TaxTMI 
TaxTMI 
TaxTMI 
2005 (8) TMI 533
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....-1995, which was challenged in appeal before CIT(A), who passed a combined order on 9-11-1995. Against this order of CIT(A), the revenue has preferred further appeal to the Tribunal, which are numbered as 69 to 71. The assessee preferred appeals for the assessment years 1979-80 and 1980-81, which are numbered as 1308 and 1309. 2. Main issues involved in these appeals are about chargeability of interest under sections 139(8), 217 and 220(2), whether they are appealable and whether non-mentioning of interest in the assessment order amounts to waiver. During the course of hearing detailed arguments took place and written submissions were given by both the parties. These written submissions will be reproduced part by part at appropriate places in this order for the sake of convenience and justice. 3. The assessee was earlier called Renusagar Power Co. Ltd. is now merged with Hindalco Industries Ltd. 4. The revenue submitted a summary of facts leading to present dispute. This is reproduced below. 5. All six appeals of the department are against the orders of ld. CIT(A) for assessment years 1978-79, 1979-80 and 1980-81. Appeal No. 1173/ALD/95 and Appeal No. 69/ALD/96 are directed aga....
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....sorbed depreciation. Accordingly, in the said rectification order, the total income was revised to Rs. 27,40,855. Again, rectification order dated 14-12-1984 was further rectified on 15-3-1985 (Refer Page Nos. 15 to 16 of the Paper Book) wherein a total loss of Rs. 1,88,292 was determined. The ld. CIT(A) vide its order dated 27-1-1986 for assessment year 1980-81 has directed the Assessing Officer to modify the unabsorbed losses, depreciation and allowances of earlier years as these have not correctly worked out. Accordingly, the order giving effect to the CIT(A)'s order dated 27-1-1986 was carried out on 28-12-1992 under section 254/251/143(3) (Refer Page Nos. 17 to 25 of the Paper Book) wherein the total income for the year under consideration was revised to Rs. 2,79,75,560. In the demand notice ITNS 150, the tax payable was determined at Rs. 5,05,85,681 which includes interest under sections 139(8), 217 and 220(2) and were charged for the first time (Copy of ITNS-150 is enclosed herewith). The above appeal effect order dated 28-12-1992 was rectified under section 154 on 15-2-1993 (Refer Page Nos. 26 to 30 of the Paper Book) to charge the tax @ 55% instead of 65%. Accordingly, as ....
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....has set aside the appeal effect order dated 19-5-1995 and further directed the Assessing Officer to give proper appeal effect to CIT(A) order dated 30-3-1995. It is against this order of the ld. CIT(A) dated 9-11-1995, that the department filed another present appeal before the ITAT numbered as ITA No. 69/ALD/96. The order giving effect to the order of CIT(A) dated 9-11-1995 was passed on 12-3-1997 (Refer Page Nos. 99 to 106 of the Paper Book) revising the total income to Rs. 1,36,99,480 and an amount of Rs. 1,57,91,524 was refunded as per ITNS-150. In this order no interest under any of the sections were charged. (a) Appeal No. 1173/Ald./95 7. The first ground is- "That the ld. CIT(A) has erred in giving finding that the order of the ld. CIT(A) dated 22-3-1993 has become final as department's appeal has been dismissed by ITAT. He has totally ignored the finding of ITAT that the A.O. will be free to pass any order, which he deems proper according to law without any fetters and he will not be bound by any observations/directions made by ld. CIT(A) in his orders. Thus, the order of ld. CIT(A) is factually wrong and not maintainable." 8. This ground is against the observations of ....
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....bsequent order dated 28-12-1992 (page Nos. 17 to 25 of Paper Book) the revised total income is a positive figure and stood at Rs. 2,79,75,560. Hence, provisions of sections 139(8), 217 and 220(2) are attracted. 14. Without prejudice to the above, it is submitted that omission to make a reference to interest payable under provisions of section 215 or section 217 in the order of regular assessment cannot amount to an order waiving it. This view has been taken in the following judicial decisions :- 1.Addl. CIT v. Saraya Distillery [1978] 115 ITR 34 (All.). 2.CIT v. Nanda Traders/Executors of the Estate of Late H.H. Rajkuverba Dowager Maharani Saheb of Gondal [1978] 115 ITR 301 (Kar.). 3.CIT v. City Palayacot Co. [1986] 122 ITR 430 (Mad.). 4.Ratanlal Dhondiram v. CIT [1983] 141 ITR 363 (Bom.). 5.R.R. Pictures v. CIT [1983] 143 ITR 429 (Mad.). 15. The submission of the ld. Counsel of the assessee is as under : "No interest was charged under sections 139(8) and 217 when the original order of assessment was passed and the notice of demand was issued. This will be evident from the notice of demand at pages 4 and 5 of the paper book. No ITNS 150 was ever served on the assessee. In a....
