P. Krishnamoorthy, J.
9. The question involved in this writ petition is as to whether an assessment made for the first time by resort to Section 147 of the Income-tax Act, 1961, is a 'regular assessment' for the purpose of charging interest under Section 217 of the above Act. A reference to the Full Bench was necessitated as the Division Bench which heard the matter felt that there is a direct conflict between two Bench decisions of this court in Gates Foam and Rubber Co. v. CIT : [1973]90ITR422(Ker) and Kerala Kaumudi (P) Ltd. v. CIT : [1990]181ITR30(Ker) , in regard to the scope and import of the expression 'regular assessment' occurring in Section 217 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act').
10. The petitioner is an assessee to income-tax on the file of respondent No. 1. She is a partner of the firm, M/s. Thamarapilly Brothers, Cochin, and Cochin Wood Industries. For the assessment year 1980-81 (accounting year ending March 31, 1980), the petitioner was liable to pay advance tax under the Act. The petitioner submitted an estimate of her income as required under Section 209A(1) of the Act on March 15, 1980, as she was not an assessee till then ; but no payment of advance tax was made in accordance with the estimate. Though the petitioner was bound to submit a return of her income for the assessment year 1980-81 on or before July 1, 1980, the return could not be filed in time. Later, the petitioner was served with a notice under Section 147 of the Act, for submission of the return which was filed by her on February 19, 1983. Along with the return, she produced the challan for having paid self-assessment tax in full under Section 140A of the Act, The first respondent issued a notice under Section 143 and completed the assessment by exhibit P1 order dated October 12, 1983. While completing the assessment, the first respondent levied interest under Section 217 in the sum of Rs. 56,368. Aggrieved by the levy of interest under Section 217, the petitioner requested the second respondent, the Inspecting- Assistant Commissioner of Income-tax, Ernakulam, by an application to reduce or waive the interest under Section 217 on the ground that such interest could not be levied, and there were circumstances which permitted waiver of such interest pursuant to Rule 40 of the Income-tax Rules. By exhibit P-3 order, the second respondent rejected the application and confirmed the levy of interest. Aggrieved by exhibit P-3, the petitioner filed a revision petition under Section 264 of the Act before the third respondent. The third respondent declined to interfere and dismissed the revision petition by his order (exhibit P-5) dated July 23, 1986. The petitioner is challenging the above orders with regard to levy of interest under Section 217 of the Act alone.
11. The only ground of attack against the levy of interest under Section 217 of the Act raised by counsel for the petitioner is that, in order to levy interest under the aforesaid section, the assessment should be a 'regular assessment'. According to counsel, the assessment made by resort to Section 147 read with Section 148 is not a regular assessment as defined in the Act and, accordingly, the petitioner is not liable for any interest under Section 217. In support of the aforesaid contention, counsel relied on a Division Bench decision of this court in Gates Foam and Rubber Co.'s case : [1973]90ITR422(Ker) . According to counsel for the petitioner, assessment for the assessment year 1980-81 having been made by resort to Section 147, it is not a 'regular assessment' and, accordingly, the first respondent has no jurisdiction to levy interest as contemplated under Section 217 of the Act. Thus, the only question to be considered in this case is as to whether an assessment made for the first time by resort to Section 147 of the Act is a 'regular assessment' for the purpose of Section 217 of the Act.
