Season Rubber Ltd. vs Commissioner of Income Tax

The appellant is a company incorporated under the Companies Act and is engaged in the business of manufacture of centrifuged latex. The assessment of the appellant under the Income Tax Act, 1961, for the year 1986-87 was originally completed on March 15, 1989, in which the Assessing Officer levied a sum of Rs. 16,615 as interest u/s 139(8) and a sum of Rs. 1,32,309 as interest u/s 215 of the Income Tax Act, 1961. The appellant took up the assessment order in appeal before the Commissioner of Income Tax (Appeals), who granted relief to the appellant. The Assessing Officer gave effect to the appellate order in which interest u/s 139(8) Rs. 8,805 and interest u/s 215 Rs. 63,813 were levied. The appellant filed a petition for waiver of the interest levied u/s 139(8) and also u/s 215 of the Act before the Commissioner of Income Tax u/s 264 of the Act. The Commissioner, as per order dated July 22, 1994, waived the interest levied u/s 139(8), but declined to grant waiver of the interest levied u/s 215. Regarding the levy of interest u/s 215 of the Act, the Commissioner of Income Tax observed as follows :

"As regards interest levied u/s 215, it is seen that an order of the Income Tax Appellate Tribunal for the assessment year 1986-87 allowing relief to the assessee as regards the claim for depreciation has been issued and on giving effect to the same the assessee will be entitled to substantial relief as regards interest levied u/s 215. The Assessing Officer is directed to verify the order of the Tribunal and give effect to the same immediately so as to correctly quantify the reduced interest u/s 215."

Pursuant to the direction issued by the Commissioner in the said order, the Assessing Officer gave effect to the Tribunal''s order giving further relief. The order of the Commissioner was also given effect to by the Assessing Officer as per order dated November 17, 1994, in which interest Rs. 28,847 was levied u/s 215 of the Act. The appellant, being aggrieved by the aforesaid levy of interest, filed an appeal before the Commissioner of Income Tax (Appeals), who, by his order dated March 27, 1996, allowed the appeal directing the deletion of the interest levied u/s 215 of the Act. In appeal by the Department, the Appellate Tribunal cancelled the order of the first appellate authority by holding that no appeal will lie against the levy of interest u/s 215 of the Act and restored the order of the assessing authority.

Shri John Ramesh, learned counsel for the appellant, submits that though the assessee had filed a revision u/s 264 of the Income Tax Act for waiver of the interest levied under Sections 139(8) and 215 of the Act, the Commissioner of Income Tax had considered only the waiver of interest u/s 139(8) and left open the matter in regard to the levy of interest u/s 215 for consideration by the Assessing Officer. Counsel further submits that the Tribunal was not justified in holding that no appeal will lie against the levy of interest u/s 215 made by the assessing authority. He, in support of the above, relied on the decisions of the Karnataka High Court in Commissioner of Income Tax, Karnataka-I, Bangalore Vs. Executors of the Estate of Late H.H. Rajkuverba Dowager Maharani Saheb of Gondal, and of the Calcutta High Court in Commissioner of Income Tax Vs. Lalit Prasad Rohini Kumar, and the decision of the Supreme Court in Central Provinces Manganese Ore Co. Ltd. Vs. Commissioner of Income Tax, . On the basis of the aforesaid decisions, he submits that the Tribunal had acted illegally in setting aside the order of the Commissioner of Income Tax (Appeals).

Shri P.K.R. Menon, learned senior Central Government standing counsel for the Revenue, on the other hand, submits that the appellant, by filing a petition u/s 264 for waiver of the interest, had admitted his liability to pay interest under Sections 139(8) and 215. He also submits that the appellant had only sought for waiver/reduction of the interest levied under the aforesaid two sections as provided under Sections 139(8) and 215 read with Rules 117A, and 40, respectively, of the Income Tax Rules. The senior counsel further submits that since the Commissioner of Income Tax had declined to grant relief of waiver of the interest levied u/s 215 of the Act, the Assessing Officer, while giving effect to the order of the Tribunal and the order of the Commissioner of Income Tax, had no jurisdiction to consider the question regarding the validity of the levy of interest u/s 215 of the Act. Admittedly, the appellant did not challenge the levy of interest u/s 215 of the Act made in the original assessment order. It is only against the revised order giving effect to the first appellate order the appellant had chosen to file a revision u/s 264 of the Income Tax Act read with Rule 40 of the Rules, seeking for waiver of the interest. We find from the order of the Commissioner of Income Tax that the Commissioner has specifically noted the contention of the appellant regarding the waiver of interest as follows :

"As regards interest u/s 215, the assessee''s representative stated that the return having been filed on December 17, 1986, and the assessment having been completed vide order dated March 15, 1989, and the delay in the completion of the assessment not being attributable to the assessee, the waiver of interest u/s 215 may be sympathetically considered."

We also find that the Commissioner has observed in that context that by giving effect to the order of the Income Tax Appellate Tribunal, the assessee will get substantial relief as regards interest levied u/s 215 of the Act. From the above, it is clear that the Commissioner had declined to grant the relief in regard to the levy of interest u/s 215 of the Act to the appellant. It is true that the Commissioner of Income Tax has directed the Assessing Officer to verify the order of the Tribunal and give effect to the same immediately so as to correctly quantify the interest levied u/s 215. It is by virtue of the above direction as also the direction contained in the appellate order of the Tribunal that the Assessing Officer had passed the order dated November 17, 1994, wherein interest u/s 215 was fixed at Rs. 28,847 as against the interest of Rs. 1,32,315 levied by the Assessing Officer originally and the sum of Rs. 63,813 fixed in the revised order giving effect to the first appellate order. The appellant had chosen to file an appeal against the levy of the reduced interest of Rs. 28,847 before the first appellate authority. According to us, the appellate authority had acted illegally in directing the Assessing Officer to waive the interest levied u/s 215 without noticing the fact that the Commissioner of Income Tax has declined to grant the said relief. According to us, had the first appellate authority noticed the order of the Commissioner of Income Tax passed u/s 264 of the Act read with Rule 40 of the Rules, he would not have entertained the appeal at all. The Tribunal, according to us, has rightly cancelled the order of the first appellate authority by holding that in view of the order passed by the Commissioner of Income Tax u/s 264 of the Act, no appeal will lie against an order passed by the Assessing Officer giving effect to the appellate order and the consequential reduction of interest u/s 215.

The decisions of the Supreme Court and of the High Courts relied on by counsel for the assessee have no relevance on the facts of the case on hand. The appellant had applied before the Commissioner of Income Tax for waiver/ reduction of the interest levied u/s 215 which was declined. In the above circumstances, there is no question of filing any appeal against the order giving effect to the directions issued by the Commissioner in the revision order for the very same relief. The Commissioner of Income Tax (Appeals) had no jurisdiction to entertain such an appeal. We do not find any merit in this appeal. It is accordingly dismissed.