Levy of interest under sections 139(8) and 217 on reassessment under section 147 is unauthorized; appeal maintainable.

Whether interest under section 139(8) and section 217 can be levied on an assessment made after notice under section 148 and completed under section 143(3) read with section 147 is examined; the statutory definition of regular assessment is limited to assessments under section 143 or section 144, and reassessment under section 147 therefore falls outside that definition, so interest authorised only for regular assessments cannot be imposed on such reassessment; the Explanation inserted later operates prospectively and does not validate earlier levies; where the assessee denies liability to interest, the levy may be contested and is maintainable to the extent of non-liability.

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Issues: (i) Whether an assessment made under section 143(3) read with section 147 of the Income-tax Act, 1961 is a "regular assessment" for the purpose of charging interest under section 139(8) and section 217; (ii) Whether an appeal against the charging of interest under sections 139(8) and 217 is maintainable.

Issue (i): Whether an assessment made under section 143(3) read with section 147 is a "regular assessment" within the meaning of section 2(40) for levy of interest under section 139(8) and section 217.

Analysis: Section 2(40) defines "regular assessment" as an assessment made under section 143 or section 144. The return filed by the assessee on June 1, 1979 was beyond the period permitted under section 139(4)(b)(iii) and thus was not a valid return; the Income-tax Officer therefore issued a notice under section 148 and made assessment under section 143(3) read with section 147. Precedent from multiple High Courts and this Court supports the view that proceedings under section 147 (reassessment) do not fall within the statutory definition of "regular assessment" and cannot be equated with assessments under section 143 or 144. The Explanation 2 to section 139(8) inserted in 1984 was prospective and does not affect the legal position for the assessment year in question.

Conclusion: An assessment under section 143(3) read with section 147 is not a "regular assessment" for the purposes of section 139(8) and section 217. The levy of interest on that basis is unauthorised.

Issue (ii): Whether an appeal against the charging of interest under sections 139(8) and 217 is maintainable.

Analysis: The levy of interest is part of the assessment process and where the assessee totally denies liability to interest, the levy can be challenged on appeal limited to the ground of non-liability. The Supreme Court has recognised that interest charged as part of assessment may be disputed in appeal if the assessee contends he is not liable to the levy.

Conclusion: An appeal against the charging of interest under sections 139(8) and 217 is maintainable and the assessee is entitled to dispute the levy.

Final Conclusion: The questions referred are answered in favour of the assessee and against the Revenue: the assessment in the present case being under section 143(3) read with section 147 is not a "regular assessment" for levy of interest under section 139(8) and section 217, and the appeal against such levy is maintainable.

Ratio Decidendi: For the purpose of sections authorising interest (including section 139(8) and section 217), a "regular assessment" means an assessment made under section 143 or section 144 only; reassessment under section 147 does not qualify as a regular assessment, and interest cannot be levied on that basis in the absence of a statutory provision made retrospective.

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