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.... charged in original assessment than same cannot be charged in reassessment made under section 147. The headnotes reads : "Held accordingly, that the original assessment of the assessee for the assessment year 1988-89 was made and thereafter reassessment was made by resorting to section 148. No interest under section 139(8) was levied in the course of the original assessment. Interest under section 139(8) could not be levied when reassessment was made under section 147." 19. The issue raised by revenue is as to whether non-charging of interest tantamounts to waiver. The decisions are clearly in favour of revenue that by not charging the same in original assessment it would not mean that Assessing Officer has waived it. Following decisions support this proposition; 19.1 Addl. CIT v. Krishna Narayan Naik [1984] 150 ITR 513 (Bom.) The mere non-mention on the part of the ITO in the assessment order, of penal interest under section 217(1) of the I.T. Act, 1961, for failure by the assessee to file an estimate of advance tax and pay advance tax as required by section 212(3), cannot lead to the assumption that the ITO had waived the levy of penal interest. CIT v. Executors of the Estat....
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....ave been satisfied. Since on the question that as to whether interest can be charged by way of rectification, there are two views one by Hon'ble Calcutta High Court in I.O.L. Ltd.'s case (supra) and other by Patna High Court in Ashok Trading Co.'s case (supra), we take a view favourable to the assessee that interest cannot be recovered by way of rectification if not originally charged by the Assessing Officer in the assessment. There is always a view possible that by not charging the interest in the original assessment the Assessing Officer may have waived it. So far as interest under section 139(8) is concerned we are of the view that since delay in filing the return is less than a month and assessee has also filed Form No. 6 to get the time for filing the return extended, there is no default and no interest can be charged following I.O.L. Ltd.'s case (supra) and also the decision of Karnataka High Court in B.V. Aswathaiah & Bros. v. ITO [1985] 155 ITR 422 1 relied on by ld. Counsel of the assessee for the proposition that interest under section 139(8) can be charged only for a completed month of default and in present case the due date for filing of return is 30-6-1978 and the r....
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.... ITO [1959] 36 ITR 350 (SC) followed. (ii) That the rectification order dated August 17, 1966, was also a proceeding in the assessment and so limitation for a fresh rectification order had to be counted from that date. The second order of rectification had been passed within four years from August 17, 1966, and so was not barred by limitation. (iii) That after the rectification under section 154 of the Act, a positive income was determined on November 14, 1969, and so the Income-tax Officer was justified in charging interest under section 217 of the Act. 20.2 CIT v. Arunachal Saw & Veneer Mills (P.) Ltd. [1997] 225 ITR 363 (Gauhati) : "Although the assessee did not file its return in time, as the income was below the taxable limit, the Assessing Officer did not charge interest under section 139(8) and section 217 of the Income-tax Act, 1961, in the original assessment. However, after giving due notice, he commenced rectification proceedings and he found that the assessee had taxable income and he charged interest under sections 139(8) and 217. The Commissioner of Income-tax (Appeals) allowed the appeal on the ground that interest could not be charged in rectification proceeding....
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..... The assessee had filed return income at loss figure. On his own estimate he is not liable to pay advance tax. Also, there is no finding by the Assessing Officer that the assessee is required to file estimate of advance tax, which has not been filed by him. Further, if in the original assessment order the charge about levy of interest has not been specifically stated than subsequently in the rectification order or in giving appeal effect order it may not be possible to do so. Support is derived from the decision in CIT v. Autolite (India) (P.) Ltd. [2002] 256 ITR 303 (Raj.). Thus there are two views possible on the subject. We therefore adopt a view favourable to the assessee and hold that as there was no finding in the original assessment order determining positive income, about chargeability of interest under section 217, basic conditions for charging interest are not satisfied. Also in subsequent orders either under section 154 or passed for giving appeal effect, no such finding has been given. No interest under section 217, therefore, could be charged through subsequent orders either under section 154 or under section 250. 22. Thus, we hold that though not charging interest i....
