P.C. KHURANA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee-petitioner has approached this Court by way of instant petition under Articles 226/227 of the Constitution of India for setting aside the order dated 16.3.1990 (Annexure P-5) under Section 264 of the Income Tax Act, 1961 (in short "the Act") read with order dated 6.5.1991 (Annexure P-12) under Section 154 of the Act passed by respondent No.1 and to cancel the levy of penal interest under Sections 215 and 139(8) of the Act by respondent No.2 vide order under Sections 154/155 of the Act dated 29.9.1988/3.10.1988 (Annexure P-3).

(2.) THE facts relevant for the disposal of the present petition as narrated in the petition are that the assessee-petitioner filed his return on 29.7.1985 for the assessment year 1985-86 declaring an income of Rs.8,80,175.00. The said return was revised on 13.8.1986 declaring an income of Rs.7,49,547.00 which included share from a registered firm M/s K. and Company, New Delhi at Rs.8,28,669.00. The assessment was completed by respondent No.2 on 29.1.1988 at an income of Rs.7,67,880.00. The share from the registered firm was accepted at the returned figure subject to rectification under Sections 154/155 of the Act. The tax on the assessed income worked out to Rs.4,54,774.00 against which the petitioner had deposited the advance tax at Rs.5,90,670.00. Thus, the refund of excess advance tax along with interest under Section 214 of the Act was allowed to the petitioner. No penal interest under Sections 215 and 139 (8) of the Act was charged from the petitioner. On completion of the assessment of M/s K. and Company where the petitioner's share was determined at Rs.20,82,312.00, the assessee moved an application dated 16.7.1988 to respondent No.2 for passing the rectification order under Sections 154/155 of the Act. Respondent No.2 issued a letter dated 23.9.1988 to the petitioner to show cause as to why the interest paid under Section 214 of the Act allowed to him at the time of making the assessment on 29.1.1988 be not withdrawn against which the petitioner filed his objection. Respondent No.2 vide order dated 29.9.1988/3.10.1988 rejected the objection of the petitioner and withdrew the interest allowed under Section 214 of the Act and made modification in the income of the petitioner. Respondent No.2 also levied interest at Rs.2,63,877.00 under Section 215 of the Act and Rs.8000.00 under Section 139(8) of Act. Thereafter, the petitioner moved an application under Rule 40 of the Income Tax Rules, 1962 (for brevity, "the 1962 Rules") for waiver/reduction of interest chargeable under Sections 215/217 of the Act upon which interest levied at Rs.2,63,877.00 under Section 215 of the Act was reduced to Rs.1,35,936.00. Feeling aggrieved against the levy of penal interest under Sections 215 and 139(8) of the Act, the petitioner filed a petition under Section 264 (1) of the Act before respondent No.1. Respondent No.1 vide order dated 16.3.1990 upheld the levy of penal interest by respondent No.2 and rejected the revision petition. As respondent No.1 failed to deal with the grounds and also failed to take notice of various decisions, the petitioner filed an application under Section 154 of the Act bringing all the necessary facts to his notice. Respondent No.1 vide order dated 6.5.1991 dismissed the said application under Section 154 of the Act. Hence, the present writ petition.

(3.) LEARNED counsel for the petitioner submitted that the revenue was in error in levying interest under Sections 215 and 139(8) of the Act and the rejection of the petition which was filed under Section 264 of the Act was also unjustified. Even the application filed under Section 154 of the Act for rectification of order dated 16.3.1990 passed by the Commissioner has been declined ignoring well settled principles of law. According to the learned counsel, the return declaring income for the assessment year 1985-86 was filed on 29.7.1985 wherein the income was declared at Rs.8,80,175.00. The regular assessment under Section 143(3) of the Act was framed on 29.1.1988 wherein no interest was sought to be levied under Sections 215 and 139(8) of the Act. The revenue invoked the provisions of Sections 154/155 of the Act for levying interest under Sections 215 and 139(8) of the Act which was not permissible. Learned counsel further submitted that if the Assessing Officer had failed to levy interest under Sections 215 and 139(8) of the Act at the time of regular assessment, it was not open to the revenue to invoke the provisions of Section 154 of the Act in such a situation. Learned counsel also submitted that no notice under Section 154(3) of the Act was issued to the assessee and, therefore, the order under Section 154 of the Act was bad. Support was sought by the learned counsel for the assessee from the following judgments:-