The Judgment was delivered by :
T.D.SUGLA, VICE PRESIDENT:
This is a Departmental appeal against the order of the AAC directing the ITO to allow the assessee interest under s. 214 . The assessee is a company, and the proceedings relate to its assessment for the asst. yr. 1970-71. The facts are in a narrow compass and are common. Return for the year was filed on 23rd Sept., 1970 disclosing a total income of Rs. 34, 42, 790. By his order dt. 30th Dec., 1972, the ITO completed the assessment under s. 143(3) computing the total income at Rs. 34, 40, 443. Tax chargeable was computed and after making adjustment for tax paid in advance, tax payable by the assessee was determined at Rs. 1, 37, 615 for which a demand notice was issued under s. 156 . The appeal was partly allowed by the AAC vide order dt. 15th June, 1973, effect to which was given by the ITO. vide order dt. 18th March, 1974. As a result the total tax payable by the assessee was considerably reduced and the assessee became entitled to a refund of Rs. 1, 21, 700 as against a demand of Rs. 1, 37, 615 raised originally. T e ITO issued a refund order but did not say a word in the order whether or not any amount was payable to the assessee as interest under s. 214 and no interest was, in fact, computed or paid. The assessee did not file an appeal against the ITO's order dt. 18th march, 1974 even though no interest under s. 214 was granted.
2. Against that part of the order of the AAC whereby he had confirmed the disallowance of relief claimed under s. 80-I the assessee had gone in further appeal to the Tribunal. By its order dt. 16th May, 1974 Bombay Bench 'E; of the Tribunal restored the appeal to the file of the AAC directing him to consider the assessee's claim for deduction under s. 80-I . By order dt. 28th Aug., 1974 the AAC accepted the submissions made on behalf of the assessee and held that the assessee was entitled to deduction under s. 80-I and directed the ITO to compute the deduction. The ITO gave effect to the latter order of the AAC vide his order dt. 31st Dec., 1974. This resulted in a reduction of total income to Rs. 32, 12, 854 and in a further refund of Rs. 1, 25, 168. This time also the ITO has not said a word in his order about interest payable to the assessee under s. 214 nor any interest was, as a matter of fact, determined as payable. However, this time the assessee filed an appeal and the AAC has by his impugned order dt. 26th Feb., 1976 allowed the assessee's claim and directed the ITO to grant interest to the assessee under s. 214 .
3. The main contention of the Revenue before us is that the assessees' appeal before the AAC against non-granting of interest under s. 214 was incompetent for two reasons, namely.
(1) No appeal was provided for against non-granting of interest under s. 214 in s. 246 of the IT Act, 1961, and
(2) Assuming it was so, the assessee missed the opportunity as the cause of grievance arose for the first time on 18th March, 1974 when the ITO had computed the sum of Rs. 1, 21, 700 as refund payable to the assessee, but had not allowed interest and the assessee had not filed appeal within 80 days of the receipt of the said order.
Reliance was then placed on a decision of the Tribunal in the case of Caltax Oil Refining (hereinafter referred to as "DB" decision
") where following the Gujarat High Courts decision in the case of Sharma Construction Co. 1975 (100) ITR 603 (Guj). in preference to the Special decision of the Tribunal in the case of Royal Western Indian Turf Club Ltd. dt. 28th Feb., 1975 Bombay Bench (hereinafter referred as the "SB decision"), the Tribunal held that the appeal against levy of interest under s. 215 , 139 etc. was not competent. The for the assessee, on the other hands, relied upon a recent full Bench decision of the Bombay High Court in the case of Daimler Benz A.G. 1977 CTR 568 : 1977 (108) ITR 961 (Bom) and contended that in view thereof the earlier SB decision should be followed.
4. The Bench which heard the appeal originally, it may be stated, has taken the view that SB and DB of the Tribunal having expressed contrary opinions as stated above and because of complexity of the issue on account of differing High Court judgements, the matter be placed before the President for constituting a larger Bench to decide the dispute. By his order dt. 8th Nov., 1977 the President has constituted a larger Bench consisting of five Members to hear and dispose of the appeal under powers vested in his under s. 255(3) of the IT Act.
