2000 (12) TMI 98 - SC - Income Tax

Interest can be charged for late filing in assessments under section 147. Court clarifies law.

K. Govindan And Sons Versus Commissioner Of Income-Tax

The court held that an assessment made under section 147 of the Income-tax Act qualifies as a 'regular assessment' for the purposes of section 139(8). ... Return, Interest, Reassessment, Delay In Filing Returns, Assessment, Interpretation Of Taxing Statutes Issues Involved:1. Whether an assessment made under section 147 of the Income-tax Act, 1961, can be considered a 'regular assessment' for the purpose of section 139(8) of the Act.2. Whether interest can be charged for default in filing a return under section 139(8) in an assessment made under section 147.Issue-wise Detailed Analysis:1. Definition of 'Regular Assessment':The primary issue in this case revolves around the interpretation of 'regular assessment' as defined under section 2(40) of the Income-tax Act, 1961. The court examined whether an assessment made under section 147, which deals with income escaping assessment, qualifies as a 'regular assessment' for the purposes of section 139(8).The court referred to section 2(40) which defines 'regular assessment' as an assessment made under sub-section (3) of section 143 or section 144. Section 143 outlines the procedure for assessment based on a return filed under section 139 or in response to a notice under section 142(1). Section 144 deals with best judgment assessment in cases where the assessee fails to file a return or comply with notices.2. Applicability of Section 139(8) to Assessments under Section 147:The court analyzed whether the provisions of section 139(8), which imposes interest for late filing of returns, apply to assessments made under section 147. Section 139(8) imposes simple interest at 15% per annum from the date immediately following the specified date to the date of furnishing the return or the date of completion of the assessment under section 144.The court noted that Explanation 2 to section 139(8) states that an assessment made for the first time under section 147 shall be regarded as a regular assessment for the purposes of this sub-section. This explanation was introduced by the Taxation Laws (Amendment) Act, 1984, effective from April 1, 1985. The court had to determine whether this explanation was clarificatory or amendatory.Clarificatory Nature of Explanation 2:The court held that if Explanation 2 is construed as clarificatory, it would apply to the assessment year 1984-85. The court emphasized that section 147, which deals with income escaping assessment, should be read in conjunction with section 148, which mandates the issuance of a notice before making an assessment, reassessment, or recomputation under section 147. The court concluded that an initial assessment made under section 147, where the assessee furnishes a return in response to a notice under section 148, qualifies as a 'regular assessment' under section 2(40).Relevant Case Law:The court reviewed several high court decisions to support its interpretation. In K. Gopalaswami Mudaliar v. Fifth Addl. ITO [1963] 49 ITR 322 (Mad), it was held that an initial assessment made under section 147 is a regular assessment. Similarly, the Delhi High Court in National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India [1981] 130 ITR 928, and a Full Bench of the Kerala High Court in Lally Jacob v. ITO [1992] 197 ITR 439, took the view that an assessment made for the first time under section 147 is a regular assessment.Contrary Views:The court also considered contrary views from the Gauhati High Court in CIT v. Triple Crown Agencies [1993] 204 ITR 377, and the Punjab and Haryana High Court in CIT v. Sushma Saxena (Smt.) [1997] 223 ITR 395, which held that an assessment or reassessment under section 147 is not a regular assessment. However, the Supreme Court disagreed with these views, stating that they were not correct in law.Conclusion:The court concluded that an initial assessment under section 147 is a 'regular assessment' for the purposes of section 139(8), and therefore, interest can be charged for default in filing a return under section 139(8) in such assessments. The Explanation 2 to section 139(8) is merely clarificatory and applies to the assessment year 1984-85. Consequently, the appeal filed by the assessee was dismissed with costs.Final Judgment:The appeal filed by the assessee was dismissed, affirming that the assessment made under section 147 is a 'regular assessment' and interest under section 139(8) can be charged in such cases.