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.... liability of the assessee and requires issuance of a fresh demand notice. Interest can only be charged from the last order and in respect of the fresh demand notice and the assessee cannot be treated as an assessee in default on the basis of the earlier demand notices and no interest can be charged in respect of the same from any earlier date. Reliance is placed on the judgment of the Supreme Court reported in 52 ITR 538 , 247 ITR 821, 136 Sales Tax Cases 636, judgment of Andhra Pradesh High Court reported in 250 ITR 97, judgment of the Calcutta High Court reported in 211 ITR 610 and the latest judgment of the Kerala High Court reported in 271 ITR 570 in which it was held by the Kerala High Court as follows : 'In a taxation statute one has to look at what is clearly stated. There is no room for any intendment. There is no equity or presumption about tax. Nothing is to be read in and nothing is to be implied. In view of the clear language used in section 220(2) of the Income-tax Act, 1961, when a fresh demand notice is issued in pursuance of a fresh assessment order passed as a result of the appellate order, interest is payable only when the amount is not paid as per the fresh dem....
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....ount of tax pursuant to the notice of demand under section 156 of the Income-tax Act, 1961, for the assessment year 1984-85. The assessee filed an appeal which was allowed. Consequently, the Department made refund with interest. Against the order in first appeal, the Revenue preferred an appeal which was allowed by the Tribunal. As a consequence, a demand was raised wherein interest was charged under section 220(2) from the date of the original demand. The assessee, in a writ petition, contended that it had already paid the entire amount of tax, and the entire amount of demand having been wiped out, the question of charging interest from the original date of demand would not arise : Held, that interest could not be charged from the date of the original demand notice." 28.3 Vikrant Tyres Ltd. v. First ITO [2001] 247 ITR 821 (SC) "In respect of certain assessment years assessment orders were served on the assessee and demand notices were issued and the assessee complied with the demands by paying the tax due thereunder within time. The appellate authority allowed the assessee's appeals against the assessment orders and the taxes paid by the assessee were refunded. The Appellate Tr....
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....ction 3 restored the original notice of demand which was never satisfied by the assessee and did away with the need to issue a fresh notice. That section could not be resorted to for reviving a demand notice which was already fully satisfied. It is a settled principle that while construing revenue Acts courts have to give a fair and reasonable construction to the language of the statute without leaning to one side or the other, meaning thereby that no tax or levy can be imposed on a subject by an Act of Parliament without the words of the statute clearly showing an intention to lay the burden on the subject. In this process courts must adhere to the words of the statute and the so-called equitable construction of those words of the statute is not permissible. The task of the court is to construe the provisions of taxing enactments according to the ordinary and natural meaning of the language used and then to apply that meaning to the facts of the case and in that process if the taxpayer is brought within the net he is caught, otherwise he has to go free." 29. The following principles can be derived from the decision of the Supreme Court : (i)A notice of demand under section 156 ....
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....ate back to the original default. If the demand does not survive in the register of the department when the assessment order is set aside, the assessee cannot be compelled to make the payment and hence he will not be in default. (II)If the assessment is set aside on a limited issue/s and some issues are confirmed against the assessee then the original demand notice does not cease to exist. While giving appeal effect the demand relating to the set aside issues should be taken into minus and the assessee would continue to be in default in respect of balance of demand from the date of original default. In the fresh demand notice issued on making the fresh assessment after deciding the issues set aside the assessee will be in default for only balance of demand raised and fallen due as he is in continuous default for the demand in respect of issues confirmed in appeal. (III)Wherever the demand has been paid , the assessee will not be treated as in default and no interest for that amount thereafter will be charged. Similarly where the total income is reduced to nil or to a minus figure then again the assessee cannot be treated as in default. (IV)Thus when the assessment becomes final ....
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....e said judgment by the Supreme Court that the levy of interest is part of the process of assessment. Although sections 143 and 144 do not specifically provide for the levy of interest it is nevertheless a part of the process of assessing the tax liability of the assessee. Inasmuch as the levy of interest is the part of the process of assessment, it is open to an assessee to dispute the levy of interest in appeal. (i)Under section 246(1)(a) of the Act any assessee aggrieved by the following orders may appeal against such orders; (a) an order against the assessee, where the assessee denies his liability to be assessed under the Act. Section 2(7) of the Act defines 'Assessee' to mean a person by whom any tax or any other sum is payable under the Act. Interest is a sum payable under the Act and the order for payment of interest has been made against the assessee. The assessee in respect of the said interest denies his liability to be assessed in relation thereto under the Act. The assessee says that the interest is not leviable. It is, therefore, submitted that the appeal is competent under section 246(1)(a) of the Act. Reliance is placed on the decisions in CIT v. Balkrishna Malhotra....
