Maintainability of appeal against interest under income-tax law when linked to a valid assessment challenge.

An appeal against interest levied under section 139(8) of the Income-tax Act, 1961 is maintainable when it is raised incidentally in a competent appeal against the assessment, because the interest liability is linked to the assessed tax. Section 246(1)(c) does not provide a separate appeal against an order under section 139(8) standing alone, but it does permit an assessee to challenge an assessment order and, within that appeal, contest the consequential interest charge. A standalone challenge to the interest order lies outside the appellate provision, though revision under section 264 may be available. The appeal was held competent in favour of the assessee.

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Issues: Whether an appeal lay against an order of the Income-tax Officer charging interest under section 139(8) of the Income-tax Act, 1961, where the appeal was not confined merely to the interest order but arose in the course of challenge to the assessment.

Analysis: The right of appeal exists only when conferred by statute. Under section 246(1)(c) of the Income-tax Act, 1961, an appeal is competent against orders denying liability to be assessed or against an assessment order under sections 143(3) or 144 where the assessee objects to the assessed income, tax, loss, or status. There is no separate provision for an appeal against an order under section 139(8) simpliciter. However, where the appeal is otherwise competent under section 246(1)(c), a challenge to the levy of interest under section 139(8) can also be entertained because the liability to interest is linked with the quantum of tax. Only a standalone challenge to the interest order would fall outside the appellate provision, though revision under section 264 may then be available.

Conclusion: The appeal was competent, and the question was answered in the affirmative, in favour of the assessee and against the Revenue.

Ratio Decidendi: An appeal against levy of interest under section 139(8) of the Income-tax Act, 1961 is maintainable when it is incidentally connected with a competent appeal against the assessment, but not when the interest order is challenged in isolation.

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