Retrospective interest under income tax reassessment was impermissible where earlier assessment years were governed by the repealed Act.

In reassessment proceedings under section 148 for assessment years governed by the Indian Income-tax Act, 1922, interest under the proviso to section 139(1) of the Income-tax Act, 1961 was not chargeable. Section 297 was construed as carrying only the machinery of the new Act into reopened assessments, not as creating a fresh substantive liability for earlier years. Because the returns related to periods before 1 April 1962, the interest provision was treated as a new burden and could not be applied retrospectively. The levy therefore failed.

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Issues: Whether, in reassessment proceedings initiated under section 148 of the Income-tax Act, 1961 for assessment years governed by the Indian Income-tax Act, 1922, interest could be levied under the proviso to section 139(1) of the Income-tax Act, 1961.

Analysis: The assessment years in question preceded 1 April 1962, and the returns were filed only after notice under section 148 of the Income-tax Act, 1961. The saving and transitional provisions in section 297 of the Income-tax Act, 1961 were construed as applying the machinery of the new Act to reopened assessments, but not as creating a new substantive liability for periods governed by the repealed Act. Interest under section 139, as it then stood, was treated as a new burden and not merely a procedural incident of assessment. The rule against retrospective operation barred importing that liability into assessments for earlier years, and the reopening provisions could not be used to impose a liability that did not exist under the earlier statute.

Conclusion: Interest under the proviso to section 139(1) of the Income-tax Act, 1961 was not lawfully chargeable in these reassessment proceedings, and the levy failed.

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