share income was taken as assessed in the aforesaid concern and interest under section 139(8)/215/217 was also charged in all the four years under consideration. The Commissioner of Income-tax (Appeals) while accepting the appeals of the assessee deleted the interest charged and the Revenue is in appeal before us. The learned Departmental Representative submitted that due opportunity was granted for enhancement of share income as it was assessed subject to rectification and thus such opportunity covered all interrelated actions and ancillary matters as these are coterminous with income and, inter alia, covers all consequential actions. So, there was no flaw or ambiguity in the order of the Assessing Officer and the Commissioner of Income-tax (Appeals) has not properly appreciated what was placed and discussed before him and simply accepted the plea of the assessee. Moreover, the case law relied on is on different point and the ratio of these cases is not applicable here in the case in hand as interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground that interest could not be charged in rectification proceedings. The Tribunal upheld the order of the Commissioner (Appeals). On a reference: Held, that interest under sections 139(8) and 217 could be charged at the time of rectification of the assessment order." So, while accepting the appeals of the Revenue, we reverse the order of the Commissioner of Income-tax (Appeals) and restore that of the Assessing Officer. The appeals of the Revenue are allowed. R.K. BALI (Accountant Member).- I have carefully gone through the order passed by my learned colleague, the Judicial Member, but I am unable to agree with his reasoning and conclusion with regard to the reversing of the order of the Commissioner of Income-tax (Appeals) who has deleted the interest charged by the Assessing Officer under sections 139(8) and 215/217 for the assessment years 1984-85 to 1987-88 which was levied by the Assessing Officer in the revision orders passed under section 155. I give my reasons and related facts for the same as under. The assessee, Shri Sandeep Khanna, is a partner in Kailash Nath and Associates which are two firms of the same name carrying on business at Delhi and Bangalore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax (Appeals) accepted the plea of the assessee and held that the Assessing Officer was not justified in enhancing/charging the interest under sections 139(8) and 215/217 and accordingly deleted the interest charged under section 139(8) for the assessment year 1984-85 and interest charged under sections 215/217 for all the four assessment years under consideration. Aggrieved by the orders of the learned Commissioner of Income-tax (Appeals), the Revenue filed these four appeals and took a common ground that "on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in deleting the interest charged under sections 139(8) and 215/217 for the assessment years 1984-85 to 1987-88". It was argued before us by the learned Departmental Representative that the Assessing Officer had granted due opportunity to the assessee for enhancement of share income as it was assessed originally, subject to rectification and this opportunity covered all inter-related actions and ancillary matters as these were coterminous with income and inter alia covered all consequential actions. Accordingly, it was projected that there was no flaw or ambiguity in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication order passed was illegal inasmuch as, no notice under sub-section (3) of section 154 was issued before passing the rectification order. The Tribunal also held that the Income-tax Officer was equally incompetent to charge interest under section 217 in the circumstances of the case and thereupon the Revenue applied for and obtained the reference under section 256(2). The High Court in the aforesaid judgment held as under: "Section 154(3) of the Income-tax Act, 1961, provides that an amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee shall not be made under this section unless the authority concerned has given notice to the assessee of its intention so to do and has allowed the assessee a reasonable opportunity of being heard. It is evident that sub-section (3) of section 154 of the Income-tax Act, 1961, gives statutory shape to the principles of natural justice. Any order of rectification, which has the effect of enhancing the liability of the assessee, passed without complying with the said requirement, is invalid in law." The ratio of the above judgment clearly applies to the facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision of the Gauhati High Court which is an ex parte decision without representation from the assessee, relied on by my learned Brother. Accordingly, I will uphold the order of the learned Commissioner of Income-tax (Appeals) and dismiss all the four appeals filed by the Revenue. ORDER OF REFERENCE TO THIRD MEMBER On a difference of opinion between the Members who heard these appeals, the following' point of difference is referred to the hon'ble President for the opinion of the third Member: "Whether, on the facts and in the circumstances of the case, the Judicial Member is justified in confirming the order of the Assessing Officer charging interest under sections 139(8) and 215/217 levied in revision orders passed under section 155 or the order of the learned Commissioner of Income-tax (Appeals) deleting the interest charged under the aforesaid sections should be confirmed as held by the Accountant Member?" ORDER OF THIRD MEMBER R.M. MEHTA (Vice-President).- The following question has been referred to me under section 255(4) of the Income-tax Act, 1961: "Whether, on the facts and in the circumstances of the case, the Judicial Member is justified in confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n an order passed under section 155 only with a view to rectify the share income, without affording an opportunity to the assessee as to why interest should not be charged. It was submitted that the charging of interest without due opportunity was bad in law. Reliance was placed on the decision of the Orissa High Court reported in CIT v. Gangaram Chapolia and Co. [1991] 187 ITR 594 and that of the Allahabad High Court in CIT v. Pankaj Gupta [1991] 188 ITR 184. The Commissioner of Income-tax (Appeals) accepted the arguments advanced on behalf of the assessee and deleted interest charged under section 139(8) for the assessment year 1984-85 and interest charged under section 215/217 for all the four years. Aggrieved with the orders of the Commissioner of Income-tax (Appeals), the Revenue filed appeals before the Tribunal and raised an argument to the effect that the opportunity given to the assessee to enhance the share income covered all inter-related and ancillary matters. It was accordingly argued that there was no flaw or ambiguity in the order of the Assessing Officer passed under section 155. These arguments appealed to the learned Judicial Member who set aside the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducing a refund or otherwise increasing the liability of the assessee shall not be made under this section unless the authority concerned has given notice to the assessee of its intention so to do and has allowed the assessee a reasonable opportunity of being heard. It is evident that sub-section (3) of section 154 of the Income-tax Act, 1961, gives statutory shape to the principles of natural justice. Any order of rectification, which has the effect of enhancing the liability of the assessee, passed without complying with the said requirement, is invalid in law". The decision of the Gauhati High Court in CIT v. Arunachal Saw and Veneer Mills (P.) Ltd. [1997] 225 ITR 363 was rightly distinguished by the learned Accountant Member on the following grounds: (i) The matter had proceeded ex parte qua the assessee who had no opportunity to refer to any reported decision on the subject; (ii) It was not clear whether in the rectification proceedings initiated, the assessee was given a notice about the intention of the Assessing Officer to charge interest under sections 139(8) and 217; and (iii) The question referred to the High Court was whether interest under sections 139(8) and 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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