12. The main argument of counsel for the petitioner for contending that an assessment as in the present case is not a regular assessment is based on the definition of 'regular assessment' in Section 2(40) of the Act and certain other relevant provisions contained in the Act. 'Regular assessment' is defined in Section 2(40) of the Act as follows :
''regular assessment' means the assessment made under Section 143 or Section 144;'
13. Section 147 of the Act deals with income escaping assessment and, according to counsel for the petitioner, power is given to the Income-tax Officer to assess such income under Section 147 if the conditions mentioned in Clauses (a) and (b) are satisfied. On that basis, counsel contended that an assessment made by resort to Section 147 is not an assessment under Section 143 or Section 144 of the Act. It is his case that a distinction is made in the Act between an assessment under Section 143 or Section 144 and an assessment under Section 147 of the Act and he relied on the provisions contained in Section 153 and Section 246 for the above purpose. The income escaping assessment has to be assessed subject to the provisions of Sections 148 - 153. Section 153 of the Act deals with the time limit for completion of assessments and reassessments. According to counsel, a distinction is made in Section 153 between an assessment made under Section 143 or Section 144 and an assessment made under Section 147 as they are separately dealt with under Sub-section (1) and Sub-section (2) of the aforesaid section. Section 246 which confers a right of appeal against an order of assessment also makes a distinction between an order of assessment made under Section 143 or Section 144 on the one hand and an assessment made under Section 147 on the other. Section 246(c) provides for an appeal against an assessment under Section 143 or Section 144 whereas Sub-clause (e) provides for an appeal against an order of assessment made under Section 147 or Section 150. Based on these provisions, counsel for the petitioner maintains that there is a distinction between an assessment and a regular assessment and that only an assessment made under Section 143 or Section 144 will come under the definition of' regular assessment'. On the other hand, counsel for the Revenue contended that any assessment made 'for the first time', whether it be under Section 143 or Section 144 or by resort to Section 148 is a regular assessment within the meaning of the Income-tax Act. Counsel for the Revenue further contended that, on the wording of Sections 147 and 148, it is clear that any notice under Section 148 has to be deemed to be a notice under Section 139(2) of the Act and, thereafter, all the other provisions of the Act shall apply accordingly for the assessment. It is further submitted by him that there is no section other than Sections 143 and 144 for making an order of assessment and as such the assessment as in the present case has also to be treated as an order of assessment under Section 143 or 144 thereby making it a regular assessment. Counsel for the Revenue relied on the provisions contained in Section 140A of the Act which deals with self-assessment. Sub-section (1) of Section 140A provides that if any tax is payable on the basis of any return required to be furnished under Section 139 or Section 148, after taking into account the amount of tax, if any, already paid, the assessee has to pay the tax before furnishing the return and the return shall be accompanied by proof of payment of such tax. Whether the return is filed under Section 139 or in pursuance of a notice under Section 148, the assessee has to pay the, admitted tax along with the return, no doubt taking into account the tax already paid by him. Sub-section (2) of Section 140A provides that, after a regular assessment under Section 143 or Section 144 has been made, any amount paid under Sub-section (1) shall be deemed to have been paid towards the regular assessment. The provisions contained in Section 140A(2), according to counsel for the Revenue, make it absolutely clear that even an assessment made by resort to Section 147 is a regular assessment under Section 143 or Section 144.
14. As far as this case is concerned, we are concerned only with the question as to whether an assessment made for the first time by resort to Section 147 is a regular assessment or not. It will be advantageous to understand the general scheme of the Act before going into this question and the decisions on that aspect. Under Section 139 of the Act, every person who is assessable under the Income-tax Act has to file a return of his income within the time stipulated therein. If a person having assessable income omits to file a return and if the Income-tax Officer is of the opinion that such a person is assessable under the Act, he may, before the end of the relevant assessment year, issue a notice and serve the same on him, requiring him to furnish, within 30 days from the date of service of notice, a return of his income verified in the prescribed manner and setting forth such other particulars as may be necessary under Section 139(2) of the Act. It is clear from the aforesaid sub-section that notice under Section 139(2) has to be issued before the end of the relevant assessment year. Under Section 140A of the Act, any tax payable on the basis of any return filed voluntarily by the assessee or in pursuance of a notice under Section 139(2) has also to be paid along with the return. Section 142 deals with the enquiry to be made by the Income-tax Officer before making an assessment on any person who has filed a return. Section 143 authorises the Income-tax Officer to determine the sum pay able by the assessee and to make an order of assessment. The Income-tax Officer is authorised to pass an order of assessment without requiring the presence of the assessee or the production of any evidence in support of the return or after an enquiry under Section 142. Section 144 deals with best judgment assessments and the Income-tax Officer is given power to make a best judgment assessment if a person fails to make a return required by any notice given under Sub-section (2) of Section 139 or fails to comply with any of the terms of a notice issued under Sub-section (1) of Section 142 or, even after filing a return, the assessee fails to comply with all the terms of a notice issued under Sub-section (2) of Section 143. Thus, Sections 139 - 144 deal with the filing of returns, enquiry by the Income-tax Officer and the order of assessment to be made by the Income-tax Officer.
