Commissioner of Income Tax vs Mahalaxmi Rice Mill

On an application u/s 256(1) of the Income Tax Act, 1961, the Tribunal has referred the following question set out in paragraph 2 of the application for our opinion :

"Whether, on the facts and in the circumstances of the case, particularly in view of the fact that in the original assessment no interest u/s 215(1) of the Income Tax Act, 1961, was levied as the advance tax paid was in excess of the ''assessed tax'', the Tribunal was justified in law in holding that interest under Sub-section (3) of Section 215 of the said Act cannot be levied on the reassessment made u/s 147 of the said Act ?"

The assessee is Mahalaxmi Rice Mills. The assessment years are 1987-88 and 1988-89. The previous year ended on relates to both the assessment years as on 1393 B.S and 1394 B.S., respectively. Thereafter there was a search u/s 132 of the Act by the Department at the office and business premises of the assessee including the godown of the assessee. The assessment, therefore, was reopened invoking the provisions of Section 147 read with Section 148 of the Act of 1961 and the assessee also filed the revised return of income on February 9, 1990. After assessing the income on the basis of the materials seized during the search, the income was enhanced and interest was also charged u/s 215 of the Act on the basis of enhanced income which was made u/s 143(3) read with Section 147 of the Act.

The assessee has challenged the levy of interest on the basis of enhanced income which was enhanced in the reassessment. The case of the assessee was that the interest u/s 215 can be charged only for the period from the first day of April next following the said financial year up to the date of regular assessment and reassessment is not a regular assessment.

The limited controversy therefore is whether the reassessment is a regular assessment as provided u/s 215 of the Act.

Learned counsel for the Revenue fairly admits that the apex court has considered the meaning of "regular assessment" as referred to u/s 214 of the Act. The provisions of Sections 215 and 214 are pari materia so far as the interests for the period is concerned, that is, up to the date of the regular assessment. The expression, "regular assessment" has been used in both the sections, i.e., u/s 214 and u/s 215 of the Act. He fairly admits that the view taken by the apex court in the case of Modi Industries Limited, Modinagar and Others Vs. Commissioner of Income Tax, Delhi and Another, , covers the issue in question referred.

While considering the meaning of expression "regular assessment", their Lordships have observed at pages 800-801 as under :

"For all the above reasons--particularly having regard to the scheme of the Act and use of the phrase ''regular assessment'' in various sections of the Act-we are of the view that in Section 214, ''regular assessment'' has been used in no other sense than the first order of assessment passed u/s 143 or Section 144. If any consequential order has to be passed by the Income Tax Officer to give effect to an order passed by the higher authority, that consequential order cannot be treated as the ''regular assessment'' nor can the date of the consequential order be treated as the date of the regular assessment."

Following the view taken by the apex court regarding the meaning of "regular assessment", we answer the question referred to us in the affirmative, i.e., in favour of the assessee and against the Revenue.

All parties are to act on a xeroxed signed copy of this dictated order on the usual undertaking.