Skip to content


income-tax Officer Vs. United Carbon (i) Ltd. - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Mumbai
Decided On
Judge
Reported in(1984)7ITD363(Mum.)
Appellantincome-tax Officer
RespondentUnited Carbon (i) Ltd.
Excerpt:
.....passed by the ito on 10-7-1981 is barred by limitation. our finding is that it is not. there is no time limit fixed in the statute for an order under section 216. since it is an order separate from the assessment order, the time limit given in respect of the assessment proceedings would not be applicable. as the karnataka high court has pointed out, this is not a part of the assessment proceedings. therefore, the time limit for the assessment proceedings would not be applicable. this is not a rectification proceeding either. therefore, the time limit for rectification proceedings also would not apply. as a matter of fact, there is no time limit fixed at all. therefore, it cannot be said that the order is barred by limitation. in this connection, we may refer to the decision of the bombay.....
Judgment:
1. This is an appeal by the department. The ITO had passed an independent order levying interest under Section 216 of the Income-tax Act, 1961 ('the Act'). On appeal, the Commissioner (Appeals) held that the order could not be considered as an order under Section 154 of the Act. He further gave a finding that since the order was passed after a lapse of 4 years, it was barred by limitation.

2. Against this finding, the assessee is in appeal before us. Shri Sarkari, for the assessee, submitted that the ITO had not given any finding regarding the levy of interest in the assessment order. He submitted that such a finding was necessary before interest under Section 216 could be levied. He pointed out that even in the draft assessment order no reference was made to interest under Section 216.

He further pointed out that the ITO had not taken any proceedings under Section 273 of the Act for levy of penalty. Relying on a decision of the Cochin Bench of the Tribunal in the case of Alapat Bros. [IT Appeal No. 391 (Coch.) of 1979, dated 22-6-1981], he submitted that the levy of interest is not mandatory at all. The ITO has to apply his mind and decide whether it has to be levied or not. The very fact that in the draft assessment order and in the final assessment order, no mention is made of interest under Section 216 shows, according to Shri Sarkari, that the ITO had formed an opinion that interest under Section 216 should not be levied. Although the order does not refer to Section 154, it is the case of Shri Sarkari that the order has to be considered as an order under Section 154. He also submitted for our acceptance the finding of the Commissioner (Appeals) that the order is barred by limitation.

3. We have considered the facts of the case. The assessee is a limited company. As per the advance income-tax notice, the assessee ought to have paid about Rs. 1.13 crores as advance income-tax. The assessee had filed an estimate on 13-6-1975 showing a tax payable by them of Rs. 25.98 lakhs. The first instalment was paid on this basis. But the second instalment, however, was not on the basis of the estimate but an ad hoc figure of Rs. 18 lakhs. There was no estimate filed to explain this payment. On 11-12-1975, another estimate was filed, according to which the total tax payable was Rs. 57.75 lakhs. The tax was paid accordingly.

4. The ITO had completed the assessment and no reference to interest under Section 216 was made in the order. The assessment was finalised on 13-9-1977. On 10-7-1981, the ITO had passed a separate order under Section 216. In this order he made a mention to the facts which we have given above and then gave a finding that the assessee had underestimated the instalments for June and September and, therefore, interest under Section 216 has to be charged. As we stated earlier, the Commissioner (Appeals) held that it was barred by limitation.

5. We are of the opinion that the departmental appeal has to be allowed. The Commissioner (Appeals) and the assessee had proceeded on the assumption that the levy of interest under Section 216 is part and parcel of the assessment proceedings. If interest was not levied in the assessment order, then it has to be treated as an omission or that the ITO after having applied his mind had decided not to levy the interest.

Both these inferences are not correct. Merely because no reference is made to the levy of interest under Section 216, it cannot be said that the ITO had decided that it was not leviable. The Gujarat High Court has pointed in the case of CIT v. Ramjibhai Hirjibhai and Sons [1977] 110 ITR 411 that there is no presumption that the ITO has waived or decided not to levy interest merely because it is not mentioned in the assessment order. A similar decision has been given by the Calcutta High Court in the case of Singho Mica Mining Co. Ltd. v. CIT [1978] 111 ITR 231. The Allahabad High Court has also expressed the same opinion in the case of Addl. CIT v. Saraya Distillery [1978] 115 ITR 34. It is not necessary to multiply the authorities on this point. Suffice it to say that an omission to mention in the a sessment order does not mean anything.

