TMI Blog2006 (4) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... alore Bench dated June 13, 1995, made in I.T.A. No. 985(Bang.)/1989, under section 256(1) of the Income-tax Act, 1961 (for short hereinafter referred to as "the Act"), at the instance of the assessee. The questions referred for our opinion are as under: "1. On the facts and in the circumstances of the case, whether the Tribunal is right in holding that reassessment proceedings were rightly initiated for the assessment year 1972-73 and the Income-tax Officer was not seized of the information relating to acquisition of house property, although the same was reflected in wealth-tax records for the assessment year 1973-74 and when that records were available, when original assessment under the Income-tax Act was made? 2. On the facts and in the circumstances of the case, whether the Tribunal was justified in restricting the interest levied under section 139(8) and under section 217(1A) of the Act to the figures in original assessment?" The brief facts leading to this reference are as under: The assessee is manufacturing aluminium and steel vessels in his factory. He filed his return of income for the assessment year 1972-73 declaring the total income of Rs. 32,500 from business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firmed the finding of the two authorities, in so far as the addition is concerned, it modified the order regarding the payment of interest and restricted the payment of interest to the original figures of Rs. 3,080 and Rs. 5,714, respectively, levied for the delay caused in filing the return. It is thereafter, at the instance of the assessee, as noticed by us earlier, the aforesaid questions of law are referred for our opinion. Learned counsel for the appellant Sri Ramamurthy, challenging the order of the Tribunal, made two submissions. Firstly, he submitted that when the assessee has enclosed the wealth-tax returns to the income-tax return, it cannot be said that the assessee had suppressed this acquisition of site, and therefore, the proceedings initiated under section 148 of the Act are without jurisdiction. Elaborating this submission he contended that since the assessee had given the information in the wealth-tax return with regard to the acquisition of site, it cannot be said that there was non-declaration of property by the assessee and that the Department discovered it at the time of search and seizure. It is his further submission that since the information was already a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment that interest cannot be effaced by virtue of the reassessment order. It is further submitted by him that the liability for payment of interest is a statute provided under section 139(8) of the Act and that liability is fixed because of the delay in filing of the returns on payment of tax. When that is the statutory liability and the claim of the Act, the observation made by this court that since the earlier order of the assessment stood effaced by virtue of the order of reassessment the liability to pay interest also gets effaced, is contrary to the mandate of the statute and, therefore, it has to be declared as per incuriam or at any rate in view of the aforesaid judgment of the Supreme Court, the law is clear on the point. In the light of the aforesaid submissions, the two points that arise for consideration are: (i) Whether in the facts and circumstances of the case, it can be said that the assessee has suppressed the acquisition of site before the subject-matter of reopening of assessment? (ii) Whether the assessee is not liable to pay interest for delay in filing the returns originally as well as for not disclosing the income in the said return? In so far a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee did not file the returns for the assessment year 1972-73 within the stipulated period. There was delay in filing the said return. Therefore, he was liable to pay interest under section 139(8) of the Income-tax Act. As the assessee had not disclosed the source of donations which were shown in the returns, the authorities treated it as concealment of income and directed payment of interest under section 217(1A) of the Act. The assessee paid the interest along with tax without any demur. He did not challenge the said order. It is only after search and seizure authorities recovered the sale deed under which the assessee had acquired a site and a sum of Rs. 1,05,000 was held as the concealed income and proceedings were initiated for reopening of the assessment. After such reopening of the said assessment, all that the Income-tax Officer has done is to add this income to the income which was already assessed. He has not set aside the original assessment done. It is in that context the question for consideration is, whether the interest levied for delay in filing the return and for suppressing the income is also liable to be set aside merely because no interest could be levied a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re income of that year. The resulting position is that the order of reassessment so made will have to take the place of the original order of assessment. There can be no dichotomy of thought in this matter. That being the necessary consequence of reassessment, the period of limitation, in the present case, should be reckoned from the reassessment order dated March 15,1973, and not from the earlier rectification order or the original assessment order. In coming to the aforesaid decision, the Division Bench was relying on the judgment of the Supreme Court in Deputy Commissioner of Commercial Taxes v. H.R. Sri Ramulu [1977] 39 STC 177 where Justice Khanna speaking for the court observed that, the reason for that is that once an assessment is reopened, the initial order of assessment ceases to be operative. The effect of reopening the assessment is to vacate or set aside the initial order of assessment and to substitute in its place the order made on reassessment. The initial order of reassessment cannot be said to survive, even partially, although the justification for reassessment arises because of turnover escaping assessment in a limited field or only with respect to a part of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessments under section 140A, a provisional assessment before its abolition in 1971 and an assessment/reassessment under section 147. The said regular assessment does not include the assessment done under the Act, whether under section 143/144 or completed after issue of notice under section 148. It is further held that assessments under section 143/144 fall under a distinct category of assessments and the assessments made under section 147 are not covered by the expression "regular assessment" as defined in section 2(40). Therefore, it was held, the interest under section 139(8) and section 217 cannot be levied in the case of an assessment or reassessment made under section 147. It is also held in the aforesaid judgments that the effect of an assessment or reassessment under section 147 would be that the assessment made under section 143 or section 144 would stand effaced and for the purpose of limitation it is the order of assessment order/reassessment under section 147 alone is to be taken into consideration. However, in none of those judgments the question whether the interest levied or paid under sections 139(8) and 217 for non-disclosure of income was discussed. In the inst ..... X X X X Extracts X X X X X X X X Extracts X X X X
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