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....peal. 35. On maintainability of appeal before CIT (A), our view is that where assessee disputes the liability of interest as a whole, then he can file appeal before the CIT(A). But he cannot file an appeal merely for quantification thereof. Appeal against charging of interest under section 139(8) alone cannot be entertained [ref- K.B. Stores v. CIT [1976] 103 ITR 505 (Gauhati) which was followed in CIT v. Associated Stone Industries (Kotah) Ltd. [1981] 130 ITR 868 (Raj.)] but where assessee denies his liability to be assessed to tax, he can raise the ground of charging of interest [re-CIT v. Devichand Pan Mal [1986] 160 ITR 5452 (Raj.)]. Also where appeal is filed against regular assessment on other grounds, it will be open to the assessee to take all points including the objections to the interest levy as in appeal not only the income and tax thereon may be reduced but also the interest payable [re- CIT v. Sharma Construction Co. [1975] 100 ITR 603 (Guj.)]. Similar views expressed in National Products v. CIT [1977] 108 ITR 935 (Kar.) and in Bhikhoobhai N. Shah v. CIT [1978] 114 ITR 197 (Guj.) were approved by Hon'ble Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. CI....
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.... interest under section 217 in subsequent orders is also maintainable. 37. So far as appeal against charging of interest under section 220(2) is concerned, the Hon'ble Madhya Pradesh High Court in Princess Usha Trust v. CIT [1989] 176 ITR 2273, distinguished the Central Provinces Manganese Ore Co. Ltd.'s case (supra). It is held therein that the levy of interest under section 220(2) is not a part of process of assessment. Thus, by denying the liability to pay interest under section 220(2) of the Act, the assessee cannot be held to be denying its liability to be assessed under the Act. Section 246(c) was therefore not attracted. Thus, assessee had no right to prefer an appeal from the order levying interest under section 220(2) of the Act. Hon'ble Supreme Court held that charging of interest under section 220(2) is not appealable. Similar views are expressed in CIT v. Suresh Gokuldas [1998] 229 ITR 721 (Mad.), in ANZ Grindlays Bank PLC v. CIT [2000] 241 ITR 269 (Cal.), Biru Mal Gauri Shankar Jain & Co. v. CIT [2000] 243 ITR 234 (Punj. & Har.) and Princess Usha Trust v. ITO [2001] 247 ITR 546 (MP). But after the decision of Hon'ble Supreme Court in Vikrant Tyres Ltd.'s case (supra),....
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.... first Ground is similar to ground No. 1 in appeal No. 1173/Ald./95, which emerges from Paras 5.1, 12 and 13 of CIT(A)'s order dated 30-3-1995 on Page Nos. 63, 69 and 70 of Paper Book. The facts and circumstances are similar to ground No. 1 in ITA No. 1173/Ald./95 and the comments/decision offered for ground No. 1 in that Appeal also hold good here. This ground of revenue is, therefore, allowed. 42. Ground No. 2 is similar to ground No. 2 in appeal No. 1173/Ald./95. The facts and circumstances are identical with ground No. 2 in ITA No. 1173/Ald./95. Therefore, the comments/decision offered therein also hold good in respect of this ground. This ground of revenue is, therefore, allowed. 43. Ground No. 3 is similar to ground No. 3 in appeal No. 1173/Ald./95 and emerges from Para 15 of CIT(A)'s order dated 30-3-1995 on Page No. 70 of Paper Book for assessment year 1997-98. In the said para 15, the Ld. CIT (A) has observed as under : "In respect of interest etc., what I have decided for the year 1978-79, as written above, the same is given for this year also. Accordingly, the Assessing Officer is directed that he will make the necessary rectification in income and tax immediately and....
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....l of revenue is partly allowed. (b) Appeal No. 70/ALD/96 : 50. The Ground Nos. 1 to 5 are similar/identical to Ground Nos. 1 to 5 of Appeal No. 1173/ALD/95, and are emerging from para 5.3 of order dated 9-11-1995. Further, the Ground No. 6 is identical to Ground No. 6 of Appeal No. 69/ALD/95. 51. As the grounds in this appeal are similar to grounds taken in appeal No. 69/Ald./96, our decision is, therefore, the same as we have taken earlier in respect of appeal No. 69/Ald./96. Ground No. 1 is allowed in favour of revenue. Ground No. 2 is allowed in favour of revenue. Ground No. 3 is partly allowed in favour of revenue. Ground No. 4 is set aside to the file of Assessing Officer. Ground No. 5 is allowed as indicated in the relevant paragraphs while deciding the appeal in ITA No. 1173/Ald./95. Ground No. 6 is rejected in view of the fact that CIT(A) has set aside the order and no prejudice is caused to the revenue. (III) A.Y. 1980-81 - Appeal Nos. 1175/ALD/95 and 71/ALD/1996 : (a) Appeal No. 1175/ALD/95 : 52. Ground No. 1 is similar to ground No. 1 in appeal No. 1173/Ald./95 and emerges from Paras 5.1, 17 to 20 of CIT(A)'s order dated 30-3-1995 on Page Nos. 63, 70 and 73 o....