U.L. Bhat, C.J.
1. The following question has been referred by the Appellate Tribunal under Section 256(1) of the Income-tax Act, 1961 (for short, 'the Act'), at the instance of the Revenue :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the interest under Sections 139(8) and 217 of the Income-tax Act, 1961, is not chargeable where the first assessment was made under Section 143(3) of the Income-tax Act, 1961, read with Section 147 of the Income-tax Act, 1961 ?'
The assessee is a registered firm. The assessment year is 1978-79. The assessee did not submit a return as contemplated under Sub-section (1) of Section 139 of the Act. The Income-tax Officer did not issue notice to the assessee under Sub-section (2) of Section 139 of the Act. Long after the end of the previous year relevant to the assessment year, the Income-tax Officer issued notice to the assessee under Section 148 of the Act averring that income chargeable to tax had escaped assessment for the assessment year 1978-79 by reason of the failure on the part of the assessee to make a return. On receipt of the notice, the assessee submitted a return and also his account books. The Income-tax Officer finally passed an assessment order dated September 6, 1982, assessing the total income at Rs. 1,14,770 and levying income-tax as also interest under Sections 139 and 217(1A) of the Act. The assessee filed an appeal against this order before the Commissioner of Income-tax (Appeals) raising various contentions including the contention that the escaped assessment having been made in pursuance of notice under Section 148, it was not a regular assessment as defined in Section 2(40) of the Act and contemplated in Sections 139(8) and 217(1A) of the Act and hence interest contemplated in these provisions cannot be levied. The Commissioner of Income-tax (Appeals) upheld this contention. The Tribunal also upheld the contention in a further appeal by the Revenue. Hence, this reference.
2. We will refer to Sub-section (8) of Section 139 of the Act as it stood at the relevant time :
'139.(8)(a) Where the return under Sub-section (1) or Sub-section (2) or Sub-section (4) for an assessment year is furnished after the specified date, or is not furnished, then whether or not the Income-tax Officer has extended the date for furnishing the return under Sub-section (1) or sub-section (2), the assessee shall be liable to pay simple interest at twelve per cent. per annum, reckoned from the day immediately following the specified date to the date of the furnishing of the return or, where no return has been furnished, the date of completion of the assessment under Section 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source :
Provided that the Income-tax Officer may, in such cases and under such circumstances as may be prescribed, reduce or waive the interest payable by any assessee under this sub-section.
Explanation 1.--For the purposes of this sub-section, 'specified date' in relation to a return for an assessment year, means,--
(a) in the case of every assessee whose total income, or the total income of any person in respect of which he is assessable under this Act, includes any income from business or profession, the date of the expiry of four months from the end of the previous year or where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year, or the 30th day of June of the assessment year, whichever is later ;
(b) in the case of every other assessee, the 30th day of June of the assessment year.
Explanation 2.--For the purposes of this sub-section, where the assessee is a registered firm or an unregistered firm which has been assessed under Clause (b) of Section 183, the tax payable on the total income shall be the amount of tax which would have been payable if the firm had been assessed as an unregistered firm.
(b) Where as a result of an order under Section 154 or Section 155 or Section 250 or Section 254 or Section 260 or Section 262 or Section 264, the amount of tax on which interest was payable under this subsection has been reduced, the interest shall be reduced accordingly, and the excess interest paid, if any, shall be refunded.'
We may also notice the following Explanation 2 substituted by the Taxation Laws (Amendment) Act, 1984, with effect from April 1, 1985 :
'Explanation 2.--Where, in relation to an assessment year, an assessment is made for the first time under Section 147, the assessment so made shall be regarded as a regular assessment for the purpose of this sub-section.'
Sub-section (8) deals with cases where the return under Sub-section (1) or (2) or (4) was not furnished at all or furnished after the specified date. In such cases, liability to pay simple interest at 12 per cent. per annum would arise for the period referred to in the sub-section. Interest is payable on the amount of tax payable on the 'total income as determined on regular assessment', as reduced by the advance tax, if any, paid, and any tax deducted at source.
3. The expressions 'assessment' and 'regular assessment' are defined in the Act. Clause (8) of Section 2 of the Act defines assessment as 'including reassessment'.
4. Clause (40) of Section 2 defines 'regular assessment' as follows ;
''regular assessment' means the assessment made under Section 143 or Section 144.'
Going by this definition, 'regular assessment' would comprehend within its scope only assessment under Section 143 or under Section 144. Assessment under Section 143 can be made only in cases where a return has been made under Section 139. Cases of failure to make a return as required by notice under Section 139(2) or to make a return or a revised return under Sub-section (4) or Sub-section (5) of Section 139 and certain other cases are covered by Section 144 which empowers the Income-tax Officer to make a best judgment assessment.
