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2006 DIGILAW 309 (MP)

Commissioner of Income Tax v. Karimbux Maulabux

2006-02-27

A.M.SAPRE, ASHOK KUMAR TIWARI

body2006
Judgment ( 1. ) THIS is an appeal filed by Revenue (CIT) under Section 260a of the IT Act against an order dt. 24th Nov. , 1998, passed by Income-tax Appellate Tribunal (for brevity hereinafter referred to as Tribunal) in ITA No. 35/ind/1995. This appeal was admitted for final hearing on following substantial question of law: 1. Whether, on the facts and in the circumstances of the case, the Honble Tribunal was justified in law in directing the deletion of interest under Section 139 (8) and under Section 217 of IT Act, 1961? 2. Whether, on the facts and in the circumstances of the case, the Honble Tribunal was justified in law in allowing relief to the assessee by taking the view that interest under Sections 139 (8) and 217 could not be charged unless the assessment order itself incorporates an order for payment of interest? 3. Whether, on the facts and in the circumstances of the case, the Honble Tribunal was justified in law in holding that the interest under Sections 139 (8) and 217 was liable to be deleted merely on the ground that there were no specific direction in the assessment order for charging of interest even when the calculation sheet which was duly signed by the AO gives the clear working of interest under Sections 139 (8) and 217 and it was charged as per the notice under Section 156 accompanying the assessment order ? ( 2. ) HEARD Shri R. L. Jain, learned senior counsel with Ku. V. Mandlik, learned Counsel for the Revenue/appellant. None, for the respondent/assessee. ( 3. ) THE aforesaid issue was dealt with by the Tribunal in paras 7, 8 and 9 of their impugned order as follows: Para 7.-Ground No. 4 relates to charging of interest under Section 139 (8), 215 and 217 of the Act. With regard to this ground it was contended on behalf of the assessee that the interest under these sections was charged though there was no specific direction in the order of the AO which is not permissible under the law. In support of his contention, he relied on the following judgments: (i) Mulakh Raj Bimal Kumar v. ITO (ii) Manohar Gidwany v. CIT 8. In support of his contention, he relied on the following judgments: (i) Mulakh Raj Bimal Kumar v. ITO (ii) Manohar Gidwany v. CIT 8. We have carefully perused the assessment order and the aforesaid judgments and we agree with the contention of the assessee that the interest cannot be charged unless and until it is specifically directed to be charged in the assessment order. In the case of Manohai Gidwany (supra) their Lordships of the Honble Calcutta High Court have categorically held that the charging of penal interest under Section 139 and 217 is not valid if there was no mention of penal interest in the assessment order. Similar observations were made by the Honble Jammu and Kashmir High Court in the case of Mulakh Raj Bimal Kumar (supra) in which their Lordships have held that unless the order of assessment itself incorporates an order for payment of interest, the assessee cannot be asked by means of a simple demand notice to pay penal interest both under Section 139 and 217 of the Act. 9. In the light of the aforesaid judgments, we are of the view that in the instant case no interest under Section 139 (8), 215 and 217 is chargeable in the absence of specific direction in the assessment order. We, therefore, delete the interest charged by the AO. ( 4. ) LEARNED counsel for appellant placing reliance on decision of Supreme Court reported in Kalyan Kumar Ray v. CIT AIR1992 SC 159 , [1991 ]191 ITR634 (SC ), 1992 Supp (2 )SCC424 contended that the issue involved in this case stands decided in favour of appellant i. e. , Revenue and being no longer res integra, the appeal has to be allowed by setting aside of the impugned order of Tribunal who failed to take note of the decision of Supreme Court. According to learned Counsel, the Tribunal should have taken note of the decision of Supreme Court rendered in Kalyan Kumars case (supra) for deciding the issue and since the decision was ignored the impugned order is liable to be set aside on this short ground. In reply, none appeared for the assessee despite service on them. ( 5. ) HAVING heard learned Counsel for the parties and having perused record of the case, we are inclined to allow the appeal and set aside the order of Tribunal insofar as aforementioned issue is concerned. In reply, none appeared for the assessee despite service on them. ( 5. ) HAVING heard learned Counsel for the parties and having perused record of the case, we are inclined to allow the appeal and set aside the order of Tribunal insofar as aforementioned issue is concerned. ( 6. ) AS rightly urged by learned Counsel for appellant, the issue involved in this appeal is decided by the Supreme Court in the case of Kalyan Kumar (supra ). This is what their Lordships held: The statute does not, however, require that both the computations (i. e. , of the total income as well as of the sum payable) should be done on the same sheet of paper, the sheet that is superscribed assessment order. It does not prescribe any form for the purpose. It will be appreciated that once the assessment of the total income is complete with indications of the deductions, rebates, reliefs and adjustments available to the assessee, the calculation of the net tax payable is a process which