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Vittal Reddy and ors. Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberCase Referred No. 77 of 1978
Judge
Reported in[1987]165ITR673(AP)
ActsIncome Tax Act, 1961 - Sections 139, 143, 144, 217, 246 and 246(1)
AppellantVittal Reddy and ors.
RespondentCommissioner of Income-tax
Appellant AdvocateY.V. Ahjaneyulu, Adv.
Respondent AdvocateM. Suryanarayana Murthy, Adv.
Excerpt:
.....the interest awarded by the city civil court on the enhanced compensation did not accrue from year to year from the date of acquisition, but accrued only on july 12, 1971, when the city civil court's order granting additional compensation was given and as such assessable to tax in entirely in the assessment year 1972-73 ? 2. whether, on the facts and in the circumstances of the case, an appeal lies against the charge of penal interest under section 217 of the income-tax act, 1961, when the ground regarding the levy of penal interest is raised along with other grounds of appeal ? 2. the relevant facts in brief are :the assessees' lands were acquired by a notification issued under section 4 of the land acquisition act on may 3, 1967. the land acquisition collector made an award under..........the interest awarded by the city civil court on the enhanced compensation did not accrue from year to year from the date of acquisition, but accrued only on july 12, 1971, when the city civil court's order granting additional compensation was given and as such assessable to tax in entirely in the assessment year 1972-73 2. whether, on the facts and in the circumstances of the case, an appeal lies against the charge of penal interest under section 217 of the income-tax act, 1961, when the ground regarding the levy of penal interest is raised along with other grounds of appeal 2. the relevant facts in brief are : the assessees' lands were acquired by a notification issued under section 4 of the land acquisition act on may 3, 1967. the land acquisition collector made an award under.....
Judgment:

Seetharam Reddy, J.

1. The twin questions that arise at the instance of the assessee in this reference are :

'1. Whether, on the facts and in the circumstances of the case, the interest awarded by the city civil court on the enhanced compensation did not accrue from year to year from the date of acquisition, but accrued only on July 12, 1971, when the city civil court's order granting additional compensation was given and as such assessable to tax in entirely in the assessment year 1972-73

2. Whether, on the facts and in the circumstances of the case, an appeal lies against the charge of penal interest under section 217 of the Income-tax Act, 1961, when the ground regarding the levy of penal interest is raised along with other grounds of appeal

2. The relevant facts in brief are : the assessees' lands were acquired by a notification issued under section 4 of the Land Acquisition Act on May 3, 1967. The Land Acquisition Collector made an award under section 11 of the Land Acquisition Act and took possession of the lands on December 26, 1970, which falls within the previous year relevant to the assessment year 1971-72. However, not satisfied with the compensation awarded, the assessees went to the City Civil Court, Hyderabad, which enhanced the compensation on July 12, 1971, which fell within the previous year relevant to the assessment year 1972-73. It also awarded interest amounting to Rs. 23,317 under section 28 of the Land Acquisition Act.

3. The case of the assessees is that the enhanced compensation awarded by the city civil court related back to the date of the acquisition of the property and that from the date of acquisition, the right to the interest on the enhanced compensation accrued from year to year. The Income-tax Officer, however, did not accept the contention of the assessees that the interest on the enhanced compensation awarded by the civil court accrued from year to from the date of the acquisition and that what was assessable to tax in the assessment year 1972-73 was only the interest relatable to the relevant previous year but not the entire interest awarded by the civil court in the relevant previous year. According to the Income-tax Officer, however, the right of the owners of the land to interest on the enhanced compensation had accrued to the assessees only on the date when the civil court delivered its judgment awarding enhanced compensation and also the interest thereon and that since that right accrued to the assessees only in the previous year relevant to the assessment year 1972-73, the whole of the interest was in consequence liable to be taxed in the assessment year 1972-73. On appeal, it was confirmed by the Appellate Assistant Commissioner and on further appeal to the Tribunal, it was held, while dismissing the appeals, as under :

'The assessees became entitled to the interest on the enhanced compensation because the civil court, while awarding enhanced compensation had also exercised the discretion vested in it of awarding interest on such enhanced compensation and, therefore, the entire interest awarded by the civil court on the enhanced compensation was liable to be assessed and rightly assessed in the assessment in the assessment year 1972-73.'

