COMMISSIONER OF INCOME TAX Vs. SHANTILAL J MEHTA

JUDGEMENT

(1.) IN respect of the asst. yrs. 1965 66 and 1966 67, the ITO while completing the assessments, levied interest under S. 139(1) of the IT Act, 1961. The assessee filed two separate appeals before the AAC. The only material ground of appeal in respect of the asst. year 1965 66 was that ''the ITO erred in levying interest under S. 139(1)". In respect of the asst. year 1966 67 also, a similar ground was urged in the memo of appeal. We were further informed by the counsel for the assessee that the controversy referred to in the question under consideration is now relevant only for the purposes of the asst. year 1965 66.

(2.) THE AAC held that the order of the ITO passed under S. 139(1) of the Act was not an appealable order and he, therefore, declined to entertain any challenge with regard to the levy of interest by the ITO under S. 139(1) of the Act.

(3.) MR . Joshi appearing on behalf of the Revenue has relied on the decision of the Full Bench of this Court in CIT vs. Daimler Benz A.G. 1977 CTR (Bom) 568 : (1977) 108 ITR 961 (Bom) : TC6R.670 and contended that in view of the provisions of S. 246(c) of the Act, the appeal filed by the assessee challenging the levy of interest could not be entertained by the AAC and, consequently, the Tribunal was wrong in law in directing the AAC to go into the question of legality of the levy of interest. It may be pointed out that the relevant part of the provisions of S. 30 of the Indian IT Act, 1922, which was analogous to the provisions of S. 246(c) of the IT Act, 1961, fell for consideration before the Full Bench and the Full Bench was in that case concerned with construing the words "denying his liability to be assessed under this Act", which were to be found in S. 30 of the Indian IT Act, 1922, and which also occurred in S. 246(c) of the Act of 1961. The Full Bench in that case took the view on a construction of the provisions of S. 30 of the Indian IT Act, 1922, that the correct position would be that the "assessee will have no right of appeal to the AAC merely against the quantum of penal interest charged, i.e., merely for the purpose of raising a contention that the interest charged is excessive or should be reduced or should have been waived altogether". It was also held that "an appeal would lie to the AAC if he (assessee) were to deny altogether his liability to pay such interest on the ground that he is not liable to pay advance tax at all or that the amount of advance tax determined, as payable, by the ITO is not correct''. It may be pointed out that that was a case in which the assessee did not file any estimate of income under S. 18A(3) of the Indian IT Act, 1922, nor did he deposit the tax payable on the basis of such estimate because, in the opinion of the assessee, he was not under an obligation to pay the advance tax under S. 18A, in as much as, being a non resident company, its income fell under S. 18 of the Act, that is to say, an income in respect of which tax was liable to be deducted at source by the Tata Engineering and Locomotive Company at the time of payment. The ITO had charged penal interest under S. 18A(8) of the Act and the assessee's appeal was rejected by the AAC on the ground that no appeal was provided in the Act against the levy of interest but the Tribunal took the view that the appeal to the AAC was maintainable and directed the AAC to dispose of the appeal on merits.