Full Judgment
Since no return was earlier filed by the assessee and no assessment was earlier made, it was not a case of re-opening an assessment made earlier. The Assessing Officer had therefore rightly charged interest under sections 139(8) and 217 of Income-tax Act, 1961. The Tribunal has deleted the interest levied under sections 139(8) and 217 by holding that such assessment made by the Assessing Officer under section 147 cannot be treated as regular assessment. Reliance has been placed on the judgment of the Hon'ble Supreme Court in the case of Modi Industries Ltd v. CIT [1995] 216 ITR 759/82 Taxman 377. It has been pointed out that the Supreme Court in the said judgment has clearly held that the first assessment order made either under section 143 or 144 or section 143 r/w 147 will be a regular assessment in which the interest could be charged under section 139(8)/217. The learned D.R.reiterated the same submissions during the course of hearing based on the judgment of the Hon'ble Supreme Court in the case of Modi Industries Ltd. (supra).
2. The learned counsel for the assessee submitted that the Tribunal has relied upon several judgments referred to in para 4.1 of the order. In para 4.2, the Tribunal has taken into consideration the insertion of sub-section (6) in section 215 as also the corresponding amendments made in section 139(8). It has been held in various Court decisions that the said amendments made with effect from assessment year 1985-86 are not retrospective. The Tribunal after considering the relevant judgments on the point in issue came to the conclusion that an assessment or re-assessment made under section 147 is not a regular assessment within the meaning of section 2(40) for the purposes of levy of interest under sections 217 and 139(8) for and upto assessment year 1984-85 prior to amendment of the relevant provisions w.e.f. assessment year 1985-86. Such a view is also fortified by the judgment of Honourable Rajasthan High Court in the case of CIT v. Gauri Shankar Patel. The Head Note is reproduced hereunder :- "Assessment completed for the first time under section 143(3) in pursuance of notice under section 148 is not a regular assessment and interest under section 217 cannot be charged in such assessment." Similar view was taken by the Hon'ble Rajasthan High Court in the case of CIT v. Multimetals Ltd [1991] 187 ITR 99.
3. The learned D.R. placed heavy reliance on the judgment of Hon'ble Supreme Court in the case of Modi Industries Ltd. (supra) that was a judgment involving consideration of the meaning of expression "regular assessment" in section 214. The Hon'ble Supreme Court took into consideration the various amendments made in section 214, 215 w.e.f.
1-4-1985. It may be relevant here to reproduce the findings given by the Hon'ble Supreme Court in the aforesaid case :- "Upto March 31, 1975, interest under section 214 is payable from the first day of April of the relevant assessment year to the date of the first assessment order. The amount on which the interest is to be paid is the amount of advance tax paid in excess of the tax payable by the assessee as calculated in the regular assessment (the first assessment order). The amount on which interest was payable did not very due to reduction or enhancement of tax as a result of any subsequent proceedings. But with effect from April 1, 1985, while the period for which interest was payable remained constant, the amount on which the interest, was payable, varied with the variation in the quantum of refund as a result of any subsequent orders.
With effect from April 1, 1985, interest payable under section 214 will increase or decrease in accordance with the variation in the quantum of the excess payment of tax brought about by order passed subsequent to the regular assessment as mentioned in sub-section (1A)." It is clear from the aforesaid findings given by the Hon'ble Supreme Court in the case of Modi Industries Ltd. that they have not given any express finding that the amendments made w.e.f. 1-4-1985 will have retrospective operation. On the other hand, the Hon'ble Supreme Court has held that interest payable under section 214 w.e.f. 1-4-1985 will increase or decrease in accordance with the variation in the quantum of the excess payment of tax brought about by the orders passed subsequent to the regular assessment in accordance with the amended law. However, prior to 1-4-1985, no such variation will be made due to reduction or enhancement of tax as a result of any subsequent proceedings.
4. It is true that the Hon'ble Supreme Court held that the Explanation (2) introduced by the Taxation Laws (Amendment) Act 1984 w.e.f.
1-4-1985 in section 214 which says that "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 purposes of this section" furnish unmistakable indication of the meaning assigned by the Parliament to the expression "regular assessment" in section 214(1). Such findings have been given at pages 801 and 802 of the said judgment reported in 216 ITR. The said judgment however, nowhere lays down that the provisions of sections namely the Explanation (2) added below section 139(8) or section 215(6) introduced by the same amending Act, which affects the substantive rights, of the tax payers and fastens a liability for levy of interest under sections 139(8), 215, 216, 217 and 273 will be applicable with retrospective effect. Unless a express finding is given by the Hon'ble Supreme Court in a case dealing with the question relating to the prospective or retrospective applicability of these specific provisions, it is not an easy question to be answered that the similar view as has been taken by the Hon'ble Supreme Court in relation to section 214 win automatically apply for interpretation of sections 139(8) and 215(6) introduced by the amending Act 1984 w.e.f. 1-4-1985. The answer to the said question would be more difficult particularly in the light of the fact that several High Courts have given a specific finding that such Explanation (2) added below section 139(8) and section 215(6) are prospective and those cannot be applied with retrospective effect.
