TMI Blog1986 (5) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... company, the Manganese Ore (India) Ltd., Nagpur, in which the Central Government, the Governments of Maharashtra and Madhya Pradesh and the appellant had shares. The appellant was assessed to income-tax for the assessment year 1967-68, the relevant previous year being the year ended December 31, 1966. Interest under sub-section (8) of section 139 of the Income-tax Act, 1961, amounting to Rs. 56,391 and interest under section 215 of that Act amounting to Rs. 9,42,336, subsequently reduced to Rs. 5,07,880, were levied against the appellant. According to the appellant, there was ample and clear justification for the delay in furnishing the return under section 139 and for the payment of advance tax under section 212 at a figure less than 75 per cent. of the assessed tax. On March 22, 1971, the appellant preferred an appeal under clause (c) of section 246 of the Act before the Appellate Assistant Commissioner of Income-tax, Nagpur, raising objection to the total income assessed and also including grounds objecting to the interest charged under sections 139 and 215 of the Act. On being advised thereafter that the grounds objecting to the charge of interest were infructuous inasmuch a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge to the assessment of its income. The appellant filed writ petitions in the Bombay High Court at its Nagpur Bench assailing the orders of the Commissioner of Income-tax rejecting its revision petitions and on April 24, 1972, the High Court rejected the writ petitions in limine. At the relevant time, the pertinent portion of sub-section (8)(a) of section 139 provided: " Where the return under sub-section (1) or sub-section (2) or sub-section (4) for an assessment year is furnished after the 30th day of September of the assessment year, or is not furnished, then whether or not the Income-tax Officer has extended the date for furnishing the return under sub-section (1) or sub-section (2), the assessee shall be liable to pay simple interest at nine per cent. per annum, reckoned from the 1st day of October of the assessment year to the date of the furnishing of the return or, where no return has been furnished, the date of completion of the assessment under section 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid and any tax deducted at source: Provided that in the case of any person whose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y-five percent ....... (4) In such cases and under such circumstances as may be prescribed, the Income-tax Officer may reduce or waive the interest payable by the assessee under this section. " The related rule is rule 40 which details the cases and the circumstances in which the interest payable under section 215 may be reduced or waived by the Income-tax Officer. Sub-rules (1) and (5) of rule 40 of the Income-tax Rules refer to: " (1) When the relevant assessment is completed more than one year after the submission of the return, the delay in assessment not being attributable to the assessee. (5) Any case in which the Inspecting Assistant Commissioner considers that the circumstances are such that a reduction or waiver of the interest payable under section 215 or section 217 is justified. " At the very outset, it is necessary to consider the nature of the levy of interest under sub-section (8) of section 139 and under section 215. It is not correct to refer to the levy of such interest as a penalty. The expression " penal interest " has acquired usage, but is in fact an inaccurate description of the levy. Having regard to the reason for the levy and the circumstances in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded cases except one have uniformly taken the view that levy of interest under section 18A(6) or section 18A(8) of the 1922 Act or levy of interest under section 215 of the Act is not appealable but in the appeal against a regular assessment, it is open to the assessee to take every contention which, if accepted, must result in the Income-tax Officer holding that there was no liability to pay advance tax and, therefore, there was no liability to pay penal interest. In other words, it is open to an assessee to contend in the appeal against an order of assessment that he is not liable to pay any advance tax at all or the amount of advance tax determined as payable by the Income-tax Officer is not correct ; but if the assessee does not dispute the amount of advance tax determined as payable by the Income-tax Officer, he merely cannot object to the levy of penal interest or question its quantum ...... The levy of penal interest under section 139 or section 215 is made in the regular assessment order; the demand issued pursuant to the assessment order is for the total amount of liability imposed inclusive of tax and interest. While levy of penal interest under section 18A of the 1922 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opriately be dealt with by the Commissioner of Income-tax in the exercise of his revisional jurisdiction. But before the revisional jurisdiction of the Commissioner of Income tax can be invoked in such a case, it is obviously necessary for the assessee to demonstrate before the Income-tax Officer that there is a case for waiving or reducing the levy of interest. We do not find from the record before us that any such attempt was made by the assessee. Since the statute provides for the waiver or reduction of interest, it is open to the Income-tax Officer before imposing a levy under sub-section (8) of section 139 and to the Inspecting Assistant Commissioner before doing so under section 215 to issue notice to the assessee and hear him in the matter. In cases where the jurisdictional fact attracting the levy cannot be disputed, for example, that the return has been furnished under section 139 with delay, it will be a question merely of satisfying the relevant authority that there are circumstances calling for a reduction or waiver of the interest. If an opportunity to do so has not been made available to the assessee before the order levying interest is made, it will be open to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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