Decided on August 02,1973



R.N. Misra, J. - (1.) THESE are four applications under Article 226 of the Constitution asking for writs of certiorari to quash the demands raised by the Income-tax Officer, Ward "D". Cuttack, by way of interest payable by the assessee under Sections 139 and 217 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), and the orders in revision passed under Section 264(1) of that Act by the commissioner of Income-tax upholding part of the demand in respect of four assessment years 1964-65, 1965-66, 1966-67 and 1967-68. The petitioner who is the assessee under the Act happens to be the karta of a Hindu undivided family.
(2.) THE assessee made a disclosure of his income under Section 27I(4A) of the Act before the Commissioner of Income-tax, Bihar and Orissa at Patna, on January 25, 1968. About two months thereafter, the assessee filed returns under Section 139(4) of the Act for the aforesaid four years. THE Commissioner of Income-tax, opposite party No, 1, on March 21, 1972, arrived at a settlement with the assessee (vide annexure "6"). THE main terms thereof were these: "THE sum-of Rs. 2,30,000 (which was estimated as the investments up to March 31, 1967), as reduced by Rs. 50,000, opening capital, would be spread over equally in four assessment years as below: In view of the disclosure made by the assessee penalty would be levied under Section 271 (1)(c) at 20 per cent. of the tax assessed in each year. THE assessment made already for the year 1967-68 would stand quashed under Section 264 of the Act and in its place an assessment would be made in terms of what has been stated above." Pursuant to this arrangement the Commissioner revised the order of assessment for the year 1967-68 and directed adoption of Rs. 45,000 as income and required the Income-tax Officer to revise his assessment. The Income-tax Officer in terms of what was settled assessed the petitioner for the years in question and in the notice of demand added interest payable by the assessee both under Section 139 and under Section 217 of the Act. The assessee appealed against the demand particularly in the matter of addition of interest. The appeals were, however, dismissed by the Appellate Assistant Commissioner on the basis that it was the outcome of the settlement. Thereupon, the assessee went up in revision under Section 264 of the Act before the Commissioner. The Commissioner passed a combined order in respect of these years on November 18, 1972. He took the view that what had been brought into the fold of settlement was the income to be assessed under the Act and the penalty leviable under Section 271 of the Act. The settlement did not deal with the assessee's liability for interest payable under Sections 139 and 217 of the Act. In view of the fact that a part of the demand had already been paid by the assessee he directed the Income-tax Officer to recompute interest under Section 217 of the Act by giving credits to the payment made under Section 140A of the Act or taxes paid thereafter before the completion of regular assessment. He, however, did not interfere in regard to the demand of interest under Section 139 of the Act. The assessee in these writ applications contends that in respect of these four years his entire liability has been quantified as a result of the settlement and it was not open to the Income-tax Officer to raise any further demands by way of interest. It is further contended that the action of the Income-tax Officer in initiating proceedings under Section 147 of the Act and completing assessments under Section 143(3) of the Act is contrary to law. On behalf of the opposite parties a detailed affidavit in each case has been filed controverting the several allegations of the petitioner. It has been stated that the Commissioner had no jurisdiction to deal with the question of interest at that stage. Interest under both counts is a liability created by the statute and the same is to be calculated at the time of regular assessment by the Income-tax Officer. While the Commissioner was dealing with the application made under Section 271(4A) of the Act the question of interest did not arise for consideration. That apart, it was not a matter within the purview of the proceeding then undertaken before the Commissioner on the basis of disclosure of the assessee. Absence of reference to payability of interest by the petitioner cannot be construed as exemption of liability in the matter of interest. It has also been contended that the proceeding under Section 147 of the Act was of no material bearing in view of the fact that the assessee had agreed with the department to be assessed in a particular manner in respect of the four assessment years. Returns had already been filed and were pending consideration of the assessing officer. The assessee is not entitled to question at this stage the assessments in view of the fact that they are the outcome of settlement and the assessee having not challenged such assessments in accordance with law the assessments have become final. As common questions of fact and law arise in all these four writ applications and one common argument was advanced before us, we propose to dispose of all these four cases by a common judgment. We propose to dispose