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H.N. Malak Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Nagpur
Decided On
Judge
Reported in(1984)8ITD851(Nag.)
AppellantH.N. Malak
Respondentincome-tax Officer
Excerpt:
.....difference between a regular assessment as defined in section 2(40) and an assessment or reassessment under section 147. section 147 is only an enabling provision to obtain jurisdiction for assessing or reassessing escaped income and once the jurisdiction under this section has been invoked, the assessment procedure in respect of the same would be exactly the same as in respect of any other assessment, in that the assessments have to be finally completed as per the procedure laid down in the provisions and under section 143(3) or section 144, as the case may be. the bombay high court in deviprasad kejriwal v. cit [1976] 102 itr 180 had held that the words'regular assessment'appearing in section 18a(9) of the 1922 act would also cover cases of reassessment under section 34(1) of.....
Judgment:
1. These five appeals by the assessee relating to the assessment years 1970-71, 1971-72, 1972-73, 1973-74 and 1976-77 are against the orders of the AAC, in his Appeal Nos. 2-TC of 1982-83 and 5-TC of 1982-83 dated 25-10-1982 and 1-TC of 1982-83, 3-TC of 1982-83 and 4-TC of 1982-83 dated 16-3-1983. A common issue is involved in all these appeals and the detailed discussion relating to the same is to be found in the consolidated order of the AAC for the assessment years 1971-72 and 1976-77 dated 25-10-1982. The question at issue is whether the AAC was justified in holding that the ITO was legally correct in levying interest under Sections 139(8) and 215 of the Income-tax Act, 1961 ('the Act'), in respect of all the assessment years under appeal, even though the assessments were completed under Section 147(a) read with Section 144 of the Act and, therefore, did not constitute 'regular assessments' as defined in Section 2(40) of the Act. The facts in this regard, the rival submissions and our conclusion thereon are set out below.

2. In respect of the assessments under appeal, the assessee did not file the returns of income within the period specified under Section 139(4). The ITO, therefore, issued notices under Section 148 of the Act to assess the escaped income under the provisions of Section 147(a).

The appellant did not file the returns of income even in respect of the notices issued to him under Section 148. The ITO, therefore, completed all these assessments ex parte under Section 144. Subsequently, the assessments were reopened in response to applications filed under Section 146 of the Act on 5-7-1979. Even the reopened assessments for these years were again completed under Section 144. There were no further petitions under Section 146 against these assessments. For all practical purposes, these assessments appear to have become final except in regard to the issues raised in these appeals in respect of levy of interest under Sections 139(8) and 215. While completing the assessments ex parte for these years, the ITO levied interest under Section 139(8) and under Section 215. The levy of interest under these Sections was questioned before the AAC in the first appeals. The objections taken in this behalf may be summarised briefly as follows: 3. The assessments for all the years were made under Section 147 and, therefore, they were not regular assessments under Section 143 or Section 144 as defined in Section 2(40). Section 139(8), which deals with levy of interest for late submission of return, clearly lays down that such interest shall be payable with reference to the tax on the total income as determined on regular assessment. Similarly, Section 215 also specifies the charge of interest on the shortfall in the amount of advance tax with reference to the date of the regular assessment. Since all the assessments completed in the present case were not regular assessments as defined in Section 2(40) and they were only assessments under Section 147(a), the provisions of Section 139(8) and Section 215 were not attracted thereto. In support of the contention that assessments under Section 147(a) were not regular assessments as defined in Section 2(40) reliance was placed on the following decisions before the AAC. CIT v. Ganeshram Nayak [1981] 129 ITR 43 (Ori.), Smt. Kamla Vati v. CIT [1978] 111 ITR 248 (Punj. &Har.), CIT v. Smt. Jagjit Kaur [1980] 126 ITR 540 (All.) and D. Swamp, ITO v.Gammon India Ltd. [1983] 141 ITR 841 (Bom.).

It was contended that in all these cases, it was held that regular assessments as defined in Section 2(40) would not include assessments made under Section 147 for purposes of invoking the provisions of Section 273 of the Act and since according to these decisions assessments under Section 147 were not regular assessments, the provisions of Section 139(8) and Section 215 also would not apply to these assessments. Regarding the preliminary jurisdiction of the AAC to entertain appeals only against the charging of interest under Sections 139(8) and 215, ths Full Bench decision of the Bombay High Court in CIT v. Daimler Benz A.G. [1977] 108 1TR 961 was cited in support of the proposition that when the appellant denies his liability to the levy of interest as such, jurisdiction would arise to an appellate authority to adjudicate the merits of the same. The question in that case was whether the assessee could object to the levy of interest under Sections 18A(6) and 18A(8) of the Indian Income-tax Act, 1922 ('the 1922 Act') when specifically no appeals were provided therein against such an order, on the ground that the assessee denied his liability to be assessed under the 1922 Act under Sub-section (1) of Section 30 of that Act. Their Lordships held in that case that when the assessee denied his liability to be assessed under Section 18A(1), he would in effect be denying his liability to be assessed under Section 30(1) and, therefore, the orders under Sections 18A(6) and 18A(8) would become appealable orders. The AAC, following this decision, held that the interest levied in this case under Sections 139(8) and 215 of the 1961 Act would be eligible for being agitated in appeal by the assessee and proceeded to dispose of the claims on merits as under.

4. We would briefly summarise the arguments of the AAC in the following manner: All the decisions relied upon by the assessee were decided on technical grounds. No attempt was made either by the learned representative or in the decisions cited to make out any fundamental difference between a regular assessment as defined in Section 2(40) and an assessment or reassessment under Section 147. Section 147 is only an enabling provision to obtain jurisdiction for assessing or reassessing escaped income and once the jurisdiction under this section has been invoked, the assessment procedure in respect of the same would be exactly the same as in respect of any other assessment, in that the assessments have to be finally completed as per the procedure laid down in the provisions and under Section 143(3) or Section 144, as the case may be. The Bombay High Court in Deviprasad Kejriwal v. CIT [1976] 102 ITR 180 had held that the words'regular assessment'appearing in Section 18A(9) of the 1922 Act would also cover cases of reassessment under Section 34(1) of the 1922 Act. Due to inadvertance, the definition of Section 2(40) of the 1961 Act does not cover assessments and reassessments made under Section 147 and confines itself only to assessments under Sections 143 and 144. The Mysore High Court in Indian Telephone Industries Co-operative Society Ltd. v. ITO [1972] 86 ITR 566 and the Kerala High Court in P.A. Abdul Muthalif Rowther v. ITO [1976] 102 ITR 694 held that interest under Section 139(8) was chargeable even in cases where an assessment was made after the issue of notice under Section 148. The legislative omission to include assessments under Section 147 in the definition of regular assessment was unintentional. The interpretation sought on behalf of the appellant would lead to anomalous result inasmuch as, an assessee submitting a belated return within the time prescribed under Section 139(4) would be subject to levy of interest under Section 139(8} whereas, however , an assessee who totally defaults and in whose case proceedings are taken under Section 147 would escape from the charge of interest altogether.

5. The AAC also held that the assessments made in this case for all the years were in reality regular assessments as opposed to assessments under Section 147 on the following rationale.

According to him, the assessments which were completed under Section 147 were reopened under Section 146 originally. He was of the view that if a strict line of interpretation as adopted by the High Court was followed in this case, the assessee would not be entitled to file petitions under Section 146 inasmuch as the assessments would be under Section 147 and not under Section 144. Since the appellant filed such petitions under Section 146 and the assessments made under Section 144 were cancelled originally, the fresh assessments that were made subsequently could only be assessments under Section 143(3) or Section 144 read witii Section 146 and, therefore, assumed the character of regular assessments. He, therefore, held that the assessments in question, even though they were initiated under the provisions of Section 147, were in effect regular assessments as defined in Section 2(40) and as such the provisions of Section 139(8) and Section 215 would be attracted to them, thereby justifying the levy of interest under these Sections by the ITO. He, accordingly, dismissed the appeals of the assessee in this behalf. Aggrieved with the same, the assessee has filed these appeals before us.

6. Shri Dewani, the learned counsel for the assessee, made the following submissions before us: The learned AAC also concedes up to a particular stage in his conclusions that the assessments made in this case could not be considered to be regular assessments as defined in Section 2(40) as they were technically assessments made under Section 147. The learned AAC, according to him, completely misdirected himself in holding further, that once the assessments completed under Section 144 get cancelled under Section 146, the resultant subsequent assessments could only be considered to be assessments made under Section 143(3) or Section 144 and, therefore, they would constitute regular assessments as defined in Section 2(40). This reasoning of the AAC, according to him, totally ignores the fact that but for the application of the provisions of Section 147(a), the assessments in question could not be reached and subsequently completed under Section 143(3) or Section 144, as the case may be. Even though the assessments are completed under Section 143(3) or Section 144, the main operative provision by means of which they are reached is only Section 147(a) and, therefore, they cannot cease to be assessments completed under Section 147(a), which is not referred to in the definition of a regular assessment under Section 2(40).

He further made the following submissions in support of his contention that the assessments in this case for all the years under consideration were not regular assessments as defined under Section 2(40) and, therefore, they could not be subjected to levy of penal interest under Section 139(8) and Section 215. He cited the decision of the Bombay High Court in Gammon India Ltd.'s case (supra), which discussed this issue threadbare, though in the context of levy of penalty under Section 273 and came to the conclusion that an assessment or reassessment under Section 147 would not be a regular assessment and, therefore, the provisions of Section 273 had no application to the same. He particularly referred to the fact that the Hon'ble Bombay High Court considered the very question which the AAC had considered in concluding that though the assessments were reopened under Section 147, they would still constitute assessments under Section 143 or Section 144, as the case may be. He referred to the following passage in the headnote of the decision: ... When Section 148 refers to the fact that the provisions of the Act shall, so far as may be, apply to the reassessment under Section 147, the effect is only that the provisions can be resorted to for the purpose of making a reassessment under Section 147 of the Act.

The mere fact that the machinery which is availed of for the purpose of assessment under Section 143 or Section 144 of the Act can be availed of while making a reassessment under Section 147 would not make the reassessment under Section 147 the same as an assessment under Section 143 or Section 144. (p. 841) He also referred to the distinction noticed by the Bombay High Court as between assessments under Section 143 or 144 and those under Section 147 as regards the time limit for their completion specified in Section 153 of the Act. The Bombay High Court noticed that different time limits were prescribed for assessment under Sections 143 and 144 and those under Section 147 as per Section 153. He also drew our attention to the distinction highlighted by the Bombay High Court in the provisions regarding appeals contained in Clauses (c) and (e), respectively, of Section 246(1) of the Act. He also drew our attention to the fact that the Bombay High Court further stressed the distinction in this behalf by referring to Section 263(2) of the Act, which specifically prohibits a Commissioner having revisionary jurisdiction in respect of orders of reassessment under Section 147. Finally, he also relied on the following passage in the headnote of the decision: The words 'regular assessment' have now been specifically defined by the Legislature in Section 2(40) of the 1961 Act. Under the accepted canons of construction, wherever those words are used, the meaning given in the difinition clause must be substituted. When Section 273 refers to 'regular assessment' those words must be construed with reference to the meaning given to those words in Section 2(40) of the Act, as to mean an 'assessment made under Section 143 or Section 144.' There is nothing in the context of Section 273 which requires the words 'regular assessment' to be given a meaning different from the pne given by the Legislature when these words were defined.

Hence, the regular assessment under Section 143 or Section 144 and reassessment under Section 147 have been separately dealt with in the different provisions of the Act, and having regard to the terminology used in Section 273, the words 'regular assessment' therein cannot include a reassessment made under Section 147.

Therefore, penalty cannot be levied under Section 273 against an assessee on the basis of an order passed in reassessment under Section 147 of the Act because the power under Section 273 of the Act can be exercised only if the ITO in the course of any proceedings in connection with the regular assessment for any assessment year is satisfied that an assessee has furnished a statement of the advance tax payable by him which he knew or had reason to believe to be untrue. (p. 842) Though this decision was in the context of interpreting the words 'regular assessment' that appear in Section 273 for the purpose of levy of penalty under that section, the learned advocate submitted that the same interpretation would apply in the present cases also as the words used in Section 139(8) as well as in Section 215 are 'regular assessment'.

7. The learned departmental representative submitted that Section 2(8) has defined 'assessment' to include a reassessment and, therefore, a regular assessment under Section 2(40) would also include an assessment made under Section 147. He submitted that Section 147 is only an enabling provisions which lays down the machinery to catch within the net of income-tax, incomes that have escaped assessment; the assessments in question have ultimately to be completed only under Section 143(3) or Section 144, as the case may be, and, therefore, even an assessment or reassessment under Section 147 would come within the definition of a regular assessment under Section 143 or Section 144 as defined in Section 2(40). Even according to Section 148, once a notice has been served in pursuance thereof, Sections 143 and 144 would still be applicable to the proceedings and in that sense also, the assessments completed would be assessments under Sections 143 and 144 read with Section 147. He relied on Deviprasad Kejriwal's case (supra) and Kashiram Tea Industries Ltd. v. ITO [1981] 132 ITR 783 (Cal.) in support of his viewpoint. In Deviprasad KejriwaVs case (supra), the Bombay High Court, while deciding the question in regard to levy of interest under Section 18A(6) and penalty under Section 18A(9) held that the words 'regular assessment' in Section 18A(9) would cover cases of reassessment under Section 34(1). In Kashiram Tea Industries Ltd.'s case (supra), the Calcutta High Court, while interpreting the provisions of Section 273 held that the ITO had jurisdiction, in the course of reassessment proceedings, to initiate proceedings under Section 273 as reassessment proceedings would amount to a 'regular assessment'. They held so because the word 'assessment' has been defined to mean 'reassessment' and the words 'regular assessment' have not been defined to mean an initial assessment. The learned departmental representative, therefore, concluded that the ITO was within his jurisdiction to levy penal interest under Section 139(8) as well as under Section 215 even in respect of assessments completed under Section 147(a) read with Section 143(3) or Section 144.

