D.K.Seth, J. - (1.) In exercise of the powers conferred under Section 120(2) of the IT Act, 1961 (IT Act), the jurisdiction in relation to Chapter XVII-B except Section 195 and those relating to Section 221 were conferred on newly created wards in a newly created income-tax range.-Based on this creation of jurisdiction, two points in this case have since been raised by Dr. Pal, appearing on behalf of the assessee, since opposed by Mr. Agarwal for the Department. (i) The first point that has been raised is with regard to the charging of interest under Section 201(1A) on the amount defaulted. Dr. Pal contended that interest payable in terms of Sections 234A, 234B and 234C where the statute used the expression 'liable to pay interest' alike Section 201(1A), was held to be discretionary by a circular issued by the Board on 23rd May, 1996, since published in (1997) 225 ITR (St) 101. At the same time, an order passed under Section 201 is appealable under Section 246. Therefore, this liability to pay interest contemplated under Section 201(1A) was never meant to be mandatory by the legislature. (ii) The second point that has been raised is that the officer who had passed the order had no jurisdiction and as such the order passed is a nullity and cannot be enforced so far as the asst. years 1983-84, 1984-85, 1986-87 and 1987-88 are concerned. So far as the assessment year 1985-86 is concerned, the same was passed without giving opportunity and, therefore, cannot be sustained on account of infraction of the principles of audi alteram partem when such order visits the assessee with penal/civil consequences.
(2.) Mr. Agarwal, on the other hand, contended that the provisions relating to Sections 234A, 234B and 234C fixing liability to pay interest are dependent on and have to be interpreted in the context in which such interest is chargeable. According to him, these are simple defaults on the part of the assessee and the interest that is chargeable in effect is coercive measure to compel the assessee to adhere to the time schedule. The question of payment of interest would arise in all these cases only when the assessment is complete and it is found that any amount of tax becomes payable or the tax payable is in excess of amount which has been paid by way of advance tax, if paid. Therefore, the question is dependent on the determination of the liability. This interest would not be payable if no amount is found to be due on account of tax payable. Thus, in such circumstances, in one contingencies of the situation, the interest would become payable and in another contingencies it would not. It was rightly laid down by the Board to be discretionary. But this cannot be equated with a situation when the interest is compensatory in nature and payable on an amount which is not the income of the assessee but of someone else from which the assessee was liable to deduct the tax payable by such assessee and the default to deduct or to pay would start from the date it becomes deductible since this amount was payable to the treasury, simultaneously with the payment of the amounts to the third party assessee concerned. Therefore, according to him, the liability occurring in Section 201(1A) as has been engrafted in the enactment cannot be said to be discretionary. (i)He then contended that the jurisdiction though conferred on the specially created ward w.e.f. 8th May, 1989, but the same was not retrospective in operation. According to him, there cannot be any retrospective operation of a legislation conferring jurisdiction. By reason of such, legislation neither the jurisdiction, which was already there, could be taken away with retrospective effect nor the jurisdiction could be created with retrospective effect. Therefore, the default having been committed before 8th May, 1989, the jurisdiction remains with the officer before whom the return was submitted and it could not be taken away by the said circular or by creation of separate ward. According to him, the pending cases could not be transferred except by express provisions in the statute. (ii)Mr. Agarwal has also pointed out that this question of jurisdiction was taken for the first time before the learned Tribunal and was never taken either before the AO or the CIT(A). Therefore, this point can no more be agitated. (iii)Mr. Agarwal has referred to several decisions to support his contention with regard to the mandatory nature of the liability to pay interest under Section 201(1A) as well as in relation to the question of jurisdiction. We shall be referring to those decisions at appropriate stage.
(3.) In reply, Dr. Pal referred to the decision in National Thermal Power Corporation Ltd. v. CIT in order to contend that a point of law can be agitated even at the appellate stage though not raised earlier if it involves question of law arising from the facts found by the authorities. He also sought to distinguish the decisions cited by Mr. Agarwal.;