LALLY JACOB Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) The question involved in this writ petition is as to whether an assessment made for the first time by resort to S.147 of Indian Income Tax Act, 1961 is a "Regular assessment" for the purpose of charging interest under S.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 & Rubber v. Commr, of Income Tax, Kerala (90 ITR 422) and Kerala Kaumudi v. Commr, of Income Tax, Trivandrum (181 ITR 30), in regard to the scope and import of the expression 'regular assessment' occurring in S.217 of the Indian Income Tax Act, 1961 (hereinafter referred to as 'the Act').

(2.) Petitioner is an assessee to income tax on the file of respondent No. l. 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 31-3-1980), petitioner was liable to pay advance tax under the Act. Petitioner submitted an estimate of her income, as required under S.209A(1) of the Act, on 15-3-1980, 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 1st July, 1980, the return could not be filed in time. Later, the petitioner was served with a notice under S.147 of the Act, for submission of the return, which was filed by her on 19-2-1983. Along with the return she produced the challan for having paid self assessment tax in full under S.140A of the Act. The 1st respondent issued a notice under S.143(2) and completed the assessment by Ext. P1 order dated 12-10-1983. While completing the assessment, the 1st respondent levied interest under S.217 in the sum of Rs.56,368/-. Aggrieved by the levy of interest under S.217, petitioner requested the 2nd respondent the Inspecting Assistant Commissioner of Income Tax, Ernakulam, by an application, to reduce or waive interest under S.217, on the ground that such interest could not be levied, and there were circumstances which permitted waiver of such interest pursuant to R.40 of the Income Tax Rules. By Ext. P3 order, the 2nd respondent rejected the application and confirmed the levy of interest. Aggrieved by Ext. P3, petitioner filed a revision petition under S.264 of the Act before the 3rd respondent. The 3rd respondent declined to interfere and dismissed the revision petition by his order (Ext. P5) dated 23-7-1986. Petitioner is challenging the above orders with regard to levy . of interest under S.217 of the Act alone.

(3.) The only ground of attack against the levy of interest under S.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 S.147 read with S.148 is not a regular assessment as defined in the Act and accordingly the petitioner is not liable for any interest under S.217. In support of the aforesaid contention counsel relied on a Division Bench decision of this Court in Gates Foam & Rubber Case (90 ITR 422). According to counsel for the petitioner, assessment for the assessment year 1980-81 having been made by resort to S.147, it is not a 'regular assessment' and accordingly the 1st respondent has no jurisdiction to levy interest as contemplated under S.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 S.147 of the Act is a 'regular assessment" for the purpose of S.217 of the Act.