TMI Blog1985 (7) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal was justified in sustaining the order passed by the learned Appellate Assistant Commissioner waiving interest for the period from April, 1973, to the date of assessment ? " The assessee is a partnership concern. The assessment year under consideration is 1971-72. For this assessment year, the return of income was filed initially on March 23, 1972. In this return, the income declared was Rs. 1,12,370. A revised return was filed on January 19, 1974 claiming deduction under section 80J of the Income-tax Act, 1961 (Act No. XLIII of 1961) (for short " the Act "). The assessee had claimed registration. The Income-tax Officer, however, refused the registration by separate order passed under section 185 of the Act. He made the assessment of the assessee in the status of an unregistered firm by an assessment order dated January 9, 1975. The income determined was Rs. 94,535. In the appeal, the Appellate Assistant Commissioner (AAC) assessed the income at Rs. 81,020. The tax payable on this amount as a registered firm was Rs. 7,685. The assessee-firm had already paid advance tax of Rs. 10,000 on October 9, 1970, being a person not hitherto assessed in terms of section 212(3) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any order of assessment under sub-section (3) of section 143 or section 144, where the assessee objects to the amount of income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed. " Section 215 of the Act lays down as to when interest is payable by the assessee. Section 217 deals with interest payable by the assessee when no estimate is made. Thus, a reading of sections 215 and 217 make it clear that they provide that, in the circumstances set out therein, interest shall be payable by the assessee. This is, however, mitigated by a discretion given to the Income-tax Officer to reduce or waive the interest payable by the assessee under sections 215 and 217 of the Act. Reference in this connection may be made to sections 215(4) and 217(2) of the Act. The discretion to reduce or waive the interest is regulated by rule 40 of the Incometax Rules, 1962 (for short " the Rules "). Rule 40 of the Rules is as under: " 40. Waiver of interest.-The Income-tax Officer may reduce or waive the interest payable under section 215 or section 217 in the cases and under the circumstances mentioned below, namely: (1) When ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e liability to be assessed under the Act. He urged that in an appeal against the assessment order, it is permissible in law to examine the finding relating to the levy of penal interest. It was submitted that what is not permissible in regard to the interest is that the quantum cannot be challenged. He derived support from CIT v. Sharma Construction Co. [1975] 100 ITR 603 (Guj), National Products v. CIT [1977] 108 ITR 935 (Kar), CIT v. Daimler Benz (A. G.) [1977] 108 ITR 961 (Bom) [FB], Addl. CIT v. Mustakhusein Gulamhusein Ghia [1983] 143 ITR 951 (Bom) and Bihar State Road Transport Corporation v. CIT [1984] 149 ITR 208 (Pat) [FB]. In view of the sharp cleavage of judicial opinion, we must candidly state that the task before us is not free from difficulty. For the reasons which we will state hereinafter, we have reached the conclusion that the view taken by the Tribunal in this regard is correct. It is true that an order under section 215 does not find mention in section 246 of the Act, which enumerates various kinds of orders passed by the Income-tax Officer against which the assessee can appeal. Nevertheless section 246(c) gives that right to the assessee, who " denies his lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The question arose whether an appeal lay or not. After considering sections 18A and 30 of the Indian Income-tax Act, 1922, Tulzapurkar, Actg. C.J., as he then was, speaking for the court, held that the appeal to the Appellate Assistant Commissioner was maintainable and directed the Appellate Assistant Commissioner to dispose of the appeal on merits. In coming to the conclusion, National Products' Case [1977] 108 ITR 935 (Kar) and Sharma Construction Co.'s case [1975] 100 ITR 603 (Guj) were referred. In CIT v. Lalit Prasad Rohini Kumar [1979] 117 ITR 603 (Cal), an argument was raised regarding the competency of the appeal by the assessee to the Appellate Assistant Commissioner from the order of the Incometax Officer against levy of interest under section 215/217 of the Act. The learned judges examined the word " denies " and the word " assessee " as used in section 246(c) of the Act and held that the question of interest in the appeal could be agitated though no specific provision has been made in section 246 of the Act. In CIT v. Karam Chand Thapar [1979] 119 ITR 751 (Cal), the question of competency of appeal against levy of penal interest arose. It was held by the Division ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice CIT