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TMI Blog1987 (11) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... (1984) 8 ITD 851 (Nag.), Gowdar Jayadevappa v. First ITO (1985) 11 ITD 216 (Bang.), Charles D'souza v. CIT (1984) 147 ITR 694 (Kar.) and CIT v. Smt. Godavaridevi Saraf (1978) 113 ITR 589 (Bom.). Reliance was placed on Smt. Godavaridevi also Saraf's case for the proposition that there is no contrary decision on the issue involved other than the one taken by the Karnataka High Court and, therefore, this must be taken to be the rule of the law. 2. We have heard the parties, Section 2(40) defines 'regular assessment' to mean the assessment made under section 143 or section 144. Section 143 contemplates assessment made in consequence of return filed by the assessee under section 139. Section 144 contemplates assessment where assessee does not file any return in response to notice under section 139(2) and has not filed any return under section 139(4) or a revised return under section 139(5) and also fails to comply with notice under section 142(1) or with the direction under section 142(2A) and fails to comply with the notice under section 143(2). Section 139(8)(a) as it reads now for the relevant assessment years is given below : 'Sec. 139(8)(a) : Where the return under sub-section (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce 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 cent per annum from the 1st day of April next following the said financial year up to the date of the regular assessment shall be payable by the assessee upon the amount by which the advance tax so paid falls short of the assessed tax :" In case of an assessee, who does not file any return u/s 139 and the ITO is having a reason to belief that there was omission or failure on the part of the assessee to make a return, then he may make an assessment under section 147. But before making an assessment under sec. 147, he has to issue a notice u/s 148. Section 148(1) reads as under : The argument of the assessee is that regular assessment includes only assessment made u/s 143 and 144 does not include the assessment made under section 147. The reliance placed on in the case of H. N. Malak was on the issue of the term 'regular assessment' and also on the issue of levy of interest under section 139(8). Identical issue was considered in the case of Gowdar Jayade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y have to adopt it." The purpose of bringing in the observation made by their Lordships of the Gujarat High Court is that logically the provision seems to be not rational. If we read the provision as it is it leads one to form a belief that a person who files a belated return u/s 139 would be liable for interest while on the other hand, a person who does not file a return u/s 139 but files a return consequent to notice u/s 148 would not be liable for interest. This means that a person who delays the return till an assessment could be made within the statutory limit as provided under section 153(1)(a)(iii) would be liable to pay interest u/s 139(8) while on the other hand, a person who does not file the return before the assessment could be made as above, but filed the return much afterwards is not liable to pay the interest. Perhaps the Legislatures in their wisdom realising this lack of rational have introduced the Explanation by means of Taxation Laws Amendment act, 1984 which Explanation reads as under : "Explanation 2 : Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to come into force with effect from 1-4-1985. To my mind the earlier law also was and ought to be the same and in such cases the decision of the Nagpur Bench of the High Court in Smt. Godavaridevi Saraf's case should not be followed inasmuch as the view taken by the various High Courts in this behalf was certainly not the correct view particularly in the changed conception of law as expressed by the Hon'ble Supreme Court in McDowell & Co. Ltd.'s case. 2. Somewhat similar circumstances were there before the Hon'ble Supreme Court in Distributors (Baroda) (P.) Ltd. v. Union of India (1985) 155 ITR 120. In the well-known case of Cloth Traders (P.) Ltd. v. Addl. CIT (1979) 118 ITR 243 (SC) their Lordships had taken a particular view about the manner in which the relief u/s 80M was to be computed. According to this section a deduction was to be allowed out of the gross total income by way of dividends from certain companies. Their Lordships had earlier interpreted that the words "Gross total income" meant income without deducting the expenses incurred. Apparently this interpretation was contrary to the language of section 80B(iv), according to which "Gross total income" means the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh made effective from 1-4-1985 should be deemed to be declaratory and, therefore, should be applicable to the cases arising in the earlier years. Accordingly I am of the opinion that the present appeals should be accepted. The order of the AAc should be set aside and that of the ITO restored. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 As there has been a difference of opinion between us the following point of difference is referred for the opinion of the Third Member under sec. 255(4) of the Income-tax Act : "Whether on the facts and in the circumstances of the case the assessee is liable to pay interest under secs. 139(8) and 215 of the Income-tax Act, 1961 ?" THIRD MEMBER ORDER Per Shri Ch. G. Krishnamurthy, President - On a difference of opinion between the Members of Jaipur Bench, who heard these appeals, the following point of difference of opinion was assigned to me as a Third Member for my opinion : "Whether on the facts and in the circumstances of the case the assessee is liable to pay interest under secs. 139(8) and 215 of the Income-tax Act, 1961 ?" 2. These matter relate to the assessment years 1978-79 to 1980-81. For these three years interest u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght on to the Statute book with effect from 1-4-1985, the effect of that Explanation could not be given to assessment years prior to the assessment year 1985-86 and that in any case the Explanation was not in the nature of clarification but in the nature of amendment. The learned Judicial Member, however, relying upon the Supreme Court decision in the case of McDowell & Co. Ltd. and another decision of the Supreme Court in the case of Distributors (Baroda) (P.) Ltd. held that the Explanation must be regarded as clarificatory in nature and should be applicable to cases arising in the earlier years also. On that view he held that the assessments made by the Income-tax Officer should be regarded as regular assessments and interest levied must be confirmed. 4. I have heard the learned Departmental Representative as well as the learned counsel for the assessee for quite some time. The arguments proceeded before me on the same lines as proceeded before the learned Members of the Tribunal, who heard the appeals originally. The learned Departmental Representative stuck to the view relying upon McDowell & Co. Ltd.'s case that the purpose of the Explanation added to section 139(8) was only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serted with effect from 1-4-1985 was to clarify the existing legal position. I agree with the contention put forward on behalf of the assessee that if that was the position, there would have been words to indicate that the existing controversy on this issue was being resolved by the addition of this Explanation. In the absence of these words, I find it difficult to agree that the purpose of Explanation was to remove the doubts or resolve the controversy but only to amend the law with a view to bring in the assessments made u/s 147 for the first time within the meaning of the Expression "regular assessment". Other than this, the learned Judicial Member has not adverted to any other reason. I am also in agreement with the contention put forward on behalf of the assessee that the reliance placed by the learned Judicial Member in the Supreme Court decision in the case of McDowell & Co. Ltd. was not quite apposite. The assessee was not trying to make any attempt to get out of legal provision but trying to apply the law as it existed and as interpreted by several High Courts. The Kerala High Court in Gates Foam & Rubber Co. v. CIT (1973) 90 ITR 422 and Patna High Court in CIT v. Ram Chan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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