Per Shri P. I. Mohan Singh, Judicial Member - This appeal of the revenue relates to the assessment year 1981-82 and arise out of the order of the AAC, dated 19-3-1983. The revenue contests the appeal on the ground that on the facts and in the circumstances of the case, the AAC erred in deleting the interest charged under section 139(8) /215/217 of the Income-tax Act, 1961 (the act).
2. The brief facts of the case are as under : The assessee held one-seventh beneficial interest in Bhatia Family Trust. The share of her income assessable in this year amounted to Rs. 28,572. As no return had been filed by the assessee under section 139(1), the ITO issued a notice under section 148 of the Act on 7-7-1982 which was served on the assessee on 13-7-1982. Even before the notice under section 148 was served on the assessee, the assessee had filed the return on 12-7-1982.
In the order passed by the ITO under section 143(3), read with section 147(a). of the Act, he directed the levy of interest under section 139 and 215.
3. On appeal before the AAC, the point which came up for consideration before him is whether the appeal objecting to the levy of penal interest alone is maintainable or not. The ITO relying on the decision of the Gujarat High Court in the case of CIT v. Sharma Construction Co.
[1975] 100 ITR 603 contended that the appeal objecting to the levy of penal interest alone is not maintainable. The learned counsel for the assessee, on the other hand, contended that the appeal is maintainable because the assessee is denying her liability to be assessed to penal interest. In support of the aforesaid proposition he relied on the decision of the Bombay High Court in the case of CIT v. Daimler Benz A.G. [1977] 108 ITR 961 (FB). He also relied upon the decision of the Karnataka High Court in National Products v. CIT [1977] 108 ITR 935. He further contended that in a subsequent decision, namely, in the case of Bhikhoobhai N. Shah v. CIT [1978] 114 ITR 197, the Gujarat High Court explained the case in Sharma Construction Co. (supra) relied upon by the ITO and their Lordships have held that if the assessee denies his liability to pay penal interest at all, an appeal would lie. Further, relying upon the decision of the Bombay High Court in the case of CIT v. Gannon Dunkerley & Co. Ltd. [1971] 79 ITR 637 he argued that all the grounds taken fairly read to say that no interest was chargeable at all then the appeal would be competent. He claimed that in this case this exactly is the sum and substance of the grounds of appeal. The counsel also relied upon the order of the Commissioner (Appeals) dated 7-5-1982 in the case of Ravindra Jaiswal for the assessment year 1978-79 wherein on identical facts the appeal was held to be maintainable.
Alternatively, the counsel argued that if the appeal is not maintainable under clause (c) of section 245(1) of the Act, it is maintainable under clause (e). In this case it is not disputed that the assessment has been made in the course of proceedings initiated under section 147(a). Therefore, it is indeed an assessment under section 147 against which the appeal falls under clause (e) of section 246(1).
According to him, in such an appeal there is no restriction as to the point which the assessee may agitate. In support of the aforesaid proposition, he relied upon the decision of the Calcutta High Court in the cause of Surajmal Ganeshram v. CIT [1979] 120 ITR 715. He, therefore, contended that the order for levy of interest under sections 139 and 215 part of the order under section 147 and the interest levied can be agitated in appeal under clause (e) of section 246(1). On merits, the counsel argued that interest under section 139 can be charged with reference to tax payable on the total income as determined on regular assessment only. With regard to interest under section 215 the same can be charged up to the date on regular assessment only.
According to him, the regular assessment is not the same thing as in assessment under section 147. For the aforesaid proposition, he relied upon the decision of the Bombay High Court in the case of D. Swarup, ITO v. Gammon India Ltd. [1983] 141 ITR 841. After hearing the learned counsel for the assessee, the AAC following the ratio of the Bombay High Court in the case of Daimler Benz A. G. (supra) held that so far as the interest under section 215/217 is concerned, the matter is fully covered by the aforesaid decision, as according to him, the levy of interest can be challenged but only when the assessee denies his liability to assessee advance tax. Insofar as the interest under section 139 is concerned, he relied upon the decision of the Bombay High Court in the case of CIT v. S. J. Mehta (sic) and held that no appeal against interest under section 139 is competent. The AAC accepting the alternative argument of the learned counsel for the assessee held that the appeal against charging of interest under section 139 and 215 is admissible. Further, relying on the decision of the Bombay High Court mentioned supra, he deleted the interest charged by the ITO under sections 139 and 215 as against this order of the AAC, the revenue is in appeal before us.
4. At the time of hearing of the appeal, the learned departmental representative raised an additional ground of appeal namely, on the facts and in the circumstances of the case, the AAC erred in entertaining the appeal against charging of interest under section 139(8) /215/217.
5. The learned departmental representative contended before us that notice under section 148 was issued on 7-7-1982 and served on the assessee on 13-7-1982. The assessee had filed the return on 12-7-1982, that is, even before the receipt of notice. He therefore, contended that the order passed by the ITO is not one passed in the reassessment proceedings, but one passed in regular proceedings. He submitted that the section has been wrongly quoted by the ITO as section 143(3) read with section 147(a). Since the ITO has wrongly quoted the section the same, according to him is curable under section 292B of the Act. He submitted that the order of the AAC is erroneous inasmuch as he erred in entertaining the appeal and also deleting the interest. He distinguished the decision of the Calcutta High Court in Surajmal Ganeshrams case (supra) wherein the Calcutta High Court has held that an appeal against the order under section 147 can also cover a ground relating to the levy of interest and there was no restriction on the ground raised in such an appeal. According to him, the point that came up before the Calcutta High Court in the aforesaid case is the question of jurisdiction. Their Lordships of the Calcutta High Court, considering the jurisdictional issue held that an appeal was maintainable whereas in the case in question since the assessee denied the liability to be assessed to interest, the appeal is not maintainable. He further relied on the decision of the Bombay High Court in the case of Daimler Benz A. G. (supra) in support of his contention that the appeal is not maintainable.
