1995 (12) TMI 85 - AT - Income Tax

Interest charges deleted in re-assessment case for AY 1986-87 under sections 139(8) & 217

The tribunal upheld the decision of the CIT(A) to delete the interest levied under sections 139(8) and 217 for the assessment year 1986-87 in a case where ... Late Filing, Regular Assessment Issues:Interest levied under sections 139(8) and 217 for assessment year 1986-87.Analysis:The appeal by the revenue was against the order cancelling the interest levied under sections 139(8) and 217 for the assessment year 1986-87. The assessee had initially filed a return declaring total income on time, and no interest was charged under sections 139(8) and 217 during the original assessment completed under section 143(1). However, a re-assessment was initiated under section 147 after a notice was issued under section 148. The main argument before the CIT(A) was whether interest could be charged under sections 139(8) and 217 for a re-assessment made under section 147. The CIT(A) held in favor of the assessee, stating that the re-assessment under section 147 cannot be considered a regular assessment for the purpose of levying interest under sections 139(8) and 217. Therefore, the interest levied under these sections was deleted.The departmental representative argued that interest could be validly charged under sections 139(8) and 217 even if no interest was charged during the original assessment under section 143(1). It was contended that a notice under section 148 could be treated as a notice under section 139(2) for charging interest subsequently. The representative also argued that even if no interest was charged initially, it could be increased during re-assessment under section 147 based on the tax payable. However, the tribunal analyzed the relevant provisions of law and concluded that interest cannot be charged for the first time in case of a re-assessment made under section 147. The provisions inserted with effect from 1-4-85 specifically mention that only the first assessment for a particular year, whether under various sections including 147, will be regarded as a regular assessment for the purpose of levying interest under sections 139(8) and 217. Therefore, the tribunal upheld the CIT(A)'s decision to delete the interest levied under sections 139(8) and 217.In conclusion, the tribunal dismissed the revenue's appeal, affirming the decision to delete the interest charged under sections 139(8) and 217 for the assessment year 1986-87.