5. Before referring to the rival contentions and our reasons for coming to the conclusion on the point in dispute, it is desirable to refer to some almost identical submissions of Shri Tamhane, the Sr. Departmental Representative and Shri Dastur, the learned Counsel for the assessee, which are, of course, for cross purpose. Both suggest that the appeal could have been decided by an ordinary division bench of the Tribunal, and it was not necessary for the larger bench to hear and dispose it. Shri Tamhane has argued that one of his submissions was going to be that assuming non-granting of interest under s. 214 was appealable, this ground could not be taken in an appeal filed against the order of the ITO dt. 30th Dec., 1974 as the assessee was aggrieved for this when the ITO passed his order dt. 18th March, 1974 against which no appeal was, admittedly filed. Since there was no difference of opinion between the benches of the Tribunal on this aspect of the matter, he stated that it was not really necessary fo the larger bench to consider the dispute. Shri Dastur, on the other hands, contended that the only ground given by the DB in the case Caltax Oil Refinery (ITA NO. 2702 (Bom) of 1974-75, ITAT, Bombay Bench) for not following the SB decision was the Gujarat High Courts decision in the case of Sharma Construction Co. (supra) and that the said decision has been adversely commented upon by the Bombay High Court in its decision in 1977 (108) ITR 961. He, thus, urged that the SB decision held good and be followed. It was, however, made clear that he was not disputing the legality of the constitution of the larger bench but was only submitting that the property demanded that the point at issue should be treated as concluded by the SB decision.
6. In our view, the submissions made by both sides are without merit. So far as Shri Tamhane is concerned, it is sufficient to observe that unless he conceded a right of appeal against non-granting of interest under s. 214 as such, we would have no occasion to consider whether or not the assessee could challenge non-granting of interest under s. 214 while filing appeal against the order of the ITO dt. 30th Dec., 1974. Shri Tamhane has, admittedly not conceded it. Moreover, by his order dt. 31s Dec., 1974, the ITO granted a further refund of Rs. 1, 25, 168 which once against gave the assessee cause of grievance. Therefore, the question of appealability of non-granting of interest under s. 214 is very much in dispute and is required to be considered and decided. As regards Shri Dastur's contention also, we find that the problem is not so simple. It is true that DB did not follow SB decision because of the Gujarat High Court 's decision in (1975 (100) ITR 603). It is also true that the Gujarat High Court's decision ( upra) has been approved as such by the Bombay High Court in its decision in 1977 (108) ITR 961. All the same, however, we do not find a word in the Bombay decision in (
7. Coming them to the question of competence of appeal, it may be observed that granting or non-granting of interest under s. 214 is not one of the orders specifically mentioned as appealable in s. 246 and it is a settled law that right of appeal is a creature of statute 1974 AIR(SC) 1126, 1229. Unless the statute provides for an appeal, there would be no inherent right to appeal. However, in case there is any ambiguity, the relevant provisions must be construed in favour of existence of a right of appeal 1967 (66) ITR 319) and 1971 (81) ITR 89). It is in this background that we have to examine whether right of appeal against non-granting of interest under s. 214 can be found in s. 246 and needless to mention that in so doing we have to interpret the provisions of s. 246 liberally.
8. At this stage, it may be mentioned that in all decisions cited before us by the parties, the phrase "denying his liability to be assessed under the Act" used in s. 246(c) has been the subject-matter of consideration while the SB of the Tribunal which took the view in favour of competency of appeal against non-granting of interest under s. 214 had held that the right of appeal was referable to the phrase "objects to the amount of tax determined" used in that very sub-section. It is also significant that Shri Dastur categorically stated before us that his client's case was not that the right of appeal against non-granting of interest under s. 214 was referable to the phrase "denying his liability to be assessed under the Act." In fact for this reason he was vehemently urging that decision held good and should be followed.