15. Section 147 of the Act deals with income escaping assessment. According to that section, if the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year, or to disclose all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, he may assess a person to income-tax subject to the provisions contained in Sections 148 - 153. So also, even if a person has filed a return, if the Income-tax Officer has, on the basis of information in his possession, reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year, subject to the provisions of Sections 148 - 153. Thus, under Section 147 of the Act, the Income-tax Officer has power and jurisdiction to make an assessment for the first time if a person has not filed any return at all or to reassess the income even if an assessment order has already been made on the basis of the return filed by him, if there are materials available with him to come to the conclusion that income chargeable to tax has escaped assessment. As stated earlier, in this case, we are concerned only with assessment made for the first time under Section 147. Section 148 of the Act deals with the procedure to make an assessment by resort to Section 147. Section 148 enjoins the Income-tax Officer to serve a notice on the assessee containing all or any of the requirements which may be included in a notice under Sub-section (2) of Section 139. Section 148 further provides that, on the issuance of such a notice, all the other provisions of the Act, in so far as they relate to assessment, shall apply as if the notice was a notice issued under Sub-section (2) of Section 139. Sections 149 - 153 of the Act deal with the time limit for such a notice and other incidental matters. Sections 207 - 213 of the Income tax Act, 1961, deal with the liability, computation and mode of payment of advance tax payable under the Act. Section 214 provides for payment of interest by the Government on the amount by which the aggregate amount of advance tax paid during any financial year exceeds the amount of tax determined on regular assessment. Section 215 provides for payment of interest by the assessee if the advance tax paid by him under Section 209A or 212 on the basis of his own estimate is less than 75% of the tax assessed on the regular assessment. Section 216 makes an assessee liable to pay interest if he has underestimated the income. Section 217 provides for payment of interest by an assessee where he has not sent the statement or estimate of income as provided in Section 209A. Section 217, so far as it is relevant to this case, is as follows :
'217. (1) Where, on making the regular assessment, the Income-tax Officer finds--
(a) that any such person as is referred to in Clause (a) of Sub-section (1) of Section 209A has not sent the statement referred to in that clause or the estimate in lieu of such statement referred to in Sub-section (2) of that section ; or
(b) that any such person as is referred to in Clause (b) of Sub-section (1) of Section 209A has not sent the estimate referred to in that clause,
simple interest at the rate of twelve per cent. per annum from the 1st day of April next following the financial year in which the advance tax was payable in accordance with the said Sub-section (1) or Sub-section (2) up to the date of the regular assessment shall be payable By the assessee upon the amount equal to the assessed tax as defined in Sub-section (5) of Section 215.'
16. The true ambit and import of the expression ' regular assessment' has been the subject-matter of judicial interpretation in various cases, both under the Indian Income-tax Act, 1922, and under the 1961 Act. Some High Courts have taken the view that an assessment made by resort to Section 147 is not a 'regular assessment'. Some other High Courts have taken the view that an assessment made for the first time by resort to Sections 147 and 148 is a 'regular assessment'. The Bombay High Court alone has taken the view that an assessment under Section 147, whether it be an assessment for the first time or a reassessment, will also be a regular assessment as contemplated under the Income-tax Act, 1961. A question has also arisen in interpreting Section 214 of the Act as to whether an assessment made in pursuance of an appellate or revisional order will be a regular assessment or not, and all the High Courts, including a Full Bench of this court in CIT v. G. B. Transports : [1985]155ITR548(Ker) , have taken the view that such an assessment will not be a regular assessment and that only the first assessment will be a regular assessment. Gates Foam and Rubber Co.'s case : [1973]90ITR422(Ker) , CIT v. Ram Chandra Singh : [1976]104ITR77(Patna) , Smt. Kamla Vati v. CIT , CIT v. Smt. Jagjit Kaur : [1980]126ITR540(All) , CIT v. Ganeshram Nayak : [1981]129ITR43(Orissa) , Monohar Gidwany v. CIT : [1983]139ITR498(Cal) , Charles D'Souza v. CIT : [1984]147ITR694(KAR) and CIT v. Padma Timber Depot [1988] 169 ITR 646 are cases coming under the first category. K. Gopalaswami Mudaliar v. Fifth Addi ITO : [1963]49ITR322(Mad) , National Agricultural Cooperative Marketing Federation of India Ltd. v. Union of India : [1981]130ITR928(Delhi) and CIT v. Pratap Singh of Nabha : [1982]138ITR27(Delhi) are cases coming under the second category. In Deviprasad Kejriwal v. CIT : [1976]102ITR180(Bom) , the Bombay High Court has taken the view that any assessment mad,e in pursuance of a proceeding under Section 147, whether it is an assessment for the first time or a reassessment will be a 'regular assessment' under the Act. It is not necessary for us to go to the extent the Bombay High Court has gone for the purpose of this case, nor does he question arise in the present case. Here, we are concerned only with the question as to whether an assessment made for the first time by resort to Section 147 is a regular assessment or not.
17. In the first category of cases--Smt. Kamla Vati's case , Smt. Jagjit Kaur's case : [1980]126ITR540(All) , Ganeshram Nayak's case : [1981]129ITR43(Orissa) , Charles D'Souza's case : [1984]147ITR694(KAR) and Padma Timber Depot's case [1988] 169 ITR 646 the question arose as to whether an assessment made for the first time by resort to section ,147 is a regular assessment or not. The other cases were cases of reassessment under Section 147. The Division Bench case of our High Court (Gates Foam and Rubber Co.'s case : [1973]90ITR422(Ker) ) was not a case of assessment for the first time under Section 147 but a case of reassessment under Section 147. In all the decisions wherein the question regarding assessment for the first time arose, apart from relying on the definition in Section 2(40) and the other provisions of the Act, reliance was placed on the Division Bench decision of this court aforementioned. But it is to be noted that Gates Foam and Rubber Co.'s case : [1973]90ITR422(Ker) was concerned with penalty proceedings under Section 273 of the Act, and it arose in a proceeding for reassessment under Section 147 of the Act. This court was considering the case of reassessment under Section 147 and Govindan Nair J. (as he then was) made it clear that they have not considered the question as to whether any distinction has to be drawn on the basis of the provisions of the Income-tax Act, 1961, in respect of an assessment for the first time made under Section 147. It is pertinent to note the following observations made by the learned judge (at page 425) :
'Our attention has been drawn to a decision of the Madras High Court in Natarajan Chettiar v. 1TO, Karaikudi : [1961]42ITR29(Mad) , and a later decision of the same High Court in Gopalaswami Mudaliar v. Fifth Addl. 1TO, Coimbatore : [1963]49ITR322(Mad) . In both these cases the section that was considered was Section 18A(6) of the Indian Income-tax Act, 1922. In the former decision the view taken was that 'regular assessment' mentioned in Section 18A(6) will refer only to assessment made without resort to Section 34 of that Act. This view appears to have been practically dissented from in the decision in Gopalaswami Mudaliar v. Fifth Addl. ITO, Coimbatore : [1963]49ITR322(Mad) , and a distinction has been sought to be drawn between cases where there has been a previous assessment and cases in which there had been no previous assessment. The decision in Gopalaswami Mudaliar v. Fifth Addl. ITO, Coimbatore : [1963]49ITR322(Mad) , related to a case where there had not been any previous assessment and it was held therein that interest can be charged under Section 18A(6). In the later decision it was suggested that when there had been no previous assessment, the assessment made by resort to Section 34 is a regular assessment and that, therefore, Section 18A(6) will apply to such assessment ; but that section may not apply to a case where there had been previous assessment, before action was taken under Section 34 of the Act. It is not for us to consider whether any such distinction can be drawn on the basis of the provisions of the Indian income-tax Act, 1922, nor are we called upon to consider the correctness of the view taken in Natarajan Chettiar v. ITO, Karaikudi : [1961]42ITR29(Mad) .' .
18. It is thus clear from the aforesaid observations that this court has not considered the question as to whether an assessment made for the first time by resort to Section 147 will be a 'regular assessment' or not. This court has not decided that question as it did not arise and the case before the Division Bench was one of reassessment under Section 147. There are certain observations in the said judgment which are of very wide import and may include even assessments which are made for the first time in proceedings under Section 147 of the Act. But we should state that the said observations were not germane to the issue involved in that case.
19. In Gopalaswami Mudaliar's case : [1963]49ITR322(Mad) , a Division Bench of the Madras High Court had to consider the question as to whether an assessment made for the first time by resort to Section 34 of the Indian Income tax Act, 1922, corresponding to the present Section 147 is a regular assessment or not. In support of the argument that such assessments cannot be regular assessments, reliance was placed on the decision of Rajamannar C. J. in Natarajan Chettiar v. ITO : [1961]42ITR29(Mad) . The later Division Bench distinguished that case and held that the above decision must be confined to cases where there has been an initial assessment under Section 23 of the 1922 Act which is, however, reopened under Section 34 and a reassessment made and that those principles will not apply to an assessment for the first time made under Section 34. After elaborately considering various corresponding provisions of the 1922 Act, it was held by their Lordships (at page 327) :
'It seems to us that this decision is only of limited application. It does not lay down any principle that penal interest is not leviable in cases where even the initial assessment of the assessee is made by resort to Section 34. As we understand the decision it must be confined to cases where there has been an initial assessment under Section 23, which is, however, reopened under Section 34 and a reassessment is made. As we have pointed out, the expression 'regular assessment' is used in contrast with a provisional assessment. An initial assessment, though made by resort to Section 34, is none the less a regular assessment.'
20. A Division Bench of the Delhi High Court in National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India : [1981]130ITR928(Delhi) , elaborately considered the scope and content of the expression 'regular assessment' in the light of the provisions contained in the Indian Income-tax Act of 1922 and the 1961 Act. Though the case arose under Section 214 of the Income-tax Act, 1961, dealing with the right of an assessee to get interest on the excess advance tax paid, the matter was elaborately considered and it was held that an assessment made for the first time by resort to Section 34 of the 1922 Act or under Section 147 of the 1961 Act will be a regular assessment. This was followed by the same High Court in Pratap Singh's case : [1982]138ITR27(Delhi) . The Bombay High Court in Deviprasad's case : [1976]102ITR180(Bom) , went further and held that even a reassessment made under Section 34 of the 1922 Act or under Section 147 of the 1961 Act would also be a regular assessment for the purpose of Section 273. Anyhow, it is not necessary to go to that extent as we are concerned in this case only with an assessment made for the first time.
