1989-VIL-544-PAT-DT

Equivalent Citation: [1989] 180 ITR 604, 81 CTR 334, 49 TAXMANN 192

PATNA HIGH COURT

Date: 02.08.1989

PRAKASH LAL KHANDELWAL

Vs

INCOME-TAX OFFICER AND ANOTHER

BENCH

Judge(s)  : S. B. SINHA 

JUDGMENT

S. B. SINHA J.-In this writ application, the petitioner has prayed for issuance of a writ of certiorari for quashing a part of the demand notices as contained in annexures 2, 2/A and 2/B of the writ application whereby and whereunder interest has been charged on the petitioner under section 139(8) as well as under section 217 of the Income-tax Act, 1961 (hereinafter to be referred to as "the Act").

The facts of the case lie in a very narrow compass.

For the assessment years 1980-81, 1981-82 and 1982-83, the petitioner was allegedly assessed in terms of section 147 of the said Act.

According to the petitioner, notices under section 148 of the Act were issued on April 16, 1983, which were served on the petitioner on May 17, 1983, and in compliance thereof, the petitioner submitted his returns in respect of the aforementioned assessment years on March 6, 1984.

By order dated November 19, 1984, the Income-tax Officer, Ward-A, Income-tax Circle-I, Dhanbad (respondent No. 1), completed the assessment proceedings and passed assessment orders for the aforementioned assessment years which are contained in annexures 1 and 1 /B in respect of the assessment years 1980-81 and 1982-83 and it has been mentioned therein as follows:

"Proceeding under sections 271(1)(a), 271(l)(b) and 271(l)(c) initiated. Charge interest under sections 139 (8) and 217.

However, in respect of the assessment year 1981-82, in the assessment order, the words "Charge interest under section 139(8) and section 271" do not appear.

According to the petitioner, no interest was leviable under the aforementioned provisions as the petitioner was assessed under section 147 of the said Act an assessment whereunder is not a regular assessment. It is further submitted that in any event, as respondent No. 1 did not pass any order with regard to the levy of interest for the assessment years as contained in annexure I series, the purported levy of interest in the demand notices under section 139(8) and under section 217 of the said Act, is illegal.

The petitioner has further submitted that as there was no provision for appeal against the said demand notices charging interest, he filed an application before respondent No. 1 purported to be under section 154 of the said Act and respondent No. 1, by an order dated March 18, 1985, as contained in annexure 4 series to the writ application, dismissed Ile said applications filed by the petitioner and confirmed his earlier orders imposing interest in respect of the three assessment years.

Mr. S. B. Gododia, learned counsel appearing on behalf of the petitioner, raised two-fold contentions.

Firstly, learned counsel submitted that interest is chargeable under section 139(8) and section 271 of the Income-tax Act only in the event an assessee is subjected to a regular assessment and not to an assessment under section 147 thereof. According to learned counsel, this would be clear from a subsequent amendment brought in the Act with effect from April 1, 1985, as a result whereof the assessment made under section 147 of the said Act has also been brought within the mischief of the aforementioned provision.

Learned counsel, in this connection, has placed strong reliance upon a judgment of the Karnataka High Court in Charles D' Souza v. CIT [1984] 147 ITR 694 (Kar). Reliance has also been placed upon a Division Bench decision of this court in CIT v. Ram Chandra Singh [1976] 104 ITR 77.

Learned counsel next submitted that, in any event, as the matter relating to levy of interest under section 139(8) and section 217 of the said Act was not mentioned in the orders of assessments, no interest could be levied by way of demand notice. For this proposition, learned counsel has relied upon a decision in Monohar Gidwany v. CIT [1983] 139 ITR 498 (Cal).

Mr. K. K. Jhunjhunwala, learned counsel appearing on behalf of the respondents, on the other hand, submitted that from a perusal of the orders of assessment as contained in annexure 1 series to the writ application, it would appear that orders as contained were passed under section 143 (3) and section 147 of the said Act in relation to the assessment years 1980-81 and 1982-83. So far as the assessment year 1981-82 is concerned, learned counsel has placed before me the original records of this case and submitted that in the original orders of assessment, section 147 of the Act does not find a place in the assessment order in respect of the assessment year 1981-82.

