7 Bennett Coleman & Co. Ltd. vs. Dy. CIT & Ors. [ITA No. 100 of 2002; Date of order: 20th December, 2021; A.Y.: 1985-86; (Bombay High Court)] [Arising out of ITAT order dated 30th August, 2001]
Waiver of interest – Charged u/s 215 –The phrase ‘regular assessment’ means first order / original assessment
On 4th September, 1985, the applicant filed its return of income for A.Y. 1985-86 disclosing a total income of Rs. 1,53,41,650. The A.O. passed an assessment order dated 28th March, 1988 u/s 143(3) and, after making various additions and disallowances, assessed a total income of Rs. 2,74,47,780. In the assessment order, he inter alia directed interest to be charged u/s 215. He levied interest of Rs. 13,67,999 u/s 215 vide the computation sheet.
Aggrieved by the action of the A.O. in charging interest u/s 215, the appellant filed an application dated 8th July, 1988 for waiver of interest u/s 215(4) read with Rule 40 of the Income-tax Rules, 1962 (the Rules). The DCIT passed an order dated 20th March, 1989 under Rule 40(1) holding that the delay in finalisation of the assessment was not attributable to the appellant and waived the interest u/s 215 beyond one year of the filing of the return of income. The DCIT accordingly recalculated the interest chargeable u/s 215 at Rs. 4,13,630 and waived the balance of Rs. 4,40,020.
The appellant received a show cause notice dated 6th March, 1990 u/s 263 from the Commissioner of Income-tax (CIT). It filed its objections by a letter dated 26th March, 1990 objecting to the proposed action. The CIT then passed an order dated 30th March, 1990 u/s 263 setting aside the assessment in its entirety with directions to the A.O. to reframe the assessment after proper verification and application of mind.
In compliance with this order u/s 263, the A.O. passed a fresh assessment order dated 9th March, 1992 u/s 143(3) r.w.s. 263. The A.O. gave effect to the order dated 30th March, 1990 by making certain additions and disallowances and computed the income of the appellant at Rs. 4,04,37,692. There was no direction in the said order regarding the charging of interest u/s 215. However, in the computation sheet annexed to the said order, interest of Rs. 23,91,413 u/s 215 had been charged. The A.O. had also charged interest u/s 139(8).
Aggrieved by the various additions and disallowances made and the interest under sections 215 and 139(8) levied by the A.O., the appellant filed an appeal before the CIT (Appeals). The said appeal was disposed of vide an order dated 28th September, 1992 holding that interest could not be charged under sections 215 or 139(8) unless it has been charged earlier or it falls within the meaning of sections 215(3) or 139(8)(b).
Being aggrieved by the order of the CIT (Appeals) with regard to the issue of levy of interest u/s 215, the A.O. filed an appeal before the Tribunal. While challenging the said order, the A.O. accepted that part of the order of the Commissioner (Appeals) which deleted the levy of interest u/s 139(8) and confined the appeal to the deletion of interest u/s 215(6). The Tribunal restored the interest levied by the A.O. by way of the computation sheet annexed to the said order.
It was contended on behalf of the appellant that the phrase ‘regular assessment’ in the ITA has been used in no other sense than the first order of assessment passed under sections 143 or 144 and any consequential order passed by the Income-tax Officer giving effect to subsequent orders passed by a higher authority cannot be treated as regular assessment. It was further submitted that in the regular assessment there was no direction to charge interest u/s 215 and therefore interest cannot be charged in the reassessment order.
The Department fairly accepted that the word ‘regular assessment’ needs to be interpreted as the original assessment. However, it was submitted that if the appellant was seeking waiver of interest, it was required to file a new application for waiver after the order of reassessment and in the absence of such application the Tribunal was justified in restoring the order of the A.O. directing the appellant to pay interest as per section 215.
The High Court observed that section 215 makes it clear that the assessee is required to pay interest where he has paid advance tax less than 75% of the assessed tax; the assessee is required to pay simple interest @ 15% p.a. from the first day of April following the financial year up to the date of regular assessment.
The Supreme Court has summed up in the case of Modi Industries Ltd. and Others vs. Commissioner of Income-Tax and Another ([1995] 216 ITR 759) by saying that the expression ‘regular assessment’ has been used in the ITA in no other sense than the first order of assessment under sections 143 or 144. Any consequential order passed by the ITO to give effect to an order passed by the higher authority cannot be treated as a regular assessment.
The Court observed that for A.Y. 1985-86, in the regular assessment proceeding completed on 28th March, 1988, the total income was determined at Rs. 2,74,47,780 and interest u/s 215 amounting to Rs. 13,67,999 was charged. In the facts of the case, since the interest u/s 215 was charged in the regular assessment order, the A.O. had the power to charge interest u/s 215 while carrying out the reassessment.
Further, the Court observed that section 215(4) empowers the A.O. to waive or reduce the amount of interest chargeable u/s 215 under circumstances prescribed in Rule 40 of the Income-tax Rules, 1962. One such prescribed circumstance is:
(1) When without any laches or delay on the part of assessee, the assessment is completed more than one year after the submission of the return; or…….
Finally, the Court observed that the order of the Dy. CIT, Bombay dated 20th March, 1989 held that the delay in finalisation of assessment is not attributable to the assessee and therefore it is not liable to pay interest u/s 215 beyond the period of one year from the date of filing of the return. Accordingly, the appellant was held to be liable to pay an amount of Rs. 4,40,020. The order of the Dy. CIT had not been challenged by the Revenue or the appellant, with the result that the said order attained finality. In the absence of a challenge to the order under Rule 40(1), the appellant is not entitled to the benefit of the judgment of the Division Bench of this Court in the case of CIT vs. Bennett Coleman & Co. Ltd. (217 ITR 216). Therefore, the appellant is not entitled to waiver of interest for a period of one year. The appellant is entitled to the benefit of the order dated 20th March, 1989 passed under Rule 40(1) only to the extent stated therein.
Therefore, it was held that the appellant was liable to pay an amount of Rs. 4,13,630as per the order dated 20th March, 1989.