8. In reply, Shri Dewani, the learned counsel for the assessee, submitted that the Bombay High Court in Gammon India Ltd.'s case (supra) specifically distinguished its own decision in Deviprasad KejriwaVs case (supra). As to the Calcutta High Court decision in Kashiram Tea Industries Ltd.'s case (supra), Shri Dewani submitted that the Bombay High Court's decision in Gammon India Ltd.'s case (supra) is a later decision in point of time and moreover, the same is binding on the Tribunal.

9. We have considered the rival submissions and all the authorities cited before us very carefully. We are of the considered opinion that this Tribunal is bound by the decision of the Bombay High Court in Gammon India Ltd.'s case (supra), inasmuch as, it is within its jurisdiction and it is the latest on the subject of interpretation of the words 'regular assessment'. Though the decision of the Bombay High Court was delivered in the context of interpreting the words 'regular assessment' occurring in Section 273, the decision would be still applicable to these cases inasmuch as, the very same words occur in Section 139(8) as well as Section 215. The Hon'ble Bombay High Court has categorically held that an assessment under Section 147 is different from 'regular assessment' inasmuch as, the words 'regular assessment' have been defined in Section 2(40) to include only assessments under Sections 143 and 144. There is an elaborate discussion in the body of the judgment relating to the distinction between the assessments completed under Section 147 and those under Sections 143 and 144 in the context of various sections. It would also be pertinent to note in this context that the Hon'ble Bombay High Court has referred to a catena of decisions in this regard which have taken the same view. These decisions, in particular, are Gates Foam & Rubber Co. v. CIT [1973] 90 ITR 422 (Ker.), CIT v. Ram Chandra Singh [1976] 104 ITR 77 (Pat.), Smt. Kamla Vati's case (supra), Smt. Jagjit Kaur's case (supra) and Ganeshram Nayak's case (supra). They have distinguished the earlier Bombay High Court's decision in Deviprasad Kejriwal's case (supra) on the ground that the words 'regular assessment' occurring in Section 273 have been specifically defined in Section 2(40) whereas, similar words occurring in Section 18A(9) of the 1922 Act had not been defined in that Act. They further held that the matter has to be considered in the light of the fact that at several places, the word 'assessment' under Section 143 or Section 144 has been used in contradistinction with reassessment under Section 147. As regards the Calcutta High Court decision in Kashiram Tea Industries Ltd.'s case (supra), it would appear that the same was not adverted to before the Bombay High Court. A similar view was taken by the Madras High Court in M.RM.M.M. N. Natarajan Chettiar v. ITO [1961] 42 ITR 29 inasmuch as their Lordships held that there was no provision to increase the interest chargeable under Section 18A in the course of reassessment proceedings under Section 34 of the 1922 Act. The only dissenting decision is that of the Calcutta High Court in Kashiram Tea Industries Ltd.'s case (supra). The overwhelming view in this regard of the various High Courts appears to be in favour of treating an assessment made under Section 147 to be different from a regular assessment. Moreover, the words 'regular assessment' have been defined in Section 2(40) whereas, there was no similar definition in the 1922 Act. Therefore, the earlier decision of the Bombay High Court in Deviprasad KejriwaVs case (supra) has been rightly distinguished by the Bombay High Court. Having due regard to all these considerations, we are satisfied that an assessment made under Section 147 read with Section 143(3) or Section 144 would not be a 'regular assessment' as defined in Section 2(40) and as such, penal interest under Section 139(8) and Section 215 cannot be charged inasmuch as, these Sections specifically relate the levy to the completion of a regular assessment.

We accordingly, set aside the orders of the AAC, in this behalf and cancel the penalties levied in this regard.

10. In the result, the appeals field by the assessee are allowed and the AAC's orders are set aside.


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