6. The Karnataka High Court had an occasion to consider the question of an independent order for the levy of interest under Section 216. In the case of CIT v. Executors of the Estate of Late H.H. Rajkuverba Dowager Maharani Saheb of Gondal [1978] 115 ITR 301 (Kar.), it has been pointed out that an order under Section 217 of the Act can be made out only after a regular assessment is made. 'Regular assessment' as defined in Section 2(40) of the Act means the assessment made under Sections 143 or 144 of the Act. The High Court pointed out that this does not, therefore, include an order under Sections 215, 216 or 217 of the Act.

The computation of these interests is possible only after the tax due on the basis of the regular assessment is determined and the amount of tax deductible, is adjusted. Moreover, the High Court pointed out that if an order passed under Sections 215, 216 or 217 formed part of an order of assessment, it would be appealable under Section 246(c) of the Act itself and there would have been no need to enact Section 246(m) providing for appeal against an order under Section 216 only. On this basis, it is very clear to us that an order under Section 216 does not form part of an order of assessment and further, the Karnataka High Court pointed out, it has to be passed only after the regular assessment is made. On the basis of this authority, it is clear that an order under Section 216 is a separate order. Further, it is an order which has to be passed after the regular assessment is completed.

7. Shri Sarkari relied on a decision of the Cochin Bench of the Tribunal that in an order under Section 216 there must be a mandatory rinding that interest has to be imposed. We agree that the levy of interest under Section 216 is not mandatory. The ITO has to apply his mind and decide the same. But, in this case before us, the ITO has done so in a separate order under Section 216. Shri Sarkari had also relied on the fact that no penalty has been imposed under Section 273. It may be that the ITO found that the default of the assessee called for a levy of interest but not a most stringent act of levy of penalty.

Nothing further can be inferred from the absence of such a levy.

8. Since we have held that proceedings under Section 216 culminating in an order are separate proceedings, it cannot be considered as mere rectification proceedings. Therefore, it is unnecessary to consider the provisions of Section 154.

9. This will take us to the question whether the order passed by the ITO on 10-7-1981 is barred by limitation. Our finding is that it is not. There is no time limit fixed in the statute for an order under Section 216. Since it is an order separate from the assessment order, the time limit given in respect of the assessment proceedings would not be applicable. As the Karnataka High Court has pointed out, this is not a part of the assessment proceedings. Therefore, the time limit for the assessment proceedings would not be applicable. This is not a rectification proceeding either. Therefore, the time limit for rectification proceedings also would not apply. As a matter of fact, there is no time limit fixed at all. Therefore, it cannot be said that the order is barred by limitation. In this connection, we may refer to the decision of the Bombay High Court in the case of Chimanram Motilal (P.) Ltd. v. CIT [1983] 140 ITR 809. They were dealing with a case where there was a delay in passing the penalty order under Section 28(1)(c) of the Indian Income-tax Act, 1922 ('the 1922 Act'). Pointing out that the statute did not place any time limit for passing the order, the High Court rejected the assessee's contention therein that the order had to be treated as barred by limitation. On this point there are precedences. The order under Section 23A of the 1922 Act did not also contain any time limit. The Supreme Court did not approve of importing the time limit meant for the assessment proceedings therein.

Please see the decision of the Supreme Court in the case of MM. Parikh, ITO v. Navanagar Transport and Industries Ltd. [1967] 63 ITR 663. The same ruling was reiterated in this case of Pillani Investment Corporation Ltd. v. ITO [1972] 83 ITR 217 (SC).

10. So, the only point we have to see is whether there had been any undue delay in passing the order under Section 216. We find that the ITO had a month earlier passed an order under Section 154 to give deductions under Section 80VV and Section 35B, of the Act. With that, the assessment figures had become final. Immediately he had passed an order under Section 216. We do not find this to be unreasonably delayed. Therefore the order is within time.

11. No submissions have been made to us on the merits of the levy. We will, therefore, restore the order of the ITO and allow the departmental, appeal.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //