Income-tax interest levy can be challenged in an assessment appeal when the assessment itself is under appeal.

Interest levied under section 215 of the Income-tax Act was treated as part of the assessment process, so a standalone appeal confined only to interest was not maintainable. However, where the assessee had already appealed against the assessment on merits, the levy of interest could also be challenged in that appeal. Applying binding Supreme Court authority, the Court answered the referred question in the affirmative and held the appeal against interest entertainable in those circumstances, in favour of the assessee and against the Department.

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Issues: Whether an appeal against the levy of interest under section 215 of the Income-tax Act, 1961, is entertainable when the assessee has already appealed against the assessment on merits.

Analysis: The levy of interest forms part of the assessment process. While an appeal confined only to the question of interest is not maintainable, the assessee who has challenged the assessment itself in appeal is entitled to question the levy of interest as well. The referred question stood concluded by the binding Supreme Court decision applied by the Court.

Conclusion: The appeal against the levy of interest was entertainable in the present circumstances, and the question was answered in the affirmative, in favour of the assessee and against the Department.

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