1994 (11) TMI 52 - HC - Income Tax

Tribunal cancels rectification order under Income-tax Act, emphasizing need for clarity in statutory provisions

The Tribunal canceled the second rectification order under section 154 of the Income-tax Act, 1961, regarding interest calculation for belated filing of ... Rectification Proceedings Issues:Rectification of assessment under section 154 of the Income-tax Act, 1961 for charging interest on belated filing of return. Interpretation of section 139(8) and rule 119A in calculating interest payable by an assessee.Analysis:The judgment pertains to a reference made by the Income-tax Appellate Tribunal regarding the validity of a rectification order under section 154 of the Income-tax Act, 1961. The case involves the assessment year 1977-78, where the Income-tax Officer initially charged interest under section 139(8) for the belated filing of the return. The officer later rectified the assessment twice, first reducing the interest amount and then enhancing it based on objections raised during an audit. The Commissioner of Income-tax (Appeals) upheld the second rectification order, but the Tribunal, on appeal by the assessee, found scope for debate on the calculation of interest period and canceled the second rectification order.The Tribunal observed that while section 139(8) specifies a default period of 60 days for late filing, rule 119A requires rounding off the period for calculating interest to a whole month, ignoring any fraction of a month. The Tribunal found a debatable question on interpreting these provisions, especially regarding the definition of 'month' in the General Clauses Act, 1897. The Tribunal emphasized that a decision on a debatable point of law does not constitute a mistake apparent from the record, as per the Supreme Court ruling in T. S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50.The court considered arguments by the Department's counsel, who contended that rule 119A mandates rounding off a month to the nearest whole month, treating any period more than half a month as a whole month for interest calculation. The counsel referred to legislative intent and judicial precedents to support this interpretation. However, the court acknowledged conflicting views on the issue, including a Karnataka High Court judgment favoring a different interpretation of interest calculation under section 139(8) and rule 119A.Ultimately, the court held that the question at hand was not beyond controversy and allowed for debate and argument. Given the conflicting views and lack of clarity, the court agreed with the Tribunal's decision to cancel the second rectification order. The judgment was in favor of the assessee and against the Revenue, emphasizing the need for further examination before arriving at a definitive decision on the scope of rule 119A.In conclusion, the court's decision highlighted the importance of clarity and lack of controversy in rectification proceedings under section 154, emphasizing the need for a clear and unambiguous interpretation of statutory provisions to avoid debate and conflicting views in tax matters.