COMMISSIONER OF INCOME TAX Vs. GORDHANBHAI JETHABHAI

JUDGEMENT

(1.) IN this reference made under S. 256(1) of the IT Act, 1961, the Tribunal has referred the following three questions to this Court :

(2.) THE assessee filed return of his income on 29th July, 1969 and the assessment order was made on 18th Jan., 1972. It appears that some time before 15th Jan., 1976, the ITO noticed that whereas the assessee had filed an estimate showing advance tax payable as nil, the tax that was determined on regular basis was Rs. 1,25,915 and the tax deducted at source was Rs. 79,961. Thus, on 75% of the difference of Rs. 45,954, i.e., on the amount of Rs. 34,470 interest at the rate of 9% was payable under S. 215 of the Act. A notice was, therefore, issued to the assessee and then by an order dt. 15th Jan., 1976, the ITO computed interest payable by the assessee at Rs. 8,703.

(3.) AS regards question No. 1, it was contended by the learned advocate for the Revenue that s. 246 does not provide for an appeal against an order passed under S. 215 of the Act. An order rectifying an order made under S. 215 is also not appealable because it cannot be regarded as an order which has the effect of enhancing assessment. He submitted that an order whereby interest is charged does not have the effect of enhancing assessment. It is not in dispute in this case that the order which was challenged by the assessee before the AAC, was the rectification order passed under S. 154. Therefore, the question as to whether an order passed under S. 215 is appealable or not really does not arise for our consideration. What we have to consider is whether the impugned order, being an order passed under S. 154, would fall within the purview of S. 246(f) as it then stood. It is only with respect to that provision that we have to decide whether the appeal filed by the assessee before the AAC was maintainable. What was contended on behalf of the Revenue was that unless the rectification order has the effect of enhancing the assessment or reducing the same, it is not appealable. In our opinion, S. 246(f) cannot be interpreted so narrowly. If we accept the contention raised on behalf of the Revenue, that would amount to interpreting the word 'assessment' in a very narrow sense. The words which we find in the section are 'having the effect of enhancing the assessment' and not 'having the effect of enhancing the assessment made under s. 143 or 144 of the Act'. The word 'assessment' has a very wide import. The Madras High Court in N.V.N. Nagappa Chettiar vs. ITO (1958) 34 ITR 583 (Mad) has held that levying interest is a part of the process of assessment. The Supreme Court in Central Provinces Manganese Ore Co. Ltd. vs. CIT (1986) 58 CTR (SC) 112 : (1986) 160 ITR 961 (SC) has in terms held that levy of interest is a part of the process of assessment. Although ss. 143 and 144 do not specifically provide for levy of interest and the levy is, in fact, attributable to S. 139(8) or S. 215, it is nevertheless a part of the process of assessing the tax liability of the assessee. Therefore, it is not possible to say that the order levying interest does not have the effect of enhancing the assessment. Liability of the assessee gets enhanced as a result of such order and, therefore, it must be regarded as an order having the effect of enhancing assessment. We are, therefore, of the opinion that the order which was passed by the ITO in this case under S. 154 was appealable and the Tribunal was right in taking that view.