9. In order to appreciate rival contentions properly it is desirable to refer to the SB decision and DB decision of the Tribunal and the decisions of the Gujarat and the Bombay High Courts in (1975 (100) ITR 603) and (1977 (108) ITR 961) respectively. SB has vide para 14 of its order held that interest payable to or receivable from the assessee alters the sum payable; it is a tax as held by the Bombay High Court in 1965 (56) ITR 269; it also forms part of the assessee and accordingly the appeal against levy of interest and/or non-granting of its is maintainable. The DB has, on the other hand, held following the Gujarat High court's decision in ("
As regards Mathuradas B. Mohta's case 1965 (56) ITR 269 (Bom), it is true that the Division Bench has enquated charging of penal interest under s. 18-A(8) with imposition of tax liability and has, therefore, taken the view that when an assessee would be disputing his liability to pay penalty interest, he would fall within the phrase "assessee denying his liability to be assessed under this Act" and, therefore, would have a right of appeal under s. 30 of the Act. But it may be stated that the assessee had paid advance tax in his capacity as the karta of the HUF and was denying his liability to pay advance tax in his status as an individual and when the ITO charged penal interest under s. 18-A(8) to him for having failed to submit an estimate of his income any pay advance tax in his status as an individual, he preferred an appeal to the AAC. It would thus be clear that the assessee had really raised the basis issued that he was not liable to be assessed to advance tax at all in his status as an individual This becomes amply clear if pargarphs 16 and 17 of the statement of case set out in the report are carefully scrutinised. It could thus be said that since this basic issue had been raised by the assessee in the appeal which he preferred to the AAC his appeal to the AAC was competent, since he was an assessee falling within the phrase "denying his liability to be assessed under this Act" under s. 30 of the Act. If these two decisions are regarded from this angle, the apparent conflict between them, in our view, will disappear.
" 1977 (108) ITR 981 -982)."
In CIT vs. Sharma Construction Co. 1975 (100) ITR 603 (Guj) the Gujarat High Court has taken the view that s. 246 of the 1961 Act provides for appeal against different orders enumerated therein and since there is no mention of an order charging interest under s. 139 or charging penal interest under s. 217 , no appeal would lie against an order made either under s. 139 o r s. 217. It is also further held that the phrase "where the assessee denies his liability to be assessed under this Act" in s. 246(c) means the assessee who denies his liability to be charged to tax under the 1961 Act and that the word
"tax means income-tax or, in some context, Income-tax and Super-tax, but not penal interest and hence under s. 246(c) no appeal would lie against the order charging penal interest. Similarly, in the case of K.B. Stores vs. CIT 1976 (103) ITR 505 (Gauhati) the Gauhati High Court has taken the same view. It has held that interest charged under s. 139 is not tax under the 1961 Act, that it is only an adjunct to the tax assessed and that, therefore, no appeal lies to the AAC from an order of the ITO under s. 139(8) charging interest for delay in filing of the return as s. 246(c) does not provide for such an appeal. Here again, with great respect, we may point that the aspect that while resorting to ss. 20 8 to 213 (Group of sections which deal with the payment of advance tax under the 1961 Act) the ITO impliedly decides the question that the assessee is under a liability to be assessed to advance tax and the further aspect that if the assessee feels aggrieved by such decision and desires to prefer an appeal, he would be an assessee who :denies his liability to be assessed under this Act"seem to have been overlooked by both the Courts." The question arises for consideration is can one say after going through the latest Bombay High Court decision that their Lordships have approved or disapproved their earlier decision in (1965 (56) ITR 269) (which was the main plank for the SB decision).
10. We have already referred to their Lordships' observations hereinabove. As regards its decision in 1965 (56) ITR 269, their Lordships have evidently not accepted the reason given for the decision, namely, denying liability to pay interest amounted to denying liability to pay tax. No doubt. they have agreed with the final conclusion but that is for the reason that the basic issue i.e. the liability to pay advance tax, had been raised by the assessee in appeal and thus in fact liability to be assessed under the Act was denied. On the other hand, their Lordships appear to have agreed with the reason given by the Gujarat High Court for its conclusion but have not agreed with the conclusion, as in their view an important aspect that the ITO had impliedly decided the question that the assessee was under a liability to be assessed to advance tax, was overlooked by the said High Court. In view of this analysis of ours of the Bombay and Gujarat decisions in 1975 (100) ITR 603 respectively after carefully going through the latest Full Bench decision of the Bom bay High Court, we do not agree with the assessee's counsel that SB decision of the Tribunal should hold goods. As we understand, the main plank of the SB decision that interest was 'tax' has fallen to the ground in view of the Gujarat decision (supra) and the Bombay High Court's Full Bench decision supports it by implication.
