Commissioner of Income Tax vs K. Govindan and Sons.

Om Prakash, C.J.—At the instance of the Revenue, the Income Tax Appellate Tribunal drew up a statement of the case and referred the following question, relating to the assessment year 1984-85 for the opinion of this court u/s 256(2) of the Income Tax Act, 1961 (briefly, "the Act") :

"Whether, on the facts and in the circumstances of the case, levy of interest u/s 139(8) in an assessment u/s 143(3) read with Section 147(a) is valid in law ?"

Section 139(8)(a) of the Income Tax Act, 1961, provides that where the return under Sub-section (1) or Sub-section (2) or Sub-section (4) for an assessment year is furnished after the specified date, or is not furnished, then the assessee shall be liable to pay simple interest reckoned from the day immediately following the specified date to the date of the furnishing of the return, or, where no return has been furnished, the date of completion of the assessment u/s 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source.

In the case at hand, in response to a notice u/s 148 issued on February 12, 1987, the assessee filed the return of income for the assessment year 1984-85 on March 31, 1987. The Assessing Officer then completed the assessment and charged interest u/s 139(8). The contention of the assessee is that the assessment made in response to the notice u/s 143 read with Section 147(a) is not a regular assessment and, therefore, no interest u/s 139(8) could be charged. It is not disputed by the parties that no assessment under Sections 143 and 144 was made in this case and the assessment made u/s 147(a) read with Section 148 is the only assessment. The question for consideration therefore, is whether the assessment made for the first time u/s 147(a) read with Section 148, is a regular assessment. This question is not res integra so far as this court is concerned. In Lally Jacob Vs. Income Tax Officer and Others, , a Full Bench of this court ruled that an assessment for the first time made u/s 147 is a regular assessment. Explanation 2 to Section 139(8) reads as under :

"Where, in relation to an assessment year, an assessment is made for the first time u/s 147, the assessment so made shall be regarded as a regular assessment for the purposes of this Sub-section."

The Full Bench in Lally Jacob Vs. Income Tax Officer and Others, , held the same way in what has been stated under Explanation 2 to Section 139(8). Explanation 2 was inserted by the Taxation Laws (Amendment) Act, 1984, with effect from April 1, 1985. The submission of learned counsel for the assessee, therefore, is that Explanation 2 will operate prospectively and, therefore, the same will not apply for the assessment year 1984-85. In Lally Jacob Vs. Income Tax Officer and Others, , the Full Bench considered the question whether Sub-section (6) added to Section 215 by the Taxation Laws (Amendment) Act, 1984, with effect from April 1, 1985, which was couched almost in the same words in which Section 139(8) is couched, is clarifica-tory in nature. Similar contention was raised before the Full Bench that Sub-section (6) to Section 215 inserted with effect from April 1, 1985, was operative prospectively. Rejecting such contention, the Full Bench held that Sub-section (6) to Section 215 is only a clarification of the earlier law as different High Courts have expressed different opinions on the question and by the inclusion of that Sub-section alone, it may not be stated that for the assessment year in question such assessments cannot be treated as regular assessment.

Following the decision in the case of Lally Jacob Vs. Income Tax Officer and Others, , we hold that Explanation 2 to Section 139(8) inserted with effect from April 1, 1985, was only clarificatory in nature. This being so, the assessment made u/s 147(a), read with Section 148 for the first time is nothing but a regular assessment within the meaning of Section 139(8) and, therefore, the Assessing Officer rightly charged interest for delay in filing the return.

In support of his contention that assessment made u/s 147(a) read with Section 148 is not a regular assessment, learned counsel for the assessee relied on another Full Bench decision of this court in COMMISSIONER OF Income Tax, KERALA-II, ERNAKULAM Vs. G. B. TRANSPORTS, GURUVAYUR., and a Supreme Court decision in Modi Industries Limited, Modinagar and Others Vs. Commissioner of Income Tax, Delhi and Another, . In COMMISSIONER OF Income Tax, KERALA-II, ERNAKULAM Vs. G. B. TRANSPORTS, GURUVAYUR., , the Full Bench of this court held as follows (page 554) ;

"The term ''regular assessment'' is used in the statute in contradistinction to a self-assessment u/s 140A, a provisional assessment u/s 141 before its deletion and an assessment or reassessment u/s 147."

In COMMISSIONER OF Income Tax, KERALA-II, ERNAKULAM Vs. G. B. TRANSPORTS, GURUVAYUR., , the Full Bench decision referred to the fact situation where more than one assessment existed at a stage and, therefore, the Full Bench held that regular assessment is used in contradistinction to another assessment either that is in the nature of self-assessment or a provisional assessment or a full-fledged assessment made under Sections 143 and 144 of the Act. In Modi Industries Limited, Modinagar and Others Vs. Commissioner of Income Tax, Delhi and Another, , the Supreme Court considered the question whether an order passed giving effect to the orders of higher authorities either in appeal or otherwise, will amount to regular assessment and in that context the Supreme Court stated that the assessment made u/s 143 or 144 alone was a regular assessment. The Supreme Court did not consider a question whether an assessment made u/s 147(a) read with Section 148 for the first time could be called a regular assessment.

Considering Explanation 2 to Section 139(8) which is clarificatory in nature and the other case law, we are of the considered view that the assessment made for the first time u/s 147(a) read with Section 148 is a regular assessment and that being so, the Assessing Officer could legally charge interest u/s 139(8).

In the result, we answer the abovementioned question in the affirmative, that is, in favour of the Revenue and against the assessee.