TMI Blog2008 (3) TMI 683X X X X Extracts X X X X X X X X Extracts X X X X ..... d the reassessment made under section 147 of the Income-tax Act was not the first assessment ? 3. The facts, in short, are that the assessee filed the return of income for the assessment year 1988-89 on 31-8-1988. A search and seizure operation was conducted at the business premises and the residential premises of the partners of the assessee on 13-5-1989. A notice was issued under section 148 of the Act to initiate the reassessment proceedings under section 147 of the Act. The reassessment was completed on 6-3-1995 at an income of ₹ 3,42,380. It was pleaded that the interest to the tune of ₹ 47,912 and ₹ 69,390 was charged under sections 139(8) and 217 respectively of the Act. The interest was charged under section 139(8) of the Act as the assessee had not furnished any evidence to show that the original return had been filed. Being aggrieved, the assessee filed appeal before the CIT(A) challenging the action of the Assessing Officer for charging interest under sections 139(8) and 217 of the Act. The assessee produced letter No. 1872, dated 6-8-1997 of ITO, Ward No. 1, Phagwara where he had admitted the filing of original return of income by the appellant o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n completed, then in view of judgments in CIT v. M.K.K.R. Muthukaruppan Chettiar [1970] 78 ITR 69 (SC), B.R. Bamasi v. CIT [1972] 83 ITR 223 (Bom.) and CESC Ltd. v. Dy. CIT [2003] 263 ITR 4021 (Cal.), the issuance of notice for reassessment proceedings under section 147 itself was bad and the question of levy of interest did not arise. 5. On the other hand, Mr. Sanjiv Bansal, learned counsel for the revenue supported the orders passed by the authorities below and prayed for dismissal of the appeal as the appeal involved no substantial question of law. He placed reliance upon the judgment in K. Govindan Sons v. CIT [2001] 247 ITR 1922 (SC) in support of his submission that even in the case of assessment in pursuance to the proceedings initiated under section 147 of the Act, the assessee was liable for interest under section 217 of the Act. 6. We have heard the learned counsel for the parties and perused the record with their able assistance. 7. We propose to deal the case from both angles. Section 215 of the Act provides for payment of interest by the assessee if the advance tax paid by the assessee under section 209A or section 212 on the basis of his own estimate is les ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under such circumstances as may be prescribed, the Assessing Officer may reduce or waive the interest payable by the assessee under this section. (5) In this section and sections 217 and 273, assessed tax means the tax determined on the basis of the regular assessment (reduced by the amount of tax deductible in accordance with the provisions of sections 192 to 194, section 194A, section 194C, section 194D, section 195) so far as such tax relates to income subject to advance tax and so far as it is not due to variations in the rates of tax made by the Finance Act enacted for the year for which the regular assessment is made. (6) 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 assessment for the purposes of this section and sections 216, 217 and 273. 217. Interest payable by assessee when no estimate made.-(1) Where, on making the regular assessment, the Assessing Officer finds- (a )that any such person as is referred to in clause ( a) of sub-section (1) of section 209A has not sent the statement referred to in that clause or the estimate in lieu of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that first or initial assessment made by the Assessing Officer would be treated as regular assessment and in that situation assessment in pursuance to re-assessment proceedings cannot be termed as first assessment and does not come within the meaning of the expression regular assessment . Accordingly, the interest under section 217 of the Act could not have been charged. 11. Now adverting to the second facet of the controversy, the Apex Court in M.K.K.R. Muthukaruppan Chettiar s case (supra), where the return filed by the assessee was closed by the Assessing Officer by noting as no assessment in the order sheet, held that it was not an order terminating the proceedings, with the result that the return was not disposed of and the Income-tax Officer by ignoring them could not validly issue the notice of reassessment. Still further, it has been held in the case of B.R. Bamasi (supra) and CESC Ltd. s case (supra) that the notice for reassessment cannot be issued before original assessment has been completed. The Calcutta High Court in CESC Ltd. s case (supra) has observed as under:- . . .Therefore, during the pendency of such return, notice under section 148 for reopening ..... X X X X Extracts X X X X X X X X Extracts X X X X
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