is mostly arithmetical but generally time consuming. If, therefore, the ITO first draws up an order assessing the total income and indicating the adjustments to be made, directs the office to compute the tax payable on that basis and then approves of it, either immediately or some time later, no fault can be found with the process, though it is only when both the computation sheets are signed or initialled by the ITO that the process described in Section 143 (3) will be complete. A brief reference may be made to the decisions on the issue. In Sushil Chandra Ghose v. ITO AIR1958 Cal 159 , [1959 ]35 ITR379 (Cal ), the assessee was served, apart from the assessment order, with a copy of the form known as ITNS 150 which was not signed by the ITO but the Court upheld the assessment because the original thereof had been duly signed. In S. Mubarik Shah Naqshbandi v. CIT 1977 CTR (Jandk) 180 : (1977) 110 TTR 217 (Jandk), the assessment order did not determine the tax payable and there was no other paper or form containing the computation except the notice of demand. In S. Mubarik Shah Naqshbandi v. CIT 1977 CTR (Jandk) 180 : (1977) 110 TTR 217 (Jandk), the assessment order did not determine the tax payable and there was no other paper or form containing the computation except the notice of demand. In R. Gopal Ramnarayan v. ITO (1980 )19 CTR (Kar )391 , [1980 ]126 ITR369 (KAR ), [1980 ]126 ITR369 (Karn ), [1981 ]5 TAXMAN71 (Kar ), the Tribunal had annulled an assessment because the tax calculations had been made on a separate sheet of paper but the Department could not raise this issue before the High Court because it had not challenged the Tribunals order in appropriate proceedings. The Karnataka High Court, however, did have occasion later to consider the question directly and upheld an assessment made in similar circumstances in CIT v. R. Girdhar (1984 )43 CTR (Kar )253 , [1984 ]145 ITR246 (KAR ), [1984 ]145 ITR246 (Karn ), [1984 ]17 TAXMAN20 (Kar ), even though the separate sheet containing the tax computations had not been signed by the ITO. The Punjab and Haryana High Court has also taken the same view in Karuna Rani Jain v. CIT [1989 ]178 ITR321 (Pandh ). In CIT v. Krishwanti Punjabi [1983 ]139 ITR703 (Cal ) Form No. IT 30 served on the assessee was not signed and the Court remitted the matter back to find out if any determination of tax had been made before the expiry of the period of limitation prescribed under the Act for the completion of an assessment. All these decisions emphasize that all that is needed is that there must be some writing initialled or signed by the ITO before the period of limitation prescribed for completion of the assessment has expired in which the tax payable is determined and not that the form usually styled as the assessment order should itself contain the computation of tax as well. For these reasons, we see no reason to grant leave in these petitions which are, consequently, dismissed. For these reasons, we see no reason to grant leave in these petitions which are, consequently, dismissed. We should, however, like to observe that, to avoid unnecessary controversies like this, the Department should in future, adopt the salutary and useful practice of incorporating the entire tax calculations in ITNS 65 Form itself or, in the alternative, make the ITNS 150 an Annexure to form part of the assessment order, have it signed by the ITO and have it served on the assessee along with ITNS 65. That will enable the assessee to have the full details necessary to enable him to file a proper appeal, if needed, against the order and demand. If these safeguards are not taken, there is a danger of the tax calculations being left entirely to the subordinate staff, the ITO contenting himself with a cursory glance thereat. Though, largely, the tax calculations are only matters of detail and arithmetic there do arise sometimes difficult questions of interpretation of the provisions relating to tax rates, additional tax, interest and so on and the assessee should, in all fairness, have full details regarding the computation to enable him to take further steps in the matter. We should indeed like to add that the petitioner, Shri Ray, has indeed done a great service to the public by bringing this issue up to this Court. We hope that the observations made by us would ensure, at least in future, that the ITOs do not allow themselves to be indifferent to this part of the process of assessment or shirk the responsibility of verifying and authenticating the correctness of the tax computations resulting in demands being raised against assessee. ( 7. ) COMING to the facts of this case, the AO has undoubtedly signed the calculation sheet (p. 14 of paper book) mentioning therein the details of interest payable by the assessee pursuant to the determination made by AO in his assessment order passed. This in our opinion is in accord with the law laid down by Supreme Court in Kalyan Kumars case, quoted supra and hence, can be given effect to against the assessee for realization of interest under the Act as demand payable under the Act, ( 8. ) IN view of foregoing discussion and keeping in view the law laid down by Supreme Court in the case of Kalyan Kumar (supra), the appeal succeeds and is allowed. ) IN view of foregoing discussion and keeping in view the law laid down by Supreme Court in the case of Kalyan Kumar (supra), the appeal succeeds and is allowed. Impugned order is set aside. No costs.