1998 (7) TMI 61 - HC - Income Tax

Summary

Issues:
1. Validity of interest levy under section 139(8) in an assessment under section 143(3) read with section 147(a).

Analysis:
The High Court of Kerala was tasked with determining the validity of the levy of interest under section 139(8) in an assessment under section 143(3) read with section 147(a) for the assessment year 1984-85. The assessee contended that since the assessment was made under section 147(a) read with section 148 in response to a notice under section 148, it was not a regular assessment, and therefore, interest under section 139(8) could not be charged. The court noted that no assessment under sections 143 and 144 was made in this case, and the assessment under section 147(a) read with section 148 was the only assessment conducted.

The court referred to the decision in Lally Jacob v. ITO where a Full Bench ruled that an assessment made for the first time under section 147 is considered a regular assessment. The court also discussed the insertion of Explanation 2 to section 139(8) by the Taxation Laws (Amendment) Act, 1984, which clarified that an assessment made for the first time under section 147 is to be regarded as a regular assessment. The court held that Explanation 2 was clarificatory in nature and operated prospectively from April 1, 1985, making the assessment made under section 147(a) a regular assessment for the purposes of charging interest under section 139(8).

Furthermore, the court considered the contention raised by the assessee, citing the decision in CIT v. G. B. Transports and Modi Industries Ltd. v. CIT. In G. B. Transports' case, the Full Bench differentiated regular assessment from self-assessment, provisional assessment, or assessment under section 147. The Supreme Court in Modi Industries Ltd.'s case held that an assessment under section 143 or 144 alone constituted a regular assessment. However, the Supreme Court did not address whether an assessment under section 147(a) read with section 148 for the first time could be classified as a regular assessment.

Based on the clarificatory nature of Explanation 2 to section 139(8) and the relevant case law, the court concluded that the assessment made under section 147(a) read with section 148 for the first time should be considered a regular assessment. Consequently, the Assessing Officer was deemed justified in charging interest under section 139(8). As a result, the court answered the question in favor of the Revenue and against the assessee.