TMI Blog2005 (8) TMI 533X X X X Extracts X X X X X X X X Extracts X X X X ..... as filed the appeals, which are numbered as 1173 to 1175. The Assessing Officer gave appeal effect to the order of the CIT(A) on 19-5-1995, which was challenged in appeal before CIT(A), who passed a combined order on 9-11-1995. Against this order of CIT(A), the revenue has preferred further appeal to the Tribunal, which are numbered as 69 to 71. The assessee preferred appeals for the assessment years 1979-80 and 1980-81, which are numbered as 1308 and 1309. 2. Main issues involved in these appeals are about chargeability of interest under sections 139(8), 217 and 220(2), whether they are appealable and whether non-mentioning of interest in the assessment order amounts to waiver. During the course of hearing detailed arguments took place and written submissions were given by both the parties. These written submissions will be reproduced part by part at appropriate places in this order for the sake of convenience and justice. 3. The assessee was earlier called Renusagar Power Co. Ltd. is now merged with Hindalco Industries Ltd. 4. The revenue submitted a summary of facts leading to present dispute. This is reproduced below. 5. All six appeals of the department are aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectified under section 154 on 14-12-1984 (Refer Page Nos. 13 to 14 of the Paper Book) with a view to ascertain the carry forward development rebate, and unabsorbed depreciation. Accordingly, in the said rectification order, the total income was revised to Rs. 27,40,855. Again, rectification order dated 14-12-1984 was further rectified on 15-3-1985 (Refer Page Nos. 15 to 16 of the Paper Book) wherein a total loss of Rs. 1,88,292 was determined. The ld. CIT(A) vide its order dated 27-1-1986 for assessment year 1980-81 has directed the Assessing Officer to modify the unabsorbed losses, depreciation and allowances of earlier years as these have not correctly worked out. Accordingly, the order giving effect to the CIT(A) s order dated 27-1-1986 was carried out on 28-12-1992 under section 254/251/143(3) (Refer Page Nos. 17 to 25 of the Paper Book) wherein the total income for the year under consideration was revised to Rs. 2,79,75,560. In the demand notice ITNS 150, the tax payable was determined at Rs. 5,05,85,681 which includes interest under sections 139(8), 217 and 220(2) and were charged for the first time (Copy of ITNS-150 is enclosed herewith). The above appeal effect order date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19-5-1995 is again challenged before the CIT(A) by the assessee. In appeal, the ld. CIT(A) vide order dated 9-11-1995 (Refer Page. Nos. 88 to 98 of the Paper Book) has set aside the appeal effect order dated 19-5-1995 and further directed the Assessing Officer to give proper appeal effect to CIT(A) order dated 30-3-1995. It is against this order of the ld. CIT(A) dated 9-11-1995, that the department filed another present appeal before the ITAT numbered as ITA No. 69/ALD/96. The order giving effect to the order of CIT(A) dated 9-11-1995 was passed on 12-3-1997 (Refer Page Nos. 99 to 106 of the Paper Book) revising the total income to Rs. 1,36,99,480 and an amount of Rs. 1,57,91,524 was refunded as per ITNS-150. In this order no interest under any of the sections were charged. (a) Appeal No. 1173/Ald./95 7. The first ground is "That the ld. CIT(A) has erred in giving finding that the order of the ld. CIT(A) dated 22-3-1993 has become final as department s appeal has been dismissed by ITAT. He has totally ignored the finding of ITAT that the A.O. will be free to pass any order, which he deems proper according to law without any fetters and he will not be bound by any obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is that the reliance placed by the CIT(A) on the order dated 15-3-1985 is lopsided in view of the fact that, as per order dated 28-2-1981 there was a positive assessed income and also as per subsequent order dated 28-12-1992 (page Nos. 17 to 25 of Paper Book) the revised total income is a positive figure and stood at Rs. 2,79,75,560. Hence, provisions of sections 139(8), 217 and 220(2) are attracted. 14. Without prejudice to the above, it is submitted that omission to make a reference to interest payable under provisions of section 215 or section 217 in the order of regular assessment cannot amount to an order waiving it. This view has been taken in the following judicial decisions : 1. Addl. CIT v. Saraya Distillery [1978] 115 ITR 34 (All.). 2. CIT v. Nanda Traders/Executors of the Estate of Late H.H. Rajkuverba Dowager Maharani Saheb of Gondal [1978] 115 ITR 301 (Kar.). 3. CIT v. City Palayacot Co. [1986] 122 ITR 430 (Mad.). 4. Ratanlal Dhondiram v. CIT [1983] 141 ITR 363 (Bom.). 5. R.R. Pictures v. CIT [1983] 143 ITR 429 (Mad.). 15. The submission of the ld. Counsel of the assessee is as under : "No interest was charged under sections 139(8) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not be charged under section 139(8). Also when the interest had not been charged in regular assessment it could not be charged under section 154." 18. In CIT v. Ghewar Chand Soni [2003] 263 ITR 650 (Raj.) it was held that if interest under section 139(8) is not charged in original assessment than same cannot be charged in reassessment made under section 147. The headnotes reads : " Held accordingly, that the original assessment of the assessee for the assessment year 1988-89 was made and thereafter reassessment was made by resorting to section 148. No interest under section 139(8) was levied in the course of the original assessment. Interest under section 139(8) could not be levied when reassessment was made under section 147." 