COMMISSIONER OF INCOME-TAX Vs. S L CHOPRA

JUDGEMENT

(1.) THERE were six partners of Handa and Chopra, Amritsar, one of them being the assessee before us. For the assessment years 1971-72 and 1972-73, regular assessments were framed and since the assessee had paid advance tax more than the tax liability, interest was allowed to the assessee on the amount found refundable. Later on, the Income-tax Officer, by his orders passed under Section 154, read with Section 155 of the Income-tax Act, 1961, computed the income of the assessee at a higher figure and since the tax payable was found to be more, interest was charged on the enhanced tax liability. The assessee challenged the levy of interest. He remained unsuccessful before the Appellate Assistant Commissioner, but, on further appeal to the Tribunal, the orders of the Income-tax Officer and the Appellate Assistant Commissioner were set aside with the observation that the charging of interest under Section 215/217, by invoking the provisions of Section 154/155 of the Income-tax Act was not justified. The Commissioner of Income-tax sought reference and the Income-tax Appellate Tribunal, Amritsar Bench, has referred the following two questions for the assessment year 1971-72 for the opinion of this court:

(2.) THE second question is similar for the assessment year 1972-73 and as regards question No. 1, it is also similar except that the amount of interest charged for the assessment year 1972-73 is more than the interest charged for the assessment year 1971-72.

(3.) YESTERDAY, we had occasion to decide a similar question in ITR No. 197 of 1980 (Panna Lal v. CIT [1989] 179 ITR 16 (P and H)) and we came to the conclusion that in view of the provisions of Section 215 (3) of the Income-tax Act as it stood before April 1, 1985, no interest was chargeable on the enhanced liability to tax created by an order passed under Section 154/155 of the Act as there was no provision to levy interest on the creation of enhanced liability and rather the provision was for payment of interest on the amount found refundable to the assessee. It is only with effect from April 1, 1985, that provision was made for payment of interest, whether on enhancement of liability or reduction of liability to tax.