COMMISSIONER OF INCOME TAX Vs. PADMA TIMBER DEOPT

JUDGEMENT

(1.) THE Tribunal made this reference under S. 256(1) of the IT Act, 1961 ("the Act", for short). The reference relates to the income -tax asst. year 1976 -77 and the following two questions are referred for the consideration of this Court : "1. Whether, on the facts and in the circumstances of the case, the initial assessment made in pursuance of proceeding initiated under S. 147 is a regular assessment for the purpose of charging interest under S. 139 and under S. 217 ?

(2.) WHETHER , on the facts and in the circumstances of the case, an appeal against charging of interest under ss. 139 and 217 is maintainable - 2. The relevant facts may be noticed. The petitioner carries on business in the purchase and sale of timber. For the asst. year 1976 -77 for which the previous year ended on 31st March, 1976, the petitioner filed a return declaring an income of Rs. 8,990 on 1st June, 1979. The ITO held that the return filed by the assessee on 1st June, 1979, could not be considered as a return under S. 139 of the Act, inasmuch as it was not filed within the time limit specified in S. 139. The ITO, therefore, issued a notice under S. 148 on the basis that the petitioner failed to file its return of income within the time allowed under S. 139. Responding to the notice under S. 148, the assessee informed the ITO that the return already filed on 1st June, 1979, might be treated as one filed in response to the notice by the ITO issued under S. 148. That is how the ITO regularised the assessment proceedings as observed by him in the assessment year. The ITO made an addition to the income returned of Rs. 11,800 on account of deficiency in gross profit and completed the assessment on a total income of Rs. 20,790. Tax was demanded treating the assessee as an unregistered firm. The ITO also claimed interest of Rs. 884 under S. 139 of the Act and Rs. 1,274 under S. 217 of the Act. The aggregate of the tax and interest demanded by the ITO amounted to Rs. 4,828.

(3.) THE assessee filed an appeal before the AAC. The contention before him was that the levy of interest under ss. 139 and 217 of the Act by the ITO was not authorised by the provisions of the Act and was illegal. The specific claim was the assessment made by the ITO is not an assessment under S. 143(3) or S. 143(4) of the Act but is an assessment under S. 143(3) r/w S. 147(a) of the Act. In that view, it was claimed that the assessment made by the ITO cannot be held to be a "regular assessment" with the result that no interest can be levied either under S. 139(8) or under s. 217 of the Act. The AAC accepted the aforesaid contention and cancelled the levy of interest by the ITO.