Srinivasa Distilleries (P) Ltd., Chittoor V. Assistant Commissioner of Income Tax, Circle \\u2013 I, Tirupathi

ITTA/104/2002

AI Insights

M/s. Srinivasa Distilleries (P) Ltd., the appellant, contested the interest levied on them under Sections 139(8) and 217 of the Income Tax Act, 1961, for the Assessment Year 1985-86. Initially, the Assessing Officer imposed a significant tax and interest liability, which was later reduced following the appellant's applications for waiver. However, dissatisfaction with the reduced interest led the appellant to file further applications for reduction, which were not maintainable as the matter was already under appeal. The Commissioner of Income Tax's subsequent order removing the interest under Section 217 was challenged by the Department and reversed by the Tribunal, leading to this appeal by the appellant.

• Counselvise Citation: [2002] 140 COUNSELVISE.COM (IT) 796110 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 06-08-2002
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: J V PRASAD
• Assessee Lawyers: A V KAUNDINYA
• Keywords: Appeal; Assessment Year; Income Tax; Interest; Rectification; Waiver
• Section: 154; 215; 139(8); 217

Judgement Text

"* THE HONOURABLE SRI JUSTICE L. NARASIMHA REDDY and * THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM + I.T.T.A.No.104 of 2002 % 06.08.2002 # M/s. Srinivasa Distilleries (P) Ltd., Chittoor …. Appellant Vs. $ Assistant Commissioner of Income Tax, Circle – I, Tirupathi …. Respondent ! Counsel for the Appellant: SRI A.V. KRISHNA KAUNDINYA Counsel for Respondent: SRI J.V. PRASAD, SC FOR INCOME TAX Head Note: ? Cases referred: THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A.No.104 of 2002 JUDGMENT: (per the Hon’ble Sri Justice L.Narasimha Reddy) The appellant is an assessee under the Income Tax Act, 1961 (for short ‘the Act’). For the Assessment Year 1985-86, it submitted returns by showing the income of Rs.1,09,129/- and carried forward loss of Rs.6,45,990/-. The Assessing Officer passed an order on 04.01.1989 holding that the appellant is liable to pay tax of Rs.17,36,538/-, interest of Rs.91,965/- under Section 139(8) of the Act and interest of Rs.10,08,731/- under Section 217 of the Act. The appellant filed an application referable to Sections 215 and 217 (2) of the Act. Acting on the same, the Assessing Officer passed an order dated 22.03.1989 reducing the interest levied under Section 139(8) of the Act to Rs.22,791/- and the one levied under Section 217 of the Act to Rs.3,00,000/-. Not satisfied with that order, the appellant approached the Commissioner of Income Tax (Appeals) (for short ‘the Commissioner’). The appeal was rejected through order dated 18.09.1989. Thereupon, he filed an appeal before the Tribunal. Even while the appeal was pending before the Tribunal, the appellant filed an application under Section 154 of the Act before the Assessing Officer with a prayer to rectify the order of assessment. In short he wanted the interest to be slashed further over and above what was directed under order dated 22.03.1989. The Assessing Officer passed an order dated 16.11.1994 holding that the application itself was not maintainable in law. The matter was carried further before the Commissioner. Through his order dated 20.02.1996, the Commissioner held that the Department was not entitled to levy interest under Section 217 of the Act against the appellant. Aggrieved by that, the Department filed I.T.A.No.1048/Hyd/96 before the Hyderabad ‘B’ Bench of the Income Tax Appellate Tribunal. The appeal was allowed through order dated 04.06.2001. Hence, this further appeal under Section 260-A of the Act, by the assessee. Heard Sri A.V.Krishna Kaundinya, learned Senior Counsel for the appellant and Sri J.V.Prasad, learned counsel for the respondent. In a way, it can be said that the appellant had invoked the jurisdiction of successive authorities without there being any valid legal basis. When interest under provisos to Section 139 and 217 r/w Section 215 (4) of the Act was imposed, he availed the remedy of filing an application for waiver under the relevant provisions of those very sections. Substantial relief was granted to him, through order dated 22.03.1989. The interest under Section 139(8) of the Act, which was at Rs.91,965/-, was slashed to Rs.22,791/- and the one under Section 217 of the Act, which was at Rs.10,08,731/-, was reduced to Rs.3,00,000/-. This was confirmed by the Commissioner in appeal. When the further appeal before the Tribunal was pending, an application was filed under Section 154 of the Act before the Assessing Officer for rectification. Rectification is an exercise, which is to be undertaken by the Assessing Officer himself whenever he notices some errors, lapses or omissions in the order of assessment, passed by him. For the most part of it, it does not constitute a remedy for an assessee to get the order of assessment, corrected or modified. Whether it is by the Assessing Officer himself or at the instance of the assessee, the rectification can be undertaken only when the order of assessment was not subject matter of appeal or further appeal. Once an appeal is filed and an order is passed in the appeal, the order of assessment merges into the order passed in the appeal and it loses its dependency, existence or identity. Thereby, the Assessing Officer loses his right to pass any order of rectification in relation thereto. Even where an application under that provision is otherwise maintainable, the exercise can be only to the extent of rectification of a “mistake apparent from the record”. It cannot be an occasion for reviewing the order of assessment, by taking into account new grounds or fresh material. It is only the prerogative of the appellate authority and not that of the assessing officer to arrive at a different conclusion even on the same material. As rightly advised, the appellant approached the Assessing Officer by filing applications for waiver or reduction of interest, and relief was in fact granted. When relief was granted in such applications, there was absolutely no basis for him to fall back upon Section 154 of the Act. Two strong reasons exist for not entertaining the application. The first is that the order of assessment has already become the subject matter of appeal, may be after the waiver of interest to substantial extent. The second is that no error, apparent on the face of record, was pointed out. The very fact that the appellant sought waiver of interest means that he acknowledged the correctness of the order and liability to pay interest, but prayed for reduction thereof. That being the case, there was absolutely no basis for the Commissioner to hold that the appellant was not liable to pay interest under Section 217 of the Act. As a matter of fact, it was not the case of the appellant before the Assessing Officer, as is evident from the fact that he filed an application for waiver and not for withdrawal of the interest altogether. The order passed by the Commissioner suffered from patent illegality and the same was rectified by the Tribunal. We do not find any basis to interfere with the order under appeal. The appeal is accordingly dismissed. There shall be no order as to costs. The miscellaneous petitions filed in this appeal shall also stand disposed of. L.NARASIMHA REDDY, J Date: 06.08.2014 CHALLA KODANDA RAM, J Note: L.R copy to be marked B/o va "