Ajit K. Sengupta, J. - (1.) This reference relates to the assessment year 198081. The question is whether interest under Section 139(8) of the Income-tax Act, 1961, can be charged in respect of an assessment made under Section 147 of the Income-tax Act, 1961.
(2.) Shortly stated, the facts are that the assessee, a registered firm, filed its return under Section 148 of the Act on January 29, 1982. The Income-tax Officer charged interest under Section 139(8) of the Act treating the firm as an unregistered firm for the purpose of calculation of interest. The assessee filed an appeal against the said order charging interest under Section 139(8) of the Act. The Commissioner of Income-tax (Appeals) allowed the appeal holding that interest could be charged only on regular assessment and not on an assessment or a reassessment made under Section 147 of the Act. The Revenue took the matter to the Tribunal. The Tribunal, after considering the decision in the case of Charles D'Souza v. CIT [1984] 147 ITR 694 (Kar). held that, where the assessment was made under Section 147 read with Section 148 of the Income-tax Act, no interest under Section 159(8) could be levied. On the aforesaid facts and circumstances, the following question of law has been referred to this court : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in confirming the finding of the Commissioner of Income-tax (Appeals) that interest under Section 139(8) of the Income-tax Act, 1961, was not leviable where the assessment is made under Section 147 of the said Act ?" We have already noted that this case relates to the assessment year 1980-81. Section 139(8) has been amended and Explanation 2 has been added to it by the Taxation Laws (Amendment) Act, 1984, with effect from April 1, 1985. The Explanation states that where, in relation to an assessment year, an assessment is made for the first time under Section 147, the assessment so made must be regarded as a regular assessment for the purposes of this sub-section. The said amendment was made effective from the assessment year 1985-86 and, accordingly, it does not apply to the assessment year involved in this case. This amendment would clearly bring out that, prior to the insertion of the aforesaid Explanation by the Taxation Laws (Amendment) Act, 1984, no interest under Section 139(8) could be levied where the assessment was completed under Section 147 read with Section 148 of the Income-tax Act, 1961.
(3.) The Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. CIT, has held that levy of interest is part of the process of assessment. Although Sections 143 and 144 do not specifically provide for the levy of interest and the levy is, in fact, attributable to Section 139(8) or Section 215, it is nevertheless a part of the process of assessing the tax liability of the assessee. The condition precedent for levy of interest under Section 139(8) of the Act is that the assessment made should be a regular assessment. The expression "regular assessment" has been defined in Section 2(40) as an assessment made under Section 143 or 144. The definition contained in Section 2(40) prevails unless the context requires otherwise. It must be held that, prior to the amendment, only assessment made by the Income-tax Officer under Section 143 or 144 could be considered as a regular assessment within the meaning of Section 2(40) of the Act and it was not possible to expand the scope of the expression "regular assessment" to include other orders of assessment by the Income-tax Officer. Thereafter, where an assessment is made under Section 143(3) read with Section 147, interest cannot be charged under Section 139(8).;