It is admitted that there has been a delay on the part of the petitioner in filing returns. It also stands admitted that the petitioner was served with notices under section 148 of the said Act.

"Regular assessment" has been defined in section 2(40) of the said Act to mean assessment made under section 143 or 144 of the Act. In the instant case, the assessee was assessed for the first time. It is also admitted that the petitioner filed his return only after service of notice upon him under section 148 of the Act. According to the respondents, the petitioner did not file any return in terms of sections 139(1) and 139(4) of the Income-tax Act.

Section 147 of the Act postulates assessment or reassessment in a case of escaped assessment. Evidently the instant case is one falling under section 147 of the Income-tax Act inasmuch as the assessee filed his return for the first time pursuant to notices under section 148 of the Act. From plain reading of the orders of assessment as contained in annexure 1 series to the writ application, it is evident that the petitioner was assessed under section 143(3) read with section 147 of the Act.

However, it appears from the original records produced before me that before the orders of assessment were passed, notices were also issued under sections 143(2) and 142(1) by an order dated August 6, 1984, i.e., after the petitioner filed his returns. This, however, does not alter the position inasmuch as it is admitted that the petitioner has not filed any voluntary return in terms of section 139 of the Act but filed his returns only after service of notice under section 148 of the said Act.

From a perusal of the assessment orders in respect of the assessment years 1980-81 and 1982-83, it is evident that the said orders of assessment have been passed under section 143(3) and section 147 of the Act.

As noticed hereinbefore the petitioner was never assessed by the income-tax authorities and he was served with notices under section 148 of the said Act. Thus, it is a case where the assessment was bound to be done taking the aid of section 147 of the Act. Regular assessment means an "assessment in a regular manner". In this case, the petitioner being not an assessee earlier, regular assessment proceedings could not have been initiated against him. In Charles D' Souza v. CIT [1984] 147 ITR 694, the Karnataka High Court held that an assessment done in terms of section 147 of the Act is not a regular assessment.

The question, however, in this case arises as to whether an assessment under section 143(3) read with section 147 of the Act would be a regular assessment or not ?

In view of the fact that a voluntary return was not filed by the petitioner, respondent No. 1 had no other option to initiate an assessment proceeding by issuance of a notice under section 148 of the Act. In CIT v. Padma Timber Depot [1988] 169 ITR 646 (AP), after taking into consideration various decisions, the Andhra Pradesh High Court held that an assessment under section 143(3) read with section 147 of the Act cannot be regarded as a regular assessment. In the said case, the Andhra Pradesh High Court took into consideration the decision of a Division Bench of this court in CIT v. Ram Chandra Singh [1976] 104 ITR 77. So far as the assessment order in relation to the assessment year 1981-82 is concerned, it is true that from the order of assessment it appears that the said assessment was done only under section 143(3) of the Act, but for the reason stated hereinbefore, it must be held that the order of assessment could have been passed only under section 143(3) read with section 147 of the Act.

In this view of the matter, the impugned demand as contained in annexures 2, 2/A and 2/B cannot be sustained. In view of my finding aforementioned, it is not necessary to consider the second contention raised by Sri Gododia, learned counsel appearing on behalf of the petitioner.

It may be pointed out that in a given case it may be held that interest levied under section 139(8) of the Act is almost automatic inasmuch as interest levied under the aforementioned provision is not by way of penalty nor by way of additional tax but it is commercial compensation for the delay in payment of tax inevitably resulting from delayed filing of return. Reference in this connection may be made to a Full Bench decision of our own High Court in CIT v. Prayaglal Agarwala and Co. [1986] 162 ITR 570 and in Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961 (SC) and in Ganesh Dass Sreeram v. ITO [[1988] 169 ITR 221 (SC).

In view of my findings aforementioned, this writ application is allowed and the demand of interest raised in the demand notices as contained in annexures 2, 2/A and 2/B are quashed. Let a writ of mandamus be issued upon the respondents forbearing them from giving effect to the said demand notices so far as the same relate to the levy of interest under section 139(8) and section 217 of the said Act. However, in the facts and circumstances of the case, there will be no order as to costs.

 

 

 

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