Bombay High Court rules in favor of assessee-company in interest levy appeal.

The High Court of Bombay ruled in favor of the assessee-company in an appeal against the levy of interest under section 217(1A) for the assessment year 1971-72. The Court held that an appeal lies against the levy of interest if the assessee denies liability to pay penal interest at all, even if the liability to be assessed under the Act is not entirely denied. The Tribunal's decision granting relief under section 80J and rejecting the levy of interest was upheld, with the question of law answered in favor of the assessee.

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Issues:
- Appeal against levy of interest under section 217(1A)

Analysis:
The High Court of Bombay addressed the issue of whether an appeal lies against the levy of interest under section 217(1A) in a case involving an assessee-company for the assessment year 1971-72. The assessee had filed its return of income, disclosing a total income subject to set-off of carried forward deficiency under section 80J of the Income-tax Act, 1961. The Income-tax Officer completed the assessment and reduced the deduction claimed under section 80J while also levying interest under section 217(1A. The Appellate Assistant Commissioner rejected the appeal against the levy of interest, stating it was not appealable. The Tribunal later granted the assessee full relief under section 80J for the entire year, irrespective of the period the new industrial undertaking operated. Regarding the levy of interest under section 217(1A), the Tribunal held in favor of the assessee, stating that the interest was not maintainable as the assessee had challenged its liability based on certain grounds. The Department argued that an appeal against the levy of interest is only permissible if the liability to be assessed under the Act is denied entirely, as per a Full Bench judgment. However, the assessee's counsel relied on the Full Bench observations to assert that challenging the levy of interest alone is also permissible. The High Court referred to the Supreme Court's indirect consideration of the issue, noting that if the assessee denies liability to pay penal interest at all, it can challenge the order levying penal interest. In this case, the Tribunal's order indicated the assessee had denied liability to pay advance tax at all, justifying the correctness of the Tribunal's view. Consequently, the question of law was answered in the affirmative and in favor of the assessee. No costs were awarded in this judgment.

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