of a preliminary point first. The learned standing counsel contended before us that the Commissioner's order was final and was not open to dispute before us. We do not think this contention has any merit. The order of the Commissioner made under Section 264 of the Act was a judicial order and not an administrative one. In view of the decision in Dwarka Nath v. Income-tax Officer, 1965 57 ITR 349 the question of jurisdiction is no more open to doubt. The writ petitions are maintainable. On January 25, 1968 (vide annexure "1") the petitioner made a disclosure before the Commissioner of Income-tax, Bihar and Orissa at Patna. Therein he had indicated that the amount to be assessed to income-tax was Rs. 1,86,000 and he wanted it to be spread over 8 years, that is, assessment years 1959-60 to 1966-67. After hearing the assessee and his counsel the opposite party No. 1 indicated the terms of settlement which we have already referred to (vide annexure "6"). The assessee and his lawyer agreed to the terms and signed the terms of settlement in token of acceptance. The Income-tax Officer took up the assessments for those four years and completed assessments under Sections 143(3) and 147 of the Act by adopting income of Rs. 45,000 per year. He initiated a proceeding under Section 273 of the Act. In the demand notice for each of the four years, apart from tax on income of Rs. 45,000 and penalty under Section 271 of the Act at 20 per cent. as indicated in the terms of settlement, he included interest payable under Sections 139 and 217 of the Act. Under Section 139 of the Act every person having an assessable income is obliged to furnish a return of his income in accordance with the provisions of the Act. It is not disputed that the assessee had that liability. Nor is it disputed that the return had not been filed within the time allowed under law. Under Sub-section (8) of Section 139 of the Act the assessee has liability to pay interest at the rate indicated therein from the date of default to make the return till the return is made. The Income-tax Officer has raised the demand of interest on the basis of failure to furnish the return in each of the years. " Under Section 208 of the Act every assessee under certain circumstances has the liability to pay advance tax. It is not disputed that the assessee had such liability under the Act, Nor is it disputed that the assessee had failed to pay such tax notwithstanding the liability. Under Section 217 of the Act the Income-tax Officer has a statutory mandate to raise demand of simple interest at the prescribed rate for the period from 1st of April next following the financial year in which the advance tax is payable up to the date of regular assessment. The petitioner's contention is that his entire liability under the Act had been fixed by the settlement and in that view of the matter interest payable under both the provisions of the statute are no more collectable. We have already indicated the stand of the revenue which is to the effect that the Commissioner was in seisin of a proceeding under Section 271(4A) of the Act and the question of interest was not germane to such proceeding. Reliance is placed on the provisions of the statute according to which calculation of interest has to be done only when regular assessment is made. It has been contended, therefore, that non-mention regarding payment of interest in the settlement (annexure "6") cannot form the basis of the petitioner's stand that interest was not collectable. It was emphatically contended by the learned standing counsel for the revenue that the question of dealing with interest is not a matter within the purview of the Commissioner's jurisdiction and at any rate until it has been raised by the Income-tax Officer the question of its remission does not arise. The learned standing counsel has further contended that waiving of interest under both the sections is under the circumstances proscribed and as to the liability regarding interest and whether it could be waived were matters foreign to the settlement. Subsequently, when regular assessment proceedings were undertaken liability to interest was considered. We find force in the contention of the learned standing counsel. It is conceded before us by both sides that the petitioner had by making a voluntary disclosure invoked the jurisdiction of the Commissioner under Section 271(4A) of the Act. Disclosure was with reference to the income to be brought into the net of taxation. Penalty was a matter directly provided under that provision. Therefore, the Commissioner rightly dealt with the quantum of income and the question of penalty. Thereafter, he instructed the Income-tax Officer to give effect to the settlement. We are satisfied, therefore, that non-mention of the question of interest in the settlement cannot be construed as agreeing not to raise demand of interest. The claim of interest is in terms of the statute and no dispute has been raised that there is any infraction otherwise. The settlement referred to above, therefore, cannot stand as a bar to the claim of interest. The petitions have no merit and they are accordingly rejected. We make no order as to costs. B.K. Ray, J. I agree. ;

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