5. It may also be worthwhile to reproduce the head note of the judgment of Hon'ble Calcutta High Court in case of Export Enterprises (P.) Ltd. v. ITO [1983] 142 ITR 641 :- "The Law laid down by the Supreme Court cannot be said to have retrospective operation in the sense that although a debate or conflict of judicial opinion is resolved and settled by the Supreme Court, it does not obliterate the existence of such debate, doubt or conflict prior to such decision.
Jiyajeerao Cotton Mills Ltd. v. ITO [1981] 130 ITR 710 (Cal.) followed." The Hon'ble Madras High Court in the case of Seshasayee Paper & Boards Ltd. v. IAC [1986] 157 ITR 342/24 Taxman 604 has held as under :- "Even a wrong order has a finality and unless that finality is disturbed by a process known to law or by a process authorised by law, the rights of the assessee and the revenue will continue to be governed by the order. A decision of the Supreme Court will not automatically have the effect of vacating the order of the Tribunal which has been statutorily made final under section 254(4) of the Income-tax Act, 1961, and which has already been given effect to.
The question as to the capital employed for grant of relief under section 80J of the Income-tax Act, 1961 for the assessment years 1972-73 and 1974-75 came to be decided by the Tribunal and the Appellate Assistant Commissioner respectively and the Income-tax Officer passed consequential orders giving effect to the orders of the appellate authorities. The Inspecting Assistant Commissioner subsequently issued notices for rectification under section 154 in view of the amendment of section 80J by the Finance (No. 2) Act of 1980 with retrospective effect from April 1, 1972. These notices were challenged in the High Court in writ proceedings.
Held, that under the guise of exercising power under section 154, the directions given by the appellate authorities could not be undone. The notices issued by the Inspecting Assistant Commissioner of Income-tax were not valid and were liable to be quashed." 6. A useful reference can also be made to the judgment of the Hon'ble Supreme Court in the case of Poothundu Plantations (P.) Ltd. v. Agrl.
ITO. The Hon'ble Supreme Court in the aforesaid judgment has held as under :- "There can be no doubt that only an apparent error of fact or law can be rectified by an officer. If the mistake of law has to be established by construing the words of a section to find its proper meaning, then such an error cannot normally be a rectifiable error under section 36. If two views are possible, then obviously the error will not be an error apparent from the record. It is, however, well settled that if the Supreme Court has construed the meaning of a section, then any decision to the contrary given by any other authority must be held to be erroneous and such error must he treated as an error apparent on the record. In the instant case, on the strength of the decision of this court in the case of Anglo French Textile Co. Ltd. v. CIT [1953] 23 ITR 82 (SC) : TC 45R, 199, the AAC took the view that his predecessor had committed an apparent error of law in allowing carry forward of losses in the computation of agricultural income tax under the Kerala Agrl. Income-tax Act.
The question is whether section 12 of the Kerala Agrl. Income-tax Act must be interpreted in the manner in which this Court has interpreted section 24 of the Indian Income-tax Act. This is not an easy question to answer. In fact, the Single Judge before whom this question was raised in the writ petition before the Kerala High Court referred the question to a larger Bench for decision. This very fact goes to show that this was not a rectifiable error apparent on the record of the case. The Single Judge felt that the question should be examined by a larger Bench. Moreover, section 24 of the Indian Income-tax Act and section 12 of the Kerala Agrl.
Income-tax Act are not identically worded. Even if it can be established by a long process of reasoning that the meaning of the two sections is the same, the alleged mistake committed by the Agrl.
ITO cannot be treated as a mistake apparent on the record. Here, there is no question of setting off of any loss arising out of any head against any income under another head. The scope of the two Acts and the content of the two sections are materially different.
The judgment of the Supreme Court rendered under the provisions of the Indian Income-tax Act, 1922 could not straightaway be applied to an assessment made under the Kerala Agrl. Income-tax Act. If any error had at all been committed by the Agrl. ITO, it was not an error apparent on the record." In view of the aforesaid facts and discussions, we are of the considered opinion that the judgments of the Hon'ble Supreme Court rendered on September 15, 1955 i.e., subsequent to the date of passing of the order by the Tribunal on 30th September, 1994, relating to interpretation of section 214 of Income-tax Act, 1961 cannot be said to have upheld the retrospective operation in relation to interpretation of section 139(8) - Explanation (2) and 215 (6) introduced w.e.f.
1-4-1985 and it cannot be validly contended that the order passed by the Tribunal suffered from any apparent mistake. The subsequent judgment of the Hon'ble Supreme Court in relation to interpretation of a different provision of Income-tax Act cannot straightaway be applied in relation to interpretation of a different provision and it would not obliterate the existence of debate, doubt or conflict of opinion on the point in issue at the time when the decision was rendered by the Tribunal. The Hon'ble Supreme Court in the case of Poothundu Plantation (P.) Ltd. (supra) has held that even if it can be established, by a long process of reasoning that the meaning and scope of the two different sections is the same, the alleged mistake committed by the Tribunal cannot be treated as a mistake apparent on the record.
7. We are therefore of the considered opinion that the miscellaneous application submitted by the department does not come within the ambit of section 254(2) of Income-tax Act. In our view, the revenue's application has no merit and is accordingly rejected.