4. Reliance was placed on a decision of this court in CIT v. Smt. Sankari Manickyamma : [1976]105ITR172(AP) . It was further held that the Appellate Assistant Commissioner was justified in not entertaining the ground relating to charging of interest under section 217 of the Income-tax Act, 1961, on the ground that no appeal is provided against the charge of interest under that section. It, therefore, eventually held while relying on the observations made by the Benches of the Tribunal at Hyderabad and also a decision of the Calcutta High Court in Singho Mica Mining Co. Ltd. v. CIT : [1978]111ITR231(Cal) that the Appellate Assistant Commissioner was justified in not entertaining the ground relating to levy of interest under section 217 of the Income-tax Act, 1961.

5. Coming to the first question, we have no hesitation in holding that the interest awarded by the civil court on the enhanced compensation was liable to be assessed in the assessment year 1972-73 as the enhanced compensation of interest was awarded in the relevant previous year. The interest so awarded was a discretionary one in contradistinction to the interest that would accrue even at a time when the owner of the land in dispossessed by virtue of the notification issued under section 4(1) of the Land Acquisition Act and, therefore, the contention of the assessee, that the interest accrued should be spread over on the theory of relating back to the date of disposition, will not hold good and, therefore, the contention in that behalf is rejected.

6. Now, we come to the next question, whether the ground relating to charging of interest under section 217 of the Income-tax Act could be entertained though no appeal is provided against the charging of interest under the said section. It is true that under section 246 of the Income-tax Act, there is no explicit provision enabling the assessee to prefer an appeal against the orders of the Income-tax Officer or the Appellate Assistant Commissioner, as the case may be, under any of the provisions enumerated thereunder.

7. Section 246(1)(c) reads thus :

'an order against the assessee, where the assessee denies his liability to be assessed under this Act or any order of assessment under sub-section (3) of section 143 or section 144, where the assessee objects to the amount of income assessed, or to the amount of tax determined, or to the amount of loss computed, or the status under which he is assessed.'

8. In view of the above, our judgment is - an assessee is entitled to prefer an appeal against the charging of interest under section 217 of the Income-tax Act though there is no explicit provision to that effect under any of the enumerated provisions enacted under section 246 of the Income-tax Act. This is quite implicit in clause (c) of section 246(1) of the Income-tax Act, which is comprehensive as it reads 'where the assessee denies his liability to be assessed under this Act'. Since the assessee who is assessed in regard to the amount which he denies stating that he is not liable to be assessed, certainly it would competent for him to have his plea against the charging of interest under section 217 entertained in the appeal. That apart, simple interest leviable at the rate of 12 per cent. per annum, for the alleged default in payment within the meaning of section 217 itself postulates that the assessee must have knowingly committed the default which cannot ostensibly be the case here; and so is opposed to the very principle of subjecting the assessee to a more penal interest.

9. In this case, since the assessee objects to the very assessment, in a particular year, it cannot, be stated that he was having the knowledge of liability to pay the amount and yet defaulted in payment of this amount. This court in CIT v. Dr. S. Roopkaran : [1985]154ITR717(AP) (I.T.C. No. 112 of 1976 dated 10-11-1976), wherein circumstances were analogous, while answering a question, viz. :

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in entertaining the ground of appeal relating to charging of interest under section 139 of the Income-tax Act, 1961 ?'

held (at page 718) :

'As regards question No. 3, since the question of charging of interest was part of the appeal relating to capital gains, it cannot be said that the appeal was filed only on the question of interest under section 139. Hence, the appeal was certainly maintainable as laid down by several decisions of the different High Courts.'

10. Since section 139 is not one of the items enumerated under section 246 of the Act, the ratio of the above decision will be equally applicable to a case under section 217 of the Income-tax Act as well.

11. For all these reasons, we hold that the appeal lies against the charging of penal interest under section 217 of the Income-tax Act, when the ground regarding the levy of interest is raised along with other grounds of appeal.

12. In the result, we answer question No. 1 in the affirmative and against the assessee, whereas question No. 2 is answered in the affirmative and in favour of the assessee.

13. Learned counsel for the assessee, Sri Y. V. Anjaneyulu, made an oral request for grant of leave to appeal to the Supreme Court. We certify it to be a fit case for appeal to the Supreme Court inasmuch as a similar point relating to question No. 1 is already before the Supreme Court in an appeal in CIT v. Smt. Sankari Manickyamma : [1976]105ITR172(AP) . Accordingly, leave is granted.


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