1997 (9) TMI 84 - HC - Income Tax

Court sets aside tax authorities' orders, rules interest under Income-tax Act not leviable pre-1985. Assessments must follow original assessment.

The court allowed the writ petition, setting aside the impugned orders of the tax authorities and ruling that interest under section 215 of the Income-tax ... Advance Tax, Change Of Law, Interest Payable By Assessee, Regular Assessment Issues Involved:1. Levy of interest under section 215 of the Income-tax Act, 1961, based on revised assessment.2. Jurisdiction of the Assessing Officer in levying interest under section 215(1) of the Act.3. Interpretation of 'regular assessment' under section 215(1) of the Act.4. Applicability of sub-section (3) of section 215 before and after its amendment in 1985.5. Impact of the Supreme Court decision in Modi Industries Ltd. v. CIT [1995] 216 ITR 759 on the present case.Detailed Analysis:1. Levy of Interest under Section 215 of the Income-tax Act, 1961, Based on Revised Assessment:The petitioner contested the levy of interest by the assessing authority under section 215 of the Act, arguing that prior to the amendment effective from April 1, 1985, there was no provision for levying interest based on revised assessment. The court agreed, noting that section 215 as it stood before the amendment did not allow for enhancement of interest due to revised assessments.2. Jurisdiction of the Assessing Officer in Levying Interest under Section 215(1) of the Act:The petitioner argued that the Assessing Officer acted illegally and without jurisdiction in levying interest under section 215(1) based on the revised assessment. The court found that the Assessing Officer's actions were not justified under the law as it stood prior to April 1, 1985, affirming that the officer exceeded his jurisdiction.3. Interpretation of 'Regular Assessment' under Section 215(1) of the Act:The court referred to the Supreme Court's interpretation in Modi Industries Ltd. v. CIT, which clarified that 'regular assessment' refers to the original assessment made under section 143/144. The court held that the interest under section 215(1) should be calculated based on the original assessment, not any subsequent revised assessments.4. Applicability of Sub-section (3) of Section 215 Before and After its Amendment in 1985:The court noted that sub-section (3) of section 215, as it stood before April 1, 1985, only provided for the reduction of interest if the assessed tax was reduced due to subsequent proceedings. The amendment in 1985 introduced provisions for both enhancement and reduction of interest based on revised assessments. The court concluded that the pre-1985 provisions did not allow for the enhancement of interest based on revised assessments.5. Impact of the Supreme Court Decision in Modi Industries Ltd. v. CIT on the Present Case:The court heavily relied on the Supreme Court's decision in Modi Industries Ltd. v. CIT, which established that interest under section 215 could not be varied due to enhancement of tax from subsequent proceedings for periods before April 1, 1985. The Supreme Court's interpretation was pivotal in the court's decision to invalidate the interest levied based on the revised assessment.Conclusion:The court allowed the writ petition, setting aside the impugned order of the Inspecting Assistant Commissioner of Income-tax dated June 9, 1983, and the confirming order of the Commissioner of Income-tax. The court ruled that interest under section 215 could not be levied based on revised assessments for periods before April 1, 1985, and made the rule absolute in terms of prayer clause (a) with no order as to costs.