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TMI Blog2008 (6) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 for charging interest under sections 139(8) and 215, the application of the provisions of section 154(3) are mandatory, when in the notice issued under section 154/155, it has been specifically made clear that the enhancement of income will also increase the assessee's liability? (ii) Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was justified in law in entertaining the assessee's appeal against charging of interest under sections 139(8) and 215 in the order passed under section 154, when the assessee had not challenged the enhancement of income which has made assessee liable to pay interest?" 4. For the purpose of convenience the facts of I. T. A. No. 8 of 1999 are being referred to for the purpose of adjudication of the issue in question. 5. The assessee Shri Prakash Nath, partner derived his share from the firm M/s. Kailash Nath and Associates, New Delhi. His assessment under section 143(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), was provisionally completed on March 28, 1988, on the income assessed at Rs. 80,360. The assessment being provisional it was subjected to rectification under section 154/155 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsequence thereof the provisions of section 215 became enforceable. 10. Mr. Ajay Kumar, learned counsel for the respondent, has strenuously argued that before invoking the provisions of section 215 of the Act, the Assessing Officer was duty bound to have issued notice. The same is stipulated under section 215(3) of the Act. For the sake of convenience and ready reference, the relevant provisions of section 215 of the Act are reproduced hereinbelow "215.(1) Where, in any financial year, an assessee has paid advance tax under section 209A or section 212 on the basis of his own estimate (including revised estimate), and the advance tax so paid is less than seventy five per cent. of the assessed tax, simple interest at the rate of fifteen per cent. per annum from the 1st day of April next following the said financial year up to the date of the regular assessment shall be payable by the assessee upon the amount by which the advance tax so paid falls short of the assessed tax: 2................. 3. Where as a result of an order under section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e before levying of interest ought to have been issued. The requirement of issuing the "notice of demand" is for the purpose of exercising the power of waiving or reducing the interest as envisaged under section 215(4) of the Act. 15. The question of law No. (i) is answered accordingly. 16. It is an admitted case of the parties that the assessee had not challenged the amount of income assessed; the amount of tax determined; the status under which the assessee was assessed; but had restricted his ground only to the interest payable under section 215 of the Act. 17. For ready reference, clause (c) of section 246 is reproduced hereinbelow: "(c) an order against the assessee, where the assessee denies his liability to be assessed under this Act 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." 18. While considering the issue as to whether order levying interest under sections 139 (8) and 215 are appealable under section 246 of the Act, the apex court in Central Provinces Manga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ramnath's case [1955] 27 ITR 192 (Bom) under the Act, such levy is not automatic; discretion is vested in the Income-tax Officer to waive or reduce penal interest in the cases and circumstances mentioned in rule 117A and rule 40 of the Income-tax Rules, 1962. If the case of the assessee falls within the scope of the said Rules, the Income-tax Officer is bound in law to consider whether the assessee was entitled to waiver or reduction of interest. It is, therefore, clear that levy of penal interest under sections 139 and 215 is part of the assessment. When such penal interest is levied, the assessee is 'assessed', meaning thereby, he is subjected to the procedure for ascertaining and imposing liability on him. If the assessee denies his liability to be assessed under the Act, he has a right of appeal to the Appellate Assistant Commissioner against the order of assessment. Where penal interest is levied under section 215 by the order of assessment, the assessee may altogether deny his liability to pay such interest on the ground that he was not liable to pay advance tax at all or that the amount of advance tax determined by the Income-tax Officer as payable ought to be reduced. In ei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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