21. After considering the various provisions of the Act and the decisions rendered in the matter, we are clearly of the opinion that the view taken by the Madras High Court in Gopalaswami Mudaliar's case : [1963]49ITR322(Mad) and those of the Delhi High Court in National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India : [1981]130ITR928(Delhi) and Pratap Singh's case : [1982]138ITR27(Delhi) lays down the correct law. As stated earlier, this court has not considered in Gates Foam and Rubber Co.'s case : [1973]90ITR422(Ker) the content and import of the expression 'regular assessment', vis-a-vis an assessment for the first time made under Section 147. A reading of Sections 147 and 148 makes it clear that, at any rate, an assessment for the first time made by resort to Section 147 is a regular assessment. Section 148 enjoins the Income-tax Officer before making an assessment under Section 147 to serve a notice on the assessee containing all or any of the requirements which may be included in a notice under Sub-section (2) of Section 139. The further provision in that section is very significant which provides that the aforesaid notice has to be treated as if it is a notice under Section 139(2) and that all the provisions of the Act shall apply to the subsequent procedure and the final assessment. In other words, the notice issued under Section 148 has to be deemed to be a notice under Section 139(2) and, if the other provisions of the Act have to be applied, an assessment in pursuance of that can be made only under Section 143 or Section 144. We were not shown any other provision by which the Income-tax Officer is authorised to make an order of assessment under the Act. The provisions contained in Section 140A also give an indication that an assessment made in pursuance of a notice under Section 148 is a regular assessment under Section 143 or Section 144, for Section 140A(2) provides that any admitted tax paid in pursuance of Section 140A(1) shall be deemed to have been paid towards the regular assessment under Section 143 or Section 144. It is pertinent to note that Section 140A(1) deals with a return required to be furnished under Section 139 or Section 148. That makes the provision clear that an assessment made under Section 147 also will be a regular assessment under Section 143 or Section 144. Accordingly, we hold that any assessment made for the first time by resort to Section 147 will also be a regular assessment for the purpose of invoking Section 217 of the Act. With great respect, we dissent from the view expressed in certain decisions referred to earlier in this judgment which take a contrary view.
22. If this interpretation is not given to the expression 'regular assessment', it may lead to an anomalous position. Section 217 authorises the Income-tax Officer to levy interest for non-payment of, or deficit payment of, advance tax under the Act. If an interpretation is given to the expression 'regular assessment' as contended by counsel for the petitioner, the result would be that a person who actually files a return within the assessment year will be liable to pay interest if he does not pay advance tax or if there is deficiency in the amount of advance tax, whereas if a person fails to file a return within the assessment year but files it after the assessment year, he is not liable to pay interest at all under Section 217. Courts have to interpret the sections in a statute in a reasonable manner which would not defeat the avowed object. It should not lead to absurd results and, in that view of the matter also, we are clearly of the opinion that an assessment as in the present case will be a regular assessment for the purpose of Section 217 of the Income-tax Act, 1961.
23. It was pointed out that there is an observation in a Full Bench decision of this court in G.B. Transports' case : [1985]155ITR548(Ker) to the effect that an assessment or reassessment under Section 147 is not a regular assessment. That decision was regarding the interpretation of Section 214 of the Income-tax Act, 1961, and the question as in this case did not arise at all therein. Any observation made in a decision has to be understood in the context in which it is made and, in the context in which it was made in the aforesaid decision, it was only an obiter dictum and did not actually arise. That decision cannot be taken as an authority for the proposition that an assessment made for the first time even if it is by resort to Section 147 is not a regular assessment.
24. We make it clear that we have interpreted the expression 'regular assessment' only in the context of an assessment for the first time made under Section 147 and for the purpose of Section 217 of the Act and that we have not expressed any opinion as to whether the same meaning will have to be given to the case of a 'reassessment' by resort to Section 147 or of an assessment under the Act in any other situation.
25. By the Taxation Laws (Amendment) Act, 1984, Sub-section (6) was added to Section 215 of the Income-tax Act, 1961, with effect from April 1, 1985, which reads as follows :
'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 and Sections 216, 217 and 273.'
26. On the basis of the above amendment, it was contended that the assessment under Section 147 even if it is an assessment for the first time, will be regarded as a regular assessment only from April 1, 1985, and, for the assessment year 1980-81 with which we are concerned, such assessments cannot be treated as regular assessments. We are not inclined to agree with this contention. In the view that we have taken, even in the absence of Sub-section (6) of Section 215, such assessments will be regular assessments. Sub section (6) of Section 215 is only a clarification of the earlier law as different High Courts have expressed different opinions on the question and by the inclusion of that sub-section alone, it cannot be said that, for the assessment year in question, such assessments cannot be treated as regular assessments.
27. In view of what is stated above, the original petition has only to be dismissed and we do so but, in the circumstances, without any order as to costs.