Omprakash Premchand and Co. vs Commissioner of Income Tax

G.G. Sohani, J.—By this reference u/s 256(1) of the Income Tax Act (hereinafter referred to as "the Act"), the Income Tax Appellate Tribunal, Indore Bench, has referred the following question of law to this court for its opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that charging of interest u/s 217 is not appealable along with the other grounds of appeal of the assessee arising out of the order of assessment ?"

The material facts giving rise to this reference, briefly, are as follows: While framing the assessment for the assessment year 1977-78, the Income Tax Officer disallowed certain allowances claimed by the assessee and also held that the assessee was liable to pay interest u/s 217 of the Act. Aggrieved by the order passed by the Income Tax Officer, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). Amongst the grounds raised in the appeal, one ground was that interest u/s 217 of the Act should not have been charged inasmuch as the payment of advance tax was made before the close of the financial year. While partly allowing the appeal preferred by the assessee the Commissioner of Income Tax (Appeals) directed the Income Tax Officer to look into the question of levy of interest u/s 217 of the Act after taking into consideration the fact that for the purpose of levy of interest, payment made on 31st March would have to be treated as having been made within the financial year. Aggrieved by the order passed by the Commissioner of Income Tax (Appeals) directing the Income Tax Officer to reconsider the question of levy of interest u/s 217 of the Act, the Revenue preferred an appeal before the Tribunal. The Tribunal held that levy of interest u/s 217 of the Act could not be the subject-matter of appeal before the Commissioner of Income Tax (Appeals). In this view of the matter, the Tribunal allowed the appeal preferred by the Revenue. Aggrieved by that order, the assessee sought a reference and it is at the instance of the assessee that the aforesaid question of law has been referred to this court for its opinion.

Having heard learned counsel for the parties, we have come to the conclusion that the reference has to be answered in the negative and in favour of the assessee. A similar question was raised in Commissioner of Income Tax Vs. Mangal Brothers, where it was observed that if there was a valid and competent appeal before the Appellate Assistant Commissioner, then no restriction could be placed on the powers of the Appellate Assistant Commissioner to deal with the order of assessment and that the question of liability of the assessee to pay interest u/s 217 of the Act formed part of the order of assessment. Following that decision, it must be held that, in our opinion, on the facts and in the circumstances of the case, the Tribunal was not right in law in holding that the question of levy of interest u/s 217 of the Act could not be gone into along with the other grounds of appeal of the assessee, arising out of the order of assessment. Our answer to the question referred to this court is, therefore, in the negative and against the Revenue. In the circumstances of the case, parties shall bear their own costs of the reference.