Kaushal Kumar and Bros. vs Commissioner of Income Tax

Ajit K. Sengupta, J.—In this application u/s 256(2) of the income tax Act, 1961, the following questions of law were sought to be referred to this court.

"(i) Whether, on the facts and in the circumstances of the case and on a reading of the application for condonation of delay and the affidavit, the Tribunal is justified in law to reject the affidavit and to condone the delay for the entire period including the day of filing ?

(ii) Whether, on the facts and in the circumstances of the case, the Tribunal exceeded the jurisdiction by admitting without considering the delay of the last day being the filing day of appeal for which no prayer or petition was made ?

(iii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing the appeal bypassing the argument of counsel for the assessee made in respect of fraud, framing the charge in the notice u/s 154 and without withdrawing the power delegated by the income tax Officer to his subordinate in rectifying the alleged mistake ?

(iv) Whether, on the facts and in the circumstances of the case and on the reading of the assessment order delegating the power by the income tax Officer to charge interest, reason for framing charges u/s 154, the alleged ''no objection'' of the assessee, the legal aspect thereof the assumption of jurisdiction of the income tax Officer, the mistake on mistake, the debatable point of law, and the order of rectification-the Tribunal was justified to allow the appeal ?"

The income tax Officer, in the assessment order, made the following observation:

"Charge interest u/s 139(8)". Although a direction was there for charging interest, the interest was not charged. The income tax Officer, thereafter, passed the following order u/s 154 of the income tax Act, 1961:

"In this case, the assessment was completed u/s 143(3)/182 on January 25, 1982, by my predecessor with a specific direction to charge interest u/s 139(8) for late filing of the return. It appears from the records that while calculating the taxes payable on regular assessment as above, interest payable u/s 139 was omitted to be charged. This being a mistake apparent from the record, a show-cause notice u/s 154 was issued and served on the assessee. In reply, Sri S. Chatterjee, authorised representative appeared and stated that he had no objection to the proposed rectification of mistake. Accordingly, the mistake is being rectified as per computation below:

Total income assessed

Rs. 1,06,800

Tax as unregistered firm

Rs. 49,772

Less : Advance tax paid

Rs. 17,000

Rs. 32,772

Interest on above from July 1, 1979 to December 31, 1980, comes to Rs. 5,886. Charge interest as above and issue demand notice and challan along with the copy of the order."

Against the said order of the income tax Officer u/s 154 of the income tax Act, 1961, the assessee preferred an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner observed as follows:

"It is a fact that the income tax Officer has imposed penal interest u/s 139(8) for the first time taking the help of section 154 and this matter is highly debatable and different courts held different views in these circumstances. Hence, the imposition of penal interest u/s 139(8) amounting to Rs. 5,886 with the help of section 154 is not valid and is deleted accordingly and the income tax Officer is directed to delete the penal interest at his end for the assessment year 1979-80."

Against that order, the Department went up in appeal before the Tribunal. The Tribunal held as follows:

"We find no merit in the contention of learned counsel for the assessee. There is no question of any debate as to the charging of interest u/s 139(8) when it was already ordered to be charged. The mistake which has been rectified by the income tax Officer is only that the interest omitted to have been calculated has been calculated and included in the demand. Strictly speaking, it was merely a slip during the course of determination of tax payable by the assessee in terms of the order already passed. The Appellate Assistant Commissioner has patently wrongly allowed the appeal. The order of the Appellate Assistant Commissioner is reversed and that of the income tax Officer is restored."

In rejecting the reference application made by the assessee u/s 256(1) of the income tax Act, 1961, the Tribunal observed as follows:

"A simple matter is attempted to be complicated. Interest u/s 139(8) was directed to be charged in the computation. It could not be included. The income tax Officer later included it by rectifying the computation. Thus, it is a plain and simple case of rectification of mistake and no referable question of law arises from the order of the Tribunal."

In this case, the income tax Officer directed that interest should be charged. But, by mistake, it was not included in the demand notice and accordingly, it was subsequently rectified. It is not a case where no interest was charged u/s 139(8) and the income tax Officer later thought that interest should have been charged and invoked section 154 to include interest. There is no such dispute in this case. Interest was directed to be charged by the income tax Officer. Once the income tax Officer had, in the assessment order itself, directed that interest should be charged which had not been done, it is a mistake apparent from the record. In our view, therefore, the Tribunal was right in reversing the order of the Appellate Assistant Commissioner and restoring the order of the income tax Officer passed u/s 154. The Tribunal was also right in rejecting the application of the assessee as no referable question of law arises. In that view of the matter, this application is rejected. There will be no order as to costs.

K.M. Yusuf, J.

I agree.