Appeal Dismissed: No Interest for Section 147 Assessments

The appeals were dismissed, holding that the assessee was not liable to pay interest under sections 139(8) and 215 for assessments made under section 147 for the relevant assessment years. The Tribunal concluded that assessments under section 147 could not be considered 'regular assessments' and thus should not attract interest. The dissenting Judicial Member argued for retrospective application of the amendment, but the Third Member, concurring with the Accountant Member, upheld that the levy of interest was unlawful based on prior interpretations and the specific legislative provisions.

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Issues Involved:
1. Applicability of interest under sections 139(8) and 215 for assessments made under section 147.

Issue-wise Detailed Analysis of the Judgment:

1. Applicability of Interest under Sections 139(8) and 215 for Assessments Made under Section 147:

The core issue in the appeals was whether interest under sections 139(8) and 215 can be charged in respect of assessments made under section 147. The Revenue contended that interest was rightly chargeable, while the assessee argued that assessments under section 147 do not qualify as 'regular assessments' under section 2(40) and thus should not attract such interest.

The Revenue relied on the case of Bardolia Textile Mills v. ITO, asserting that despite the definition of 'regular assessment' not including assessments under section 147, the intention to avoid taxes, as discussed in McDowell & Co. Ltd. v. CTO, should result in interest being chargeable. The assessee, on the other hand, cited several cases, including H. N. Malak v. ITO and Charles D'souza v. CIT, arguing that assessments under section 147 are not 'regular assessments' and thus should not attract interest under sections 139(8) and 215.

The Tribunal examined the definition of 'regular assessment' under section 2(40) and the provisions of sections 139(8) and 215. It noted that section 139(8)(a) imposes interest for delayed returns based on 'regular assessment,' which is defined to include assessments under sections 143 and 144 but not section 147. The Tribunal also considered the amendment brought by the Taxation Laws Amendment Act, 1984, which added Explanation 2 to section 139(8), stating that assessments made for the first time under section 147 shall be regarded as 'regular assessments' for the purposes of this sub-section, effective from 1-4-1985.

The Tribunal concluded that the amendment was not clarificatory but an actual amendment effective from 1-4-1985, and thus not applicable to the assessment years in question. It held that the assessments made under section 147 for the relevant years could not be considered 'regular assessments' and thus should not attract interest under sections 139(8) and 215. Consequently, the Tribunal dismissed the departmental appeals, agreeing with the Appellate Assistant Commissioner (AAC) that the levy of interest was invalid.

Separate Judgment by Judicial Member:

The Judicial Member dissented, arguing that the amendment should be considered clarificatory and applicable retrospectively. He cited the Supreme Court's decisions in McDowell & Co. Ltd. and Distributors (Baroda) (P.) Ltd., emphasizing that the legislative intent was to treat assessments under section 147 as 'regular assessments' even before the amendment. He believed that the amendment should be deemed declaratory, thus applicable to earlier years, and concluded that the appeals should be accepted, setting aside the AAC's order and restoring the ITO's order.

Third Member's Opinion:

Due to the difference of opinion, the matter was referred to a Third Member, who sided with the Accountant Member. The Third Member agreed that the Explanation to section 139(8) was an amendment and not clarificatory, thus not applicable to the assessment years prior to 1-4-1985. The Third Member also noted that several High Courts had consistently interpreted 'regular assessment' to exclude assessments under section 147. Consequently, the Third Member upheld the view that the levy of interest was unlawful.

Final Decision:

The appeals were dismissed, and it was held that the assessee was not liable to pay interest under sections 139(8) and 215 for assessments made under section 147 for the relevant assessment years.

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