TaxTMI 
TaxTMI 
2017 (2) TMI 782
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.... Reference. 2. This Reference under Section 256(1) of the Income Tax Act, 1961 (the Act) by the Income Tax Appellate Tribunal (the Tribunal) seeks our opinion on the following substantial questions of law : (i) Whether on the facts and in the circumstances of the case, there was denial of the assessee's liability to interest under Section 215 of the I.T. Act, 1961, and thereby an appeal there against was maintainable to the CIT(A)? (ii) If the answer to the aforesaid question is in affirmative, whether the assessee was liable to pay interest u/s 215 of the Act? 3. This Reference relates to the Assessment Year 1976-77. The previous year relevant to the subject Assessment Year is 1st January, 1995 to 31st December, 1975. 4. The facts as set out in the statement of case reads as under : "2. The relevant facts are in the way following. An estimate of advance tax was filed at 'NIL' on 15.12.75. The assessment was, however, completed on a total income of Rs. 28,88,820/and the tax thereon was worked out at Rs. 18,19,956/. Since there was no advance tax payment, the ITO levied an interest on Rs. 7,33,346/u/ s 215 of the Income Tax Act, 1961. ....
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....ppellate authority and left it open to the assessee to apply to the departmental authorities for waiver or reduction of interest u/s 215 of the Act. 5. Regarding Question (i) : (a) The issue of appealability on the question of interest under Section 215 of the Act in the context of Section 246(1)(c) of the Act as in force in the subject assessment year is no longer res integra. This is so as the issue stands concluded by the decision of the Apex Court in Central Provinces Manganese Ore Co. Ltd. vs. Commissioner of Income Tax, 160 ITR 961. In the above case, the Apex Court has held that an appeal under Section 246(1)(c) of the Act to the extent interest is charged under Section 215 of the Act is appealable, provided the assessee denies his liability to be assessed and / or to levy of tax and interest thereon. (b) It would be appropriate to reproduce the relevant extract of the Apex Court decision in the case of Central Provinces Manganese Ore Co. Ltd.(supra) as under : " Now the question is whether orders levying interest under subs. (8) of S.139 and under S.215 are appealable under S.246 of the Income Tax Act. Cl. (c) of S.246 provides an appeal against an order w....
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....and rule 40 of the Income Tax Rules, 1962. If the case of the assessee falls within the scope of the 148 said Rules, the Income Tax Officer is bound in law to consider whether the assessee was entitled to waiver or reduction of interest. It is, therefore, clear that levy of penal interest under Sections 139 and 215 is part of assessment. When such penal interest is levied the assessee is "assessed", meaning thereby, he is subjected to the procedure for ascertaining and imposing liability on him. If the assessee denies his liability to be assessed under the Act, he has a right of appeal to the Appellate Assistant Commissioner against the order of assessment. Where penal interest is levied under Section 215 by the order or assessment, the assessee may altogether deny his liability to pay such interest on the ground that he was not liable to pay advance tax at all or that the amount of advance tax determined by the Income Tax Officer as payable ought to be reduced. In either case he denies his liability, wholly or partially, to be assessed. Similarly, where interest is levied under Section 139 of the Act, the assessee may deny his liability to pay such interest on the ground that the ....
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....975. (e) Therefore, the appeal which was filed before the CIT(A) by the applicant falls within the ratio of Central Provinces Manganese Ore Co. Ltd.(supra). Thus, this question is to be answered in favour of the applicant assessee. 6. Regarding Question (ii) : (a) Ms. Vissanji, learned Counsel appearing in support of the applicant assessee contended that the applicant was not liable to pay any interest under Section 215 of the Act for non-payment of advance tax in December, 1975. According to the applicant, in December, 1976 when they estimated the advance tax to be paid and filed the estimate thereof, they proceeded to do so on the basis of the understanding of the law prevailing at that time. More particularly, the decision of the Calcutta High Court in Century Enka (supra) wherein it was held that Rule 19A of the Income Tax Rules was ultra vires the Act. Therefore, the computation of capital employed has to be worked out by including also borrowed capital for computing deduction under Section 80J of the Act. This the applicant had done in December, 1975 and on that basis estimated its advance tax. At that time, the estimate was arrived at on the basis of the law as was ....
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....ion 80J of the Act. As in the facts of this case, the liability to pay advance tax did not arise only on account of the retrospective amendment but the obligation was very much in existence when the obligation to pay advance tax on 15th December, 1975 arose, on the basis of Section 80J of the Act as it stood even before the amendment. This for the reason that the Apex Court in Lohia Machines (supra) while upholding the challenge to the amendment made in 1980 to Section 80J of the Act with retrospective effect from 1972 also observed that the amendment was merely clarificatory and Section 80J of the Act even dehors the amendment would have to be read in the same manner in which the amendment is understood. Thus, the aforesaid cases relied upon by the applicant assessee in view of the above distinguishing feature would have no application to the facts of the present case. It is axiomatic that a decision of the Supreme Court does not make the law but it only declares the law as always existing since its inception. This has been repeatedly held by the Apex Court [see in B.A. Linga Reddy Vs. Karnataka State Corporation, (2015) 4 SCC 515 (para 35)]. In Lohia Machines (supra), the Apex Co....
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.... December, 1975 when the applicant filed an estimate of Nil advance tax and on 25th January, 1985 when it rendered its decision. In the present facts, it is not the applicant's case that there is any subsequent change in facts which could not be anticipated at the time of determining the advance tax. A subsequent decision of the Apex Court merely declaring the law cannot be categorized as an unanticipated fact. Therefore, the above decision also does not assist the applicant. (h) The next decision at Sr. No.(viii) of Gujarat High Court in Rainbow Industries Pvt. Ltd. (supra), the demand for interest on short payment of advance tax was deleted by the Tribunal. In a Reference before Gujarat High Court at the instance of the Revenue, the Court held that the Tribunal as a matter of fact had found that the advance tax liability was determined by the assessee therein on the basis of its method of valuing closing stock which it had followed even for the earlier assessment years. Therefore, in the absence of the Revenue pointing out that the figures adopted for computing the income was incorrect, the levy of interest could not be sustained. Therefore, the High Court proceeded with t....