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Issues Involved:
1. Whether the Income-tax Appellate Tribunal erred in confirming the charge of interest u/s 217 by invoking sub-clause (6) of section 215 despite the original return being filed on 31-10-1988 and the reassessment not being the "first assessment". Summary: Issue 1: Confirmation of Interest Charge u/s 217 - The assessee filed the return of income for the assessment year 1988-89 on 31-8-1988. A search and seizure operation was conducted on 13-5-1989, leading to a notice u/s 148 to initiate reassessment proceedings u/s 147. The reassessment was completed on 6-3-1995, and interest was charged u/s 139(8) and 217. - The CIT(A) initially allowed the appeal, holding that interest was not chargeable either u/s 139(8) or 217. However, the Tribunal modified this, charging interest u/s 139(8) for one month and remanding the issue of interest u/s 217 back to CIT(A), who upheld the interest charge. - The Tribunal, in its order dated 31-10-2006, held that the assessee failed to show that the assessment was framed on the return filed on 31-8-1988, justifying the interest charge u/s 217 as a regular assessment within the meaning of sub-section (6) of section 215. Arguments by Assessee's Counsel: - The assessee's counsel argued that a valid return was filed on 31-8-1988, acknowledged by the Tribunal. If an assessment was made on this return, the reassessment u/s 147 was not the "first assessment," and no interest u/s 217 could be levied. If no assessment was completed, the reassessment notice itself was invalid, and no interest could be levied. Arguments by Revenue's Counsel: - The revenue's counsel supported the orders and argued that the appeal involved no substantial question of law, citing K. Govindan & Sons v. CIT, which held that an assessment made for the first time u/s 147 is a regular assessment. Court's Analysis: - The court analyzed sections 215 and 217, noting that sub-section (6) of section 215, effective from 1-4-1985, treats an assessment made for the first time u/s 147 as a regular assessment. - If an assessment was framed on the return filed on 31-8-1988, the reassessment cannot be termed as "first assessment," and interest u/s 217 could not be charged. - If no assessment was framed, the reassessment notice was invalid, and no interest u/s 217 could be levied, supported by precedents like M.K.K.R. Muthukaruppan Chettiar and CESC Ltd. Conclusion: - The court concluded that the levy of interest u/s 217 was unsustainable, and the Tribunal erred in deciding against the assessee. The substantial question of law was decided in favor of the assessee, and the appeal was allowed, holding that no interest u/s 217 could be validly levied. In favour of assessee
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