v. Associated Stone Industries (Kotah) Ltd. [1981] 130 ITR 868 (Raj). Both the learned counsels want to derive support from it. We may usefully excerpt the following (headnote p. 871): "The right of appeal is a creature of statute and unless an appeal is provided for specifically or by necessary intendment, such a right cannot be availed of by any party. As there is no specific provision in section 30 of the Act of 1922 giving a right of appeal in respect of an order imposing penal interest under section 18A(6) or section 18A(8) of the Act, no appeal would be maintainable against the penal interest charged if the same is claimed to be excessive or erroneously imposed. However, if the assessee denies his liability to be assessed in respect of advance tax and thereby denies altogether his liability to pay tax, then, in an appeal filed against the order of assessment, the assessee could also challenge the imposition of penal interest, because, in that event, the assessee would be 'denying' his liability to be assessed under this Act under section 30. In substance, penal interest calculated and charged under sub-section (6) or sub-section (8) of section 18A can be challenged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 53 ITR 225, we do not find any justification to construe the expression " denying his liability to be assessed " as denial of the total liability, for, the Supreme Court has observed (p. 229): " What is the substance of the objection of the assessee ? The assessee denies his liability to be assessed under the Act in the circumstances of the case and pleads that the members of the association shall be assessed only individually. The expression 'denial of liability' is comprehensive enough to take in not only the total denial of liability but also the liability to tax under particular circumstances." (Underlining is ours). In view of those observations, it could not be held that the expression " denies the liability to be assessed under the Act " refers only to total denial of liability. The denial may be total as well as partial and the liability to pay penal interest, in our opinion, would certainly be a partial denial to be assessed under the Act, as envisaged by section 246(c) of the Act. In Addl. CIT v. Allahabad Milling Co. [1978] 111 ITR 111 (All), the question was whether an appeal can be filed before the Appellate Assistant Commissioner under section 246(c) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... occur in Part VII relating to payment of advance tax provides for waiver of interest. According to it, the Income-tax Officer may reduce or waive the interest payable under section 215 or section 217 in certain cases and under the circumstances mentioned therein. Section 251 of the Act contains the powers of the Appellate Assistant Commissioner in disposing of the appeal. Relevant part of section 251 is as under: " 251. (1) In disposing of an appeal, the Appellate Assistant Commissioner [or, as the case may be, the Commissioner (Appeals)] shall have the following powers (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment or he may set aside the assessment and refer the case back to the Income-tax Officer for making a fresh assessment in accordance with the directions given by the Appellate Assistant Commissioner [or, as the case may be, the Commissioner (Appeals)] and after making such further enquiry as may be necessary, and the Income-tax Officer shall thereupon proceed to make such fresh assessment and determine, where necessary, the amount of tax payable on the basis of such fresh assessment ...... (c) in any other case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ope of his powers is coterminous with that of the Income-tax Officer. He can do what the Income-tax Officer can do and can also direct him to do what he has failed to do." Kanpur Coal Syndicate's case [1964] 53 ITR 225 (SC) was considered in CIT v. Lalit Prasad Rohini Kumar [1979] 117 ITR 603 by the Division Bench of the Calcutta High Court. Sabyasachi Mukharji J., as he then was, with whom Sudhindra Mohan Guha J. agreed, ruled as under (headnote) : " Therefore, if the assessee was allowed to agitate the question of his liability to pay interest at all, in such a case, the Appellate Assistant Commissioner could give any direction which the Income-tax Officer could give. Therefore, the contention which was raised in the appeal about the quantum or waiver of interest could also form a part of the subject-matter of the direction by the Appellate Assistant Commissioner. In the facts and circumstances of the case, in the appeal which the assessee had filed from the order of the Income-tax Officer, the Appellate Assistant Commissioner was competent to give the direction regarding interest under sections 215 and 217 of the Act." It may be stated here that a special leave petition wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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