OM RICE MILLS Vs. INCOME TAX OFFICER
LAWS(IT)-1989-1-5
INCOME TAX APPELLATE TRIBUNAL
Decided on January 27,1989

Appellant
VERSUS
Respondents

JUDGEMENT

S.K. Chander, Accountant Member - (1.)THIS appeal by the assessee is directed against the order of the Commissioner of Income-tax (Administration), Uttar Pradesh, made under Section 263 of the Income-tax Act, 1961 (hereinafter referred to as the Act) on 29-1-1986 for the assessment year 1975-76. Before we record the submissions of the rival parties before us, we bring into focus the background from which the appeal arises.
(2.)The assessee had not been, hitherto, assessed to Income-tax. For the assessment year under appeal no return u/s. 139 of the Act had been filed. Finding that the assessee along with others had made investment in the construction of a building of M/s. Om Rice Mills, the Income-tax Officer issued notice u/s. 148 calling for a return from the assessee. This notice was issued on 7-2-1980. The assessee filed a return declaring 'nil' income on 28-2-1980. However, after taking into consideration, the report of the Valuation Officer regarding the cost of construction for the period Diwali, 1974 to Diwali, 1975 and for the period for Diwali 1976 to Diwali 1977, the ITO compared the cost of construction declared as recorded in the books of account and the cost of construction estimated by the assessee's valuer. Finally, he concluded, as recorded in his impugned order dated 29th Feb., 1984, apparently made under Section 143(3) read with Section 147(a), that the assessee had made investment of Rs. 1,51,550 in the construction of the building as against the amount debited in the books of account at Rs. 1,00,743. According to the ITO, the balance of Rs. 50,807 remained unexplained. He rounded *it off to Rs. 50,800 and brought it to tax u/s. 69B of the Income-tax Act, 1961. While completing the assessment, the ITO also issued show-cause notices for imposition of penalties under Sections 271(l)(c) and 273(b) of the Act.
After the assessment had been so completed, it appears, it was found by the ITO that interest under Sections 217 and 139(8) had not been charged and penalty action under Section 271(l)(a) had not been initiated. He, therefore, made a reference to the Commissioner under Section 263 of the Act. The Commissioner of Income-tax called for the record and issued a notice under Section 263 of the Act to the assessee to show cause why an order under Section 263 need not be made, the order of the ITO being erroneous and prejudicial on account of non-initiation of penalty and non-charging of interest. In response to this show cause notice, the ld. counsel for the assessee, Shri B.S. Vaish, Advocate appeared before the Commissioner and contended that the impugned assessment had been completed under Section 147(a) of the Act and this being, thus, not a regular assessment, interest under Section 139(8) etc. could not be charged because explanation to Section 139(8) had been introduced w.e.f. 1-4-1985 and it was applicable for and from the assessment year 1985-86 onwards. It was also contended that failure of the ITO to initiate penalty proceedings under Section 271(l)(a) did not empower the Commissioner to assume jurisdiction under Section 263 of the Act. It was projected to the Commissioner that an assessment made by the ITO could not be held to be erroneous and prejudicial to the interests of revenue merely because of the failure of the ITO to record his opinion about the penalty, if any, leviable upon the assessee. In any case, it was argued that such a minor omission or mistake could not justify the action of the Commissioner under Section 263.

(3.)THE Commissioner considered the submissions made on behalf of the assessee before him. According to him, though the assessment had been made under Section 143(3) read with Section 147 yet, it was the first assessment for the asstt. year 1975-76 because the assessee had not submitted a return under Section 139(1) of the Act. THE Commissioner pointed out that it was, thus, not a case of reassessment and as such, he was not debarred u/s. 263 from reviewing such an assessment. THEreafter, the ld. Commissioner observed that it is mandatory on the part of the 1TO to charge interest under Section 139(8) and Section 217 of the Act. According to him, the ITO committed an error in not charging interest under Sections 217 and 139(8) and since, the ITO had not left any note as to why such interest was not charged or was not chargeable, there was no application of mind by the ITO: Hence, according to the Commissioner, non-charging of interest under Section 139(8) and Section 217 was erroneous and prejudicial to the interests of revenue. He, therefore, directed the ITO to verify whether interest in accordance with the law under the above sections was chargeable or not. In support of his view, the Commissioner cited some authorities as recorded in his impugned order.


Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.