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Vineet Talkies Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 97 of 1981
Judge
Reported in[1984]148ITR66(MP)
ActsIncome Tax Act, 1961 - Sections 212(3A), 217(1A) and 246
AppellantVineet Talkies
RespondentCommissioner of Income-tax
Appellant AdvocateB.L. Nema, Adv.
Respondent AdvocateB.K. Rawat, Adv.
Excerpt:
- - act for failure on the part of the assessee to make an upward revision of advance tax estimate, as per provisions of section 212(3a) of the act......under subsection (3) of section 143 or section 144, where the assessee objects to theamount of income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed.' 5. according to the counsel, an appeal, against levy of interest under section 217(1a) of the act, lay under the expression ' where the assessee denies his liability to be assessed under this act' in clause (c) of section 246. this clause (c) is in two parts ; (i) where the assessee denies his liability to be assessed under this act, or (ii) under 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 to.....
Judgment:

C.P. Sen, J.

1. In compliance with the direction of this court under Section 256(2) of the J.T. Act, 1961, the Income-tax Appellate Tribunal has drawn up a statement of the case and referred the following question of law for the opinion of this court :

'Whether, on the facts and in the circumstances of the case, it was open to the assessee to challenge before the Appellate Assistant Commissioner and the Tribunal the charging of interest amounting to Rs. 6,331 under Section 217(1A) of the Income-tax Act, 1961 '

2. In respect of the assessment year 1970-71 for the year ending March 31, 1970, the ITO charged interest amounting to Rs. 6,331 under Section 217(1A) of the I.T. Act for failure on the part of the assessee to make an upward revision of advance tax estimate, as per provisions of Section 212(3A) of the Act. The assessee challenged the order of assessment and also charging of interest under Section 217(1A) of the Act before the AAC. The AAC reduced the total income by Rs. 2,900 but did not entertain the assessee's appeal against the order under Section 217(1A) of the Act, as according to him, Section 246 of the Act did not confer on the assessee any right of appeal against such levy. The assessee then riled a second appeal against the orderof assessment and also challenged the charging of interest under Section 217(1A) of the Act. The Appellate Tribunal held that the AAC was justified in holding that Section 246 of the Act did not provide for an appeal against charging of interest under Section 217(1A) of the Act. Thereafter, an application was made under Section 256(1) of the Act for drawing up of a statement of the case and referring the question of law to this court for opinion. The application was rejected. The assessee then filed an application under Section 256(2) of the Act before this court and by order dated November 18, 1980, in Misc. Civil Case No. 112 of 1976, the Tribunal was directed to draw up a statement of the case and refer the aforesaid question of law. Section 217(1A) reads as under :

' Where, on making the regular assessment, the Income-tax Officer finds that any such person as is referred to in Sub-section (3A) of section 212 has not sent the estimate referred to therein, simple interest at the rate of twelve per cent, per annum from the 1st day of April next following the financial year in which the advance tax was payable in accordance with the said sub-section up to the date of the regular assessment shall be payable by the assessee upon the amount by which the advance tax paid by him falls short of the assessed tax as defined in Sub-section (5) of section 215. '

3. Under this provision, the assessee is required to pay simple interest at the rate of 12% per annum from the 1st day of April next following the financial year in which the advance tax was payable up to the date of regular assessment upon the amount by which the advance tax paid by him falls short of the assessed tax by more than 331/3 per cent. If this is so, then the demand of interest under Section 217(1A) follows and the ITO has no discretion in the matter. If the tax assessed is reduced, then, in consequence, the quantum of interest also would be automatically reduced. The demand of interest under this provision is a logical consequence to an order of assessment and so there is no question of any right of appeal regarding levy of interest under Section 217(1A) of the Act. No appeal can lie for which the appellate authority has no power to give any relief.

4. However, the learned counsel for the assessee contended that an appeal lay against levy of interest under Section 246(c) of the Act, which is as under:

' 246. Any assessee, aggrieved by any of the following orders of an Income-tax Officer, may appeal to the Appellate Assistant Commissioner against such order--...

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

5. According to the counsel, an appeal, against levy of interest under Section 217(1A) of the Act, lay under the expression ' where the assessee denies his liability to be assessed under this Act' in Clause (c) of Section 246. This Clause (c) is in two parts ; (i) where the assessee denies his liability to be assessed under this Act, or (ii) under 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 to the status in which he is assessed.

6. There is divergence of opinion among different High Courts regarding interpretation of this expression 'where the assessee denies his liability to be assessed under this Act'. The majority view is that this clause does not provide for an appeal against any particular provision of this Act; it applies only where there is denial of the applicability of the Act as such because such things are already provided in the latter part of the same clause, obviously, it is used in the comprehensive sense to mean subject to the whole procedure for ascertaining and imposing liability on the taxpayer ; and the liability is under the Act and not under any particular provision or individual section of the Act, i.e., the assessee contends that he is not liable to be assessed under any provision of this Act, or, in other words, he is not liable to be subjected to any part of the procedure laid down in the Act for imposing liability to tax. The denial clause does not encompass denial which is to some part of the process of assessment or under a particular provision of the Act (See CIT v. Geeta Ram Kali Ram : [1980]121ITR708(All) ). The same view has been taken in Seetharamaswamy (Boddu) v. CAT : [1955]28ITR156(AP) , CIT v. Sharma Construction Co. : [1975]100ITR603(Guj) , K.B. Stores v. CIT , CIT v. P.S. Jain Motors (P.) Ltd. and CIT v. Shantilal J. Mehta : [1981]132ITR453(Bom) . The Allahabad Full Bench case has relied on the observations of the Supreme Court in CIT v. Kanpur Coal Syndicate : [1964]53ITR225(SC) , that the expression ' denial of liability ' is comprehensive enough to take in not only the total denial of liability but also the liability to tax under particular circumstances. In either case the denial is a denial of liability to be assessed under the provisions of the Act. In one case the assessee says that he is not liable to be assessed to tax under the Act, and in another case the assessee denies his liability to tax under the provisions of the Act if the option given to the appropriate officer under the provisions of the Act is judicially exercised. The Full Bench distinguished the two cases to the contrary in National Products v. CIT : [1977]108ITR935(KAR) andBhikhoobhai N. Shah v. CST : [1978]114ITR197(Guj) . In the Karnataka case, it was held that the levy of penal interest under Section 139 or under Section 215 of the Act is made in the regular assessment order and under these two sections a discretion is vested in the ITO to waive or reduce penal interest. This is not the case so far as levy of penal interest under Section 217(1A) of the Act is concerned. Here no discretion is given for levying of interest which is given at a particular rate. There is no power given to waive or reduce the rate of interest.

7. Therefore, the reference is answered in the negative, in favour of the Department and against the assesses. In the circumstances of the case, there shall be no order as to costs.


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