TMI Blog2008 (6) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Appellate Tribunal, Chandigarh Bench, Chandigarh, in I. T. A. Nos. 2138 to 2141/Chandi/91 and as such are being disposed of by a common judgment. 3. The appeals were admitted on the following substantial questions of law: "(i) Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was right in law in coming to the conclusion that in revision order passed under section 154/155 for charging interest under sections 139(8) and 215, the application of the provisions of section 154(3) are mandatory, when in the notice issued under section 154/155, it has been specifically made clear that the enhancement of income will also increase the assessee's liability? (ii) Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was justified in law in entertaining the assessee's appeal against charging of interest under sections 139(8) and 215 in the order passed under section 154, when the assessee had not challenged the enhancement of income which has made assessee liable to pay interest?" 4. For the purpose of convenience the facts of I. T. A. No. 8 of 1999 are being referred to for the purpose of adjudication of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that he had no objection to the proposed rectification. The necessity to revise the original assessment order arose only when the determined share of the assessee from the firm was adopted and the taxable income and the tax liability has increased. While carrying out the rectification under section 154, positive income, which was undisputed was determined resulting into the payment of enhanced tax on the enhanced taxable income. As a consequence thereof the provisions of section 215 became enforceable. 10. Mr. Ajay Kumar, learned counsel for the respondent, has strenuously argued that before invoking the provisions of section 215 of the Act, the Assessing Officer was duty bound to have issued notice. The same is stipulated under section 215(3) of the Act. For the sake of convenience and ready reference, the relevant provisions of section 215 of the Act are reproduced hereinbelow "215.(1) Where, in any financial year, an assessee has paid advance tax under section 209A or section 212 on the basis of his own estimate (including revised estimate), and the advance tax so paid is less than seventy five per cent. of the assessed tax, simple interest at the rate of fifteen per cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fact that a show-cause notice indicating the rectification of original assessment which may entail enhancement of assessment/increase of liability had already been issued to the assessee to which he had consented/not objected. 14. It cannot be said that the Income-tax Appellate Tribunal was right in law in coming to the conclusion that in the revision order passed under section 154/155, for charging interest under section 139(8) and 215 notice before levying of interest ought to have been issued. The requirement of issuing the "notice of demand" is for the purpose of exercising the power of waiving or reducing the interest as envisaged under section 215(4) of the Act. 15. The question of law No. (i) is answered accordingly. 16. It is an admitted case of the parties that the assessee had not challenged the amount of income assessed; the amount of tax determined; the status under which the assessee was assessed; but had restricted his ground only to the interest payable under section 215 of the Act. 17. For ready reference, clause (c) of section 246 is reproduced hereinbelow: "(c) an order against the assessee, where the assessee denies his liability to be assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Income-tax Officer, he merely cannot object to the levy of penal interest or question its quantum............. The levy of penal interest under section 139 or section 215 is made in the regular assessment order; the demand issued pursuant to the assessment order is for the total amount of liability imposed inclusive of tax and interest. While levy of penal interest under section 18A of the 1922 Act up to April 1, 1952, was automatic as was noticed by Chagla C. J. in Ramnath's case [1955] 27 ITR 192 (Bom) under the Act, such levy is not automatic; discretion is vested in the Income-tax Officer to waive or reduce penal interest in the cases and circumstances mentioned in rule 117A and rule 40 of the Income-tax Rules, 1962. If the case of the assessee falls within the scope of the said Rules, the Income-tax Officer is bound in law to consider whether the assessee was entitled to waiver or reduction of interest. It is, therefore, clear that levy of penal interest under sections 139 and 215 is part of the assessment. When such penal interest is levied, the assessee is 'assessed', meaning thereby, he is subjected to the procedure for ascertaining and imposing liability on him. If ..... X X X X Extracts X X X X X X X X Extracts X X X X
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