19. The issue raised by revenue is as to whether non-charging of interest tantamounts to waiver. The decisions are clearly in favour of revenue that by not charging the same in original assessment it would not mean that Assessing Officer has waived it. Following decisions support this proposition; 19.1 Addl. CIT v. Krishna Narayan Naik [1984] 150 ITR 513 (Bom.) The mere non-mention on the part of the ITO in the assessment order, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved and, therefore, that was not charged in the regular assessment;" From the above decisions we are of the view that interest not charged in original assessment cannot be deemed to have been waived. It is a conscious act of the Assessing Officer to waive the interest by giving a finding that conditions laid down for waiver have been satisfied. Since on the question that as to whether interest can be charged by way of rectification, there are two views one by Hon ble Calcutta High Court in I.O.L. Ltd. s case ( supra ) and other by Patna High Court in Ashok Trading Co. s case ( supra ), we take a view favourable to the assessee that interest cannot be recovered by way of rectification if not originally charged by the Assessing Officer in the assessment. There is always a view possible that by not charging the interest in the original assessment the Assessing Officer may have waived it. So far as interest under section 139(8) is concerned we are of the view that since delay in filing the return is less than a month and assessee has also filed Form No. 6 to get the time for filing the return extended, there is no default and no interest can be charged following I.O.L. Ltd. s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f making the original assessment order the correct or regular assessment order. 20.1-3 ( i ) That the Tribunal was correct in holding that the Income-tax Officer could rectify under section 154 of the Act the orders of assessment for the assessment years 1960-61 and 1961-62 by re-determining the written down value of the various assets. Maharana Mills (P.) Ltd. v. ITO [1959] 36 ITR 350 (SC) followed. ( ii ) That the rectification order dated August 17, 1966, was also a proceeding in the assessment and so limitation for a fresh rectification order had to be counted from that date. The second order of rectification had been passed within four years from August 17, 1966, and so was not barred by limitation. ( iii ) That after the rectification under section 154 of the Act, a positive income was determined on November 14, 1969, and so the Income-tax Officer was justified in charging interest under section 217 of the Act. 20.2 CIT v. Arunachal Saw Veneer Mills (P.) Ltd. [1997] 225 ITR 363 (Gauhati) : "Although the assessee did not file its return in time, as the income was below the taxable limit, the Assessing Officer did not charge interest under section 139( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mines the liability to interest under section 217 but he does not charge it by mentioning either in the assessment order or in the demand notice or in the computation of income then it can be inferred that he had applied his mind and not charged interest. There are, other conditions for charging interest under section 217. It has to be ensured that the assessee has failed to furnish estimate of advance tax. The assessee had filed return income at loss figure. On his own estimate he is not liable to pay advance tax. Also, there is no finding by the Assessing Officer that the assessee is required to file estimate of advance tax, which has not been filed by him. Further, if in the original assessment order the charge about levy of interest has not been specifically stated than subsequently in the rectification order or in giving appeal effect order it may not be possible to do so. Support is derived from the decision in CIT v. Autolite (India) (P.) Ltd. [2002] 256 ITR 303 (Raj.). Thus there are two views possible on the subject. We therefore adopt a view favourable to the assessee and hold that as there was no finding in the original assessment order determining positive income, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en into minus due to appeal effect or the assessee has squared up the demand or obtained a refund in between. The logic behind this argument is that the final assessment merges into original assessment and final demand relates back to original demand. 25. The assessee has contended as under : "It is submitted that the subsequent order supersedes the earlier order and the fresh order requires fresh determination of the tax liability of the assessee and requires issuance of a fresh demand notice. Interest can only be charged from the last order and in respect of the fresh demand notice and the assessee cannot be treated as an assessee in default on the basis of the earlier demand notices and no interest can be charged in respect of the same from any earlier date. Reliance is placed on the judgment of the Supreme Court reported in 52 ITR 538 , 247 ITR 821, 136 Sales Tax Cases 636, judgment of Andhra Pradesh High Court reported in 250 ITR 97, judgment of the Calcutta High Court reported in 211 ITR 610 and the latest judgment of the Kerala High Court reported in 271 ITR 570 in which it was held by the Kerala High Court as follows : In a taxation statute one has to look at wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal demand notice - Income-tax Act, 1961, section 220(2). Interest is payable if a sum is due. Where the assessee is in default in making payment of the assessed amount demanded from him he is liable to pay interest. Though interest is payable by an assessee in terms of section 220 of the Income-tax Act, 1961, by way of compensation, the same would not mean that, though there does not exist any demand, interest would become payable. The assessee paid the entire amount of tax pursuant to the notice of demand under section 156 of the Income-tax Act, 1961, for the assessment year 1984-85. The assessee filed an appeal which was allowed. Consequently, the Department made refund with interest. Against the order in first appeal, the Revenue preferred an appeal which was allowed by the Tribunal. As a consequence, a demand was raised wherein interest was charged under section 220(2) from the date of the original demand. The assessee, in a writ petition, contended that it had already paid the entire amount of tax, and the entire amount of demand having been wiped out, the question of charging interest from the original date of demand would not arise : Held, that interest could not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of refund of the tax upon the appellate order till the taxes were finally paid after disposal of the reference. ( ii ) That section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, did not apply. That section only revived a notice of demand which had never been satisfied by the assessee and which notice got quashed during some stage of the challenge and finally the quashed notice got restored by an order of a higher forum. In such a situation, section 3 restored the original notice of demand which was never satisfied by the assessee and did away with the need to issue a fresh notice. That section could not be resorted to for reviving a demand notice which was already fully satisfied. It is a settled principle that while construing revenue Acts courts have to give a fair and reasonable construction to the language of the statute without leaning to one side or the other, meaning thereby that no tax or levy can be imposed on a subject by an Act of Parliament without the words of the statute clearly showing an intention to lay the burden on the subject. In this process courts must adhere to the words of the statute and the so-called equitable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e charged till the period when fresh assessment is made, fresh demand notice is issued, and statutory time period for making the payment has expired. The assessee has to be in default for charging interest under section 220(2). For default there should be a demand pending and not paid within the statutory period given for payment. After the assessment order is set aside there is no demand pending against the assessee. When fresh assessment is made it may relate back to the original assessment but the default cannot relate back to the original default. If the demand does not survive in the register of the department when the assessment order is set aside, the assessee cannot be compelled to make the payment and hence he will not be in default. (II)If the assessment is set aside on a limited issue/s and some issues are confirmed against the assessee then the original demand notice does not cease to exist. While giving appeal effect the demand relating to the set aside issues should be taken into minus and the assessee would continue to be in default in respect of balance of demand from the date of original default. In the fresh demand notice issued on making the fresh assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Ltd. v. CBDT [1972] 84 ITR 451 and also on the commentary of Chaturvedi and Pithisaria (IVth Edition) 4th Vol. Page 4772. 34. Whereas the assessee submits as under : The chargeability of interest is appealable as the assessee had filed appeal both against various disallowances and additions and against charging of interest. The appeal filed before the CIT(A) was not against charging of interest only. In this connection reliance is placed on the judgment of Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961. It has been held in the said judgment by the Supreme Court that the levy of interest is part of the process of assessment. Although sections 143 and 144 do not specifically provide for the levy of interest it is nevertheless a part of the process of assessing the tax liability of the assessee. Inasmuch as the levy of interest is the part of the process of assessment, it is open to an assessee to dispute the levy of interest in appeal. ( i )Under section 246(1)( a ) of the Act any assessee aggrieved by the following orders may appeal against such orders; ( a ) an order against the assessee, where the assessee denies his liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal before the Tribunal which was disposed of by an order of the Tribunal dated 10th August, 1994. The grounds of appeal taken by the department before the Tribunal are at page 36 of the paper book. It can be seen from the said grounds of appeal that the department did not raise any objection in respect of maintainability of the appeal on the ground of appealability. It is, therefore, submitted that in respect of the subsequent orders passed by the Assessing Officer pursuant to the direction of the CIT(A) given in his order dated 22nd March, 1993 the department cannot raise the ground on maintainability of the appeal. 