Commissioner Of Income-Tax vs M.K. Yashwant Singh
1998 Latest Caselaw 17 Del

ORDER--Assessing officer charged interest under sections 139 and 217

Ratio :

Where liability to pay interest at all is denied, the plea as to non-liability to pay interest may be raised in appeal, however, where the liiability to pay interest is not or cannot be disputed but a waiver or reduction is sought for, the remedy of the assessee lies not in appeal but before the assessing officer to seek waiver or reduction of interest.

Held :

There is a distinction between two types of cases : one, where liability to pay interest at all is denied, and two, where the liability to pay interest is not or cannot be disputed but a waiver or reduction is sought for. In the first case, the plea as to non-liability to pay interest may be raised while disputing the assessment in appeal but in the latter case, the remedy of the assessee lies not in appeal but before the assessing authority itself to seek waiver or reduction of interest. The plea of the assessee, which has also found favour with the Appellate Assistant Commissioner and the Income Tax Appellate Tribunal, is that the levy of interest was itself bad in law and no interest could have been levied on the assessee. A plea of the nature raised by the assessee in appeal against the order of assessment, was available for consideration under section 246(c) of the Act, whatever be the result on the merits of such plea.

That being the position of law, the question is answered in the affirmative, that is, in favour of the assessee and against the department.

Case Law Analysis :

Ashok Kumar v. CIT (1998) 231 ITR 140 (Del); Associated Stone Industries (Kotah) Ltd. v. CIT (1997) 224 ITR 560 (SC); Central Provinces Manganese Ore Co. Ltd. v. CIT (1986) 160 ITR 961 (SC) followed

Application :

Not applicable to current assessment years, because sections 139(8) and 217 are inoperative now. However, the principles as enunciated in relation to section 246(C) are even currently applicable.

A. Y. :

1967-68 to 1969-70

Income Tax Act 1961 s.139(8)

Income Tax Act 1961 s.217

Income Tax Act 1961 s.246(c)

JUDGMENT

R.C. Lahoti, J.

1. In these three references under Section 256(1) of the Income-tax Act, 1961, made at the instance of the Revenue and arising out of the assessment years 1967-68, 1968-69 and 1969-70, a common question of law is referred by the Tribunal for the opinion of the High Court :

"Whether, on the facts and in the circumstances of the case, the Tribunal is legally correct in holding that the Income-tax Officer's orders charging interest under Section 139 were appealable ?"

2. There was delay in filing the returns. The assessments were framed under Section 143(3) of the Act. The assessment orders also directed-"Charge interest under Sections 139 and 217". The assessee preferred appeals. All the three appeals were heard and disposed of by a common order. The assessee had challenged the computation of income as also the levy of interest. It was urged that where the return was not filed within the time specified in the notice under Section 139(2) of the Act (as it stood before April, 1972) but was filed later and no extension of time had been applied for, the assessee was not liable to pay any interest at all under Clause (iii) of the proviso to Section 139(1) of the Act. It was urged that after April, 1972, interest for delay or default in furnishing the return of income in all cases was chargeable from the expiry of the due date for furnishing such returns voluntarily under Section 139(1) of the Act. It was, therefore, urged that returns having been filed on February 12, 1972, for 1967-68, on February 17, 1972, for the assessment years 1968-69 and 1969-70 the levy of interest under section 139 by the Income-tax Officer was bad in law and, therefore, was liable to be deleted. Reliance was placed on Garg and Co. v. CIT [1974] 97 ITR 639 (Delhi) and CIT v. Bahri Bros, (P.) Ltd. [1976] 102 ITR 443 (Patna). The plea was entertained and upheld by the Appellate Assistant Commissioner leading to deleting

of interest under Section 139 in its entirety. As to interest under Section 217, the plea of the assessee was rejected.

3. The Department went in appeal to the Income-tax Appellate Tribunal submitting that the Appellate Assistant Commissioner was not justified in entertaining the appeal under Section 246(c) of the Act in so far as the levy of interest was concerned. The Income-tax Appellate Tribunal has rejected the plea of the Department so raised.

4. In the above said backdrop of events the Department has sought for the present three references.

5. In Ashok Kumar v. CIT [1998] 231 ITR 140 (Delhi) (ITR No. 190 of 1982) decided on January 7, 1998, following the law laid down by the Supreme Court in Associated Stone Industries (Kotah) Ltd. v. CIT [1997] 224 ITR 560 and Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961, we have held that there is a distinction between two types of cases : one, where liability to pay interest at all is denied, and two, where the liability to pay interest is not or cannot be disputed but a waiver or reduction is sought for. In the first case, the plea as to non liability to pay interest may be raised while disputing the assessment in appeal but in the latter case, the remedy of the assessee lies not in appeal but before the assessing authority itself to seek waiver or reduction of interest.

6. In the case at hand, the plea of the assessee, which has also found favour with the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal, is that the levy of interest was itself bad in law and no interest could have been levied on the assessee. A plea of the nature raised by the assessee in appeal against the order of assessment, was available for consideration under Section 246(c) of the Act, whatever be the result on the merits of such plea.

7. That being the position of law, the question is answered in the affirmative, that is, in favour of the assessee and against the Department.