1996 (5) TMI 49 - HC - Income Tax

Court upholds interest charge under Income-tax Act despite missing reference in assessment order

Commissioner Of Income-Tax Versus Quality

Commissioner Of Income-Tax Versus Quality - [1997] 224 ITR 77, 146 CTR 283, 93 TAXMANN 222 Issues Involved:The judgment involves issues related to the deletion of interest charged u/s 139(8) of the Income-tax Act, 1961 without a specific order, the statutory requirement of affording an opportunity to the assessee before levy of interest u/s 139(8), and the relevance of mentioning the specific provision for interest levy in the assessment order.Deletion of Interest u/s 139(8):The assessee filed a return beyond the due date, resulting in a demand notice that included interest u/s 139(8). The Appellate Assistant Commissioner upheld the levy, but the Income-tax Appellate Tribunal disagreed, citing a Calcutta High Court decision. The Tribunal found the order levying interest deficient as it did not specify the amount charged under u/s 139(8) in the demand notice. The Tribunal deleted the demand, leading to a reference to the High Court.Statutory Opportunity for Assessee:The debate centered on whether the Income-tax Officer must provide an opportunity to the assessee before levying interest u/s 139(8). The Revenue argued that interest is compensatory, not penal, and thus no prior hearing is required. The assessee contended that rule 117A allows for evidence presentation to justify late filing, necessitating an initial opportunity for the assessee. The Supreme Court's stance on the compensatory nature of interest and the possibility of post-levy applications for reduction or waiver were highlighted.Specific Provision in Assessment Order:The Tribunal's decision to delete interest was based on the absence of a specific provision mentioned in the assessment order for interest levy. However, the High Court disagreed, stating that the levy of interest is an integral part of the assessment process. The failure to specify the exact provision for interest charge in the order was deemed non-fatal, and the Tribunal's decision was deemed unjustified.Conclusion:The High Court answered all questions in the negative, indicating that the Tribunal's deletion of interest was not justified. The judgment clarified that the absence of a specific provision reference in the assessment order does not invalidate the interest levy. The Court also emphasized that the Income-tax Officer retains the authority to review the reduction/waiver application for interest, if applicable, despite the judgment.