35. On maintainability of appeal before CIT (A), our view is that where assessee disputes the liability of interest as a whole, then he can file appeal before the CIT(A). But he cannot file an appeal merely for quantification thereof. Appeal against charging of interest under section 139(8) alone cannot be entertained [ref- K.B. Stores v. CIT [1976] 103 ITR 505 (Gauhati) which was followed in CIT v. Associated Stone Industries (Kotah) Ltd. [1981] 130 ITR 868 (Raj.)] but where assessee denies his liability to be assessed to tax, he can raise the ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, the appeal to CIT(A), that he is not liable to pay interest under section 139(8) at all in view of Form No. 6 filed, will be competent. Similarly, when the Assessing Officer did not charge interest under section 217 in the original assessment order, and charged it subsequently while giving appeal effect then, certainly the assessee has a right to deny to the assessability to interest under section 217 as according to him, the Assessing Officer did not charge interest because the conditions laid down for charging interest were not satisfied. Therefore, he is not liable to pay interest under section 217 at all. In view of the matter, appeal against charging of interest under section 217 in subsequent orders is also maintainable. 37. So far as appeal against charging of interest under section 220(2) is concerned, the Hon ble Madhya Pradesh High Court in Princess Usha Trust v. CIT [1989] 176 ITR 227 3 , distinguished the Central Provinces Manganese Ore Co. Ltd. s case ( supra ). It is held therein that the levy of interest under section 220(2) is not a part of process of assessment. Thus, by denying the liability to pay interest under section 220(2) of the Act, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered all legal claims of the assessee. Therefore, the order passed by the ld. CIT (A) vide A. Nos. 107, 108, 109/DCIT (Asstt.)/Alld./1995-96 dated 9-11-1995 is not acceptable. We do not find any infirmity in the order of CIT(A) dated 9-11-1995 in setting aside the order of Assessing Officer. We, therefore, decline to interfere. This ground of revenue is, therefore, rejected. (II) A.Y. 1979-80 - Appeal Nos. 1174/ALD/95 and 70/ALD/1996 : 40. Both the aforesaid appeals filed by the Department. In the instant case the only point in dispute is regarding chargeability of interest under sections 217 and 220(2) of the Act. The interest under section 217 was charged in the original assessment itself. (a) Appeal No. 1174/ALD/95 41. The first Ground is similar to ground No. 1 in appeal No. 1173/Ald./95, which emerges from Paras 5.1, 12 and 13 of CIT(A) s order dated 30-3-1995 on Page Nos. 63, 69 and 70 of Paper Book. The facts and circumstances are similar to ground No. 1 in ITA No. 1173/Ald./95 and the comments/decision offered for ground No. 1 in that Appeal also hold good here. This ground of revenue is, therefore, allowed. 42. Ground No. 2 is similar to ground No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 1997-98. Further, this ground is identical to ground No. 5 of Appeal No. 1173/ALD/95. 48. It has been held in respect of ground Nos. 3 and 4 for the assessment year 1978-79 in appeal No. 1173/Ald./95 that in general no appeal lies against charging of interest under sections 217, 220, but where the assessee challenges his liability to pay interest or assessability to tax then he can raise the issue in respect of interest under sections 139(8) and 217. However, we hold that there is no right of appeal against levy of interest under section 220(2) following the decision in Central Provinces Manganese Ore Co. Ltd. s case ( supra ) and Princess Usha Trust s case ( supra ). In view of this, this ground of the revenue is partly allowed. 49. In the result, the appeal of revenue is partly allowed. (b) Appeal No. 70/ALD/96 : 50. The Ground Nos. 1 to 5 are similar/identical to Ground Nos. 1 to 5 of Appeal No. 1173/ALD/95, and are emerging from para 5.3 of order dated 9-11-1995. Further, the Ground No. 6 is identical to Ground No. 6 of Appeal No. 69/ALD/95. 51. As the grounds in this appeal are similar to grounds taken in appeal No. 69/Ald./96, our decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... splaced. The Assessing Officer will charge interest under section 217 on the basis of aforesaid income as finally determined but up to the date of regular assessment. This ground of revenue is partly allowed. 55. Ground No. (4) : That the ld. CIT(A) was also not justified in giving direction with regard to charging of interest, whereas under section 246, no appeal lies before him against charging of interest under sections 139(8), 217 and 220(2). Reliance is placed on Addl. CIT v. Allahabad Milling Co. [1978] 111 ITR 111 (All.). 56. This ground emerges from para 21 of CIT(A) s order dated 30-3-1995 on Page No. 73 of Paper Book of assessment year 1978-79. Further, this ground is identical to ground No. 5 of Appeal No. 1173/ALD/95. Therefore, our comments and decision given therein will also hold good for this ground. This ground of revenue is, therefore, partly allowed. (b) Appeal No. 71/ALD/96 : 57. The Ground Nos. 1 to 5 are similar/identical to Ground Nos. 1 to 5 of Appeal No. 1173/ALD/95 and emerges from para 5.3 of order dated 9-11-1995, hence comments offered therein, equally holds good for these grounds. Further, the Ground No. 6 is identical to Ground No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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