6. the learned counsel for the assessee did not seriously challenge to the admission of the additional ground of appeal. He, however, contended that the case of the assessee is fully covered by the decision of the Calcutta High Court in the case of Surajmal Ganeshram (supra) and there is no contrary decision of any other High Court on this point. He relied upon certain observations made by their Lordships of the Calcutta High Court, in the aforesaid decision appearing on pages 724 and 725, wherein they have further held that the right of appeal from an assessment or reassessment under section 147 appears to be a general right and if such an appeal is admitted, then it does not appear that the assessee is confined to certain grounds and not others.
Relying upon the decision of the Bombay High Court in Daimler Benz A.G.s case (supra), the counsel contended that the assessee in this case has really denied his liability to the levy of interest and, therefore, the ratio laid down in the aforementioned case will squarely apply to the facts of this case. He further relied upon the decision of the Bombay High Court in Addl. CIT v. Mustakhusein Gulamhusein Ghia [1983] 143 ITR 951 wherein it was held that on an appeal against an order of assessment as a whole, the assessee is entitled to challenge the levy of interest. To negative the argument of the learned departmental representative that the assessment order passed by the ITO is not one passed in reassessment proceedings, but one passed in regular proceedings, the learned counsel for the assessee contended that since the assessee has filed the return after the issue of notice under section 148, the assessment order passed by the ITO is an order under section 143(3, read with section 147, and not an order Supreme Court 143(3). In support of the aforesaid proposition, he relied on the decision of the Allahabad High Court in Dr. Onkar Dutt sharma v. CIT [1967] 65 ITR 359 wherein it was held that the initiation of proceedings under section 34 of the Indian Income-tax Act, 1922 commence on the issue a notice under that section. Similar is the view expressed by the Patna High Court in Raja Bahadur Kamakhya Narayan Singh v. State of Bihar [1962] 45 ITR 516 and, in particular, he relied on the observation at page 522. On merits he submitted that the case of the assessee is fully covered by the Bombay High Court decision in the case Gammon India Ltd. (supra) which is followed by the Bench of the Tribunal [IT appeal Nos. 106, 107 and 447 (Nag.) of [1983], dated 10-2-1984]. He, therefore, submitted that the order of the AAC is to be sustained on merits also.
7. We have carefully considered the facts and circumstances of the case and the arguments advanced by both the sides. at the outset we find that the ground relating to challenge on maintainability of the appeal is raised at a very late stage. In view of the decision of the Calcutta Bench of the Tribunal in WTO v. Shiva Prasad Bagaria [1982] 2 ITD 449, the additional ground taken by the revenue is not maintainable.
However, since the counsel for the assessee has not seriously challenged the admission of the additional ground, the same is considered and disposed of on merits. Coming to the appealability of the order wherein the assessee has challenged the levy of interest, there cannot be an iota of doubt that the case of the assessee is fully covered by the decision of the Calcutta High Court in Surajmal Ganeshrams case (supra). Whatever may be the facts of that case, the principle laid down by the Calcutta High Court is that in an appeal against an order under section 147, there is no restriction as to the ground as is placed in section 246(c). We also find the difference in language used in section 246(c) and (e). Section 246(c) reads as under : "(c) 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 to the status under which he is assessed :" "(e) an order of assessment, reassessment or recomputation under section 147 or section 150;" On a careful reading of the aforesaid clauses, it is seen that separate appeal is provided to the AAC against an order of the ITO passed under section 147. For deciding the maintainability of the appeal what is to be seen is whether the order passed by the ITO is an order under section 143(3) or an order under section 147. When once we hold that the order [passed by the ITO is one passed under section 147, the provision for appeal is found in clause (c) of section 246. If we accept the argument of the learned departmental representative, clause (e) of section 246 becomes redundant. We are, therefore, of the considered opinion that the appeal against an order under section 147 challenging the levy of interest is maintainable. The appeal in question is admittedly against an order under section 147(a) in the light of the proposition laid down by the allahabad High Court and Patna High Court, mentioned supra, and is covered by clause (e) of section 246 and in such an appeal, there is no restriction or limitation as to the raising of any ground. Thus, the preliminary objection raised by the learned departmental representative is rejected.
8. Coming to the merits, the ITO himself has mentioned in the order the section under which he has passed the order. When once a notice is issued, the ITO assumes jurisdiction and that jurisdiction is not lost by filing of the return by the assessee. Be that as it may, it is too late for us to consider at this stage that the order was not passed by the ITO under section 147(a) when he himself has quoted the section under which he has passed the order. When once it is held that the assessment is framed under section 147(a), the case of the assessee is fully covered by the Bombay High Courts decision in Gammon India Ltd.s case (supra) and the view that the Tribunal has taken in the case of H.N. Malak (supra).