5. Section 147 deals with cases of escaped income on account of any of the circumstances referred to therein. It takes in cases of income escaping assessment on account of failure to make a return under Section 139 or to disclose truly or fully all material facts or in consequence of information in the possession of the Income-tax Officer. The assessment or reassessment under Section 147 contemplates assessment being made under that provision, subject to Sections 148 to 153. Before making assessment or reassessment or recomputation under Section 147, notice has to be issued to the assesses as required under Section 148. Sub-section (1) of Section 148 requires notice to be issued requiring the person concerned to furnish a return of his income.
6. Sub-section (1) further states :
'The provisions of this Act shall, so far as may be, apply accordingly, as if such return were a return required to be furnished under Section 139.'
A reading of the provisions in Sections 139, 143, 147 and 148 of the Act would make it clear that the assessment or reassessment contemplated under Section 147 is quite different in nature and content from the assessment under Section 143. Assessment or reassessment under Section 147 can be made only after issue of a notice under Section 148. The provision in Section 148 declaring that, as far as may be, the provisions of the Act shall apply as if the return were a return under Section 139 is a device adopted to indicate the procedure to be followed after issue of the notice under Section 148. The procedure contemplated in Section 143 is required to be followed as far as may be. This cannot lead to the inference that assessment or reassessment under Section 147 is assessment under Section 143 or that it is a regular assessment as defined in Section 2(40) of the Act. That being so, a proceeding initiated under Section 147 and terminating in assessment or reassessment is not a 'regular assessment' as contemplated in Section 139(8) of the Act and to such a case the provisions of Section 139(8) cannot apply. The same is the position regarding Section 217 of the Act.
7. The definition Section 2 commences with the words 'In this Act, unless the context otherwise requires,' It is suggested at the Bar that the context of Sections 139(8) and 217 demand that the expression 'regular assessment' occurring therein should not be ascribed the meaning given to it in Section 2(40) and must be taken in its ordinary sense. We are unable to find any difference between the ordinary meaning of 'assessment' and 'regular assessment'. The differentiation is brought about by the Legislature and that too deliberately. There are various provisions which use the expression 'assessment' or 'reassessment'. There are some provisions such as Section 139(8), Section 217 which use the expression 'regular assessment'. There is nothing in the context of these provisions which detracts from the application of the definition in Section 2(40). There can be no doubt that the expression has been used in these provisions in the sense in which it has been defined in Section 2(40) of the Act and the logical consequence would be to hold that the expression 'regular assessment' in Section 139(8) and Section 217 would not attract assessment initiated under Section 147 of the Act.
8. We may refer in this connection to a judgment of the Karnataka High Court delivered by K. Jagannatha Shetty J., as he then was, and S.R. Rajasekhara Murthy J., in Charles D'Souza v. CIT : [1984]147ITR694(KAR) . The judgment followed the views of the High Courts of Kerala, Patna, Allahabad, Orissa, Punjab and Haryana and Calcutta, which is in accordance with the view we have taken. The same view was followed in later decisions, namely, CIT v. Padma Timber Depot [1988] 169 ITR 646, Prakash Lal Khandelwal v. ITO : [1989]180ITR604(Patna) and CIT v. United Machinery and Appliances : [1993]200ITR569(Cal) . A later decision of the Kerala High Court in P.A. Abdul Muthalif Rowther v. ITO : [1976]102ITR694(Ker) takes a view different from the view taken by an earlier decision of the same High Court in Gates Foam and Rubber Co. v. CIT : [1973]90ITR422(Ker) , but without referring to the earlier decision. We are unable to agree with, the view taken in P.A. Abdul Muthalif Rowther's case : [1976]102ITR694(Ker) for the reasons already indicated by us.
9. Learned counsel for the Revenue has drawn our attention to the substituted Explanation 2 to Sub-section (8) of Section 139, according to which an assessment made for the first time under Section 147 shall be regarded as a regular assessment for the purposes of Section 139(8). This Explanation has been substituted with effect from April 1, 1985, by the Amendment Act of 1984. The attempt made by the Explanation is to widen the scope of the expression 'regular assessment' used in Sub-section (8) by bringing within its ambit assessments made for the first time under Section 147. This amendment has been apparently incorporated in view of the decisions of the various High Courts referred to in the decision of the Karnataka High Court. We do not understand the provision to be of a clarificatory nature ; it is clearly amendatory in nature and cannot have retrospective effect so as to apply to any period prior to April 1, 1985.
10. We, therefore, answer the question in the affirmative, that is, in favour of the assessee and against the Revenue. Send a copy of this judgment and order under the signature of the Registrar and seal of the High Court to the Appellate Tribunal. There will be no order as to costs.