COMMISSIONER OF GIFT TAX KERALA Vs. RATNAKARAN

JUDGEMENT

(1.) TWO common questions arise in these Tax Referred cases.They read as follows:" (i)Whether,on the facts and in the circumstances of the case,the Tribunal was justified in holding that the assessee was entitled to be heard by the Appellate Assistant Commissioner on the question of,levy of interest under sec­tion 139(1 ),proviso(iii)of the Income -tax Act,1961 as contended by him in the grounds of appeal before the Appellate Assistant Com­missioner for the assessment years 1962 -63,1963 -64 and 1964 -65? (ii)Whether,notwithstanding the fact that the assessee withdrew before the Tribunal his contention regarding the assessability of the income of Rs.40,000 as earned income for each of the assessment years,1962 -63,1963 -64 and 1964 -65,the Tribunal was justified in directing the Appellate Assistant Commissioner to hear the assessee on his objection relating to the levy of interest under section 139(1 ),pro­viso(iii)for these three years?

(2.) THE assessee had not filed his returns in time for the three years,1962 -63,1963 -64 and 1964 -65.In his belated returns he admitted an income of Rs.40,000.The Income -tax Officer treated this income as unearned income and imposed tax on that basis for the three years.By the assessment orders he also directed the payment of interest as envisaged by proviso(iii)to sub -section(1)of section 139 of the Income -tax Act,1961,for short,the Act.Appeals were taken before the Appellate Assistant Commissioner against these assessment orders and it was contended that the sum of Rs.40,000 disclosed by the assessee as his income must be taken as earned income.The further contention was raised that no interest should have been charged as envisaged by proviso(iii)to sub -section(1)of section 139 of the Act.The contention was that the proviso was not applicable because the Income -tax Officer had not granted time.The Appellate Assistant Commissioner dismissed the appeals holding that there was nothing wrong in the Income -tax Officer treating the sum of Rs.40,000 in each of the years as unearned income.The contention regarding the levy of interest was negatived on the ground that no appeal would lie from such a direction of the Income -tax Officer.There were further appeals before the Tribunal which were disposed of by a common order.Before the Tribunal,the representative of the assessee conceded that the income of Rs.40,000 may be treated as unearned income.It was however urged that there was no justifica­tion for charging interest.A ground that had been taken in the replies given by the assessee to the notice issued by the Income -tax Officer stating that proviso(iii)to sub­section(1)of section 139 is not attracted and which was not urged before the Appellate Assistant Commissioner,was raised before the Tribunal and one of the questions that was considered by the Tribunal was whether this contention should be allowed to be raised before the Tribunal.The Tribunal held that the contention could be allowed to be raised.On this aspect,the first question referred to us arises.After having said so,the Tribunal further directed the Appellate Assistant Commissioner to deal with the contention of the assessee and determine whether any interest was chargeable.Question No.2 raised in these Tax Referred Cases relates to the legality of this direction.

(3.) WE may mention at this stage that we are referring to the section as it stood before its amendment by the Finance Act,1972 which came into force on 1st April 1972.