11. It may be stated that Shri Dastur has taken pains to take us through 12th report of the Law Commission and notes on clauses of IT Bill, 1961 to show that the purpose of providing a definition to the word "tax" was a limited one that right of appeal was not intended to be curtailed and that in any event s. 2 wherin varicus words and phrases including the word "tax" are defined opens with the words "in this Act unless the context otherwise requires". According to him, therefore, even if it was assumed that the word "tax" wherever occurred in the Act should mean as defined in s. 2(43) , it could be differently interpreted if the context so required. In order to make his point, Shri Dastur submitted that at least Bombay High court had held in 1965 (56) ITR 269 that there was a right of appeal against levy of interest under s. 215 corresponding to s. 18A(6) of the old Act. The legislative intention is clear from the report of the Law Commission and the notes on clauses. Even otherwise, according to him, the legisl ture would not deprive a citizen of his right by defining a word in such a manner. He also highlighted the injustice that will be caused if we hold that the word "tax" did not include in it the word "interest." For this purpose, he stated that the assessee would be virtually remedyless if it was held that the assessee had no right of appeal against non-granting of interest under s. 214 . He further stated that the only other remedy open to the assessee could possibly be by way of writ to the Hon'ble High Court under Art. 226 of the constitution or by way of revision to the CIT. As art. 226 now stood, he was apprehensive whether an order of the ITO not granting interest under s. 214 could at all be challenged. As regards remedy by way of revision to the CIT also, he submitted that one of the conditions laid down in s. 264 was that the order must not have been subject matter of appeal before the Tribunal. In other words, this, according to Shri Dastur, would mean that if the assessee was aggrieved of various a ditions and/or disallowances, the assessee should, either go to the Tribunal or to the CIT but not to both. It was then stated that this could hardly be said to be a remedy. He, however, made it clear that he was not asking the Tribunal to hold the appeal competent on the ground of equity. His attempt was only to show that the legislature could not have possible intended that the subject would be remedlyless.
12. However, all these arguments appear to be of little consequence in view of the fact that the settled law is that the legislative intention if to be first found in the expression used in the section and reference to subject clauses, etc., would be justified only in case of ambiguity. As stated earlier, it is not the assessee's case that the right to appeal against non-granting of interest under s. 214 is found in the expression "denying his liability to be assessed under the Act". The contention is that the right of appeal is referable to the other expression, namely,"
objections to the amount of tax determined, '. It is in this context that the word "tax" assumes importance. As defined in s. 2(43) , tax certainly does not include interest. There does not appear to us to be any cogent reason to hold that the context in which it is used in s. 246 , it should include in it interest. Shri Dastur's submission that the legislature is not expected to deprive the citizen of his right to appeal by just defining t e word "tax" is fallacious as it is based on the assumption that there existed a right of appeal against levy of interest under the old Act. The assumption is not correct as there was a conflict of opinion in the decisions of High Courts in respect of the question whether appeal against levy of interest under s. 18A(6)/(8) of the Old Act and/or ss. 215, 217 and 139 of the new Act was maintainable and, therefore, there was no question of taking away right of appeal as urged. Moreover, the question is not whether the legislature has taken away any such right. It is whether after the definition of the word "tax" in the IT Act, 1961 there is any scope for reading the word "interest" in the word "tax".
13. Reference may usefully to made to s. 246(c) :
"246(1)(c) an order against the assessee, where the assessee denies his liability to be assessed under this Act or any order of assessment under this Act or any order of assessment under sub-s. (3) of s. 143 or s. 144 , where the assessee objects to the amount of income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed;"
It is evident that sub-s. 246(c) contemplates right of appeal against any order where the assessee denies his liability to be assessed under the Act. As the Counsel has not sought right of appeal in this phrase, we are not concerned with this phrase in this appeal. The clause, of course, contemplates right of appeal against any order of assessment under s. 143(3) or s. 144 but in the latter case the right is not absolute. It is available only where the assessee object to the :
(1) Amount of income assessed;
(2) Amount of tax determined; and
(3) Amount of loss computed or the status under which he is assessed.
No doubt, s. 143(3) and 144 required the ITO to compute the total income and determine the sum payable by or refundable to the assessee, and determination of the sum payable by or refundable to the assessee may require the determination of interest payable by or refundable to the assessee under s. 139 , 215 , 216 , 217 and /or 214 etc; and adjustment necessary therefor. However, the right of appeal is not against the determination of sum payable or refundable and unless the assessee objects to the tax determined as distinct from the sum determined, it is not possible to accept the assessee's submissions. In fact, the use of the words "tax", "interest", " penalty"," fine"or" any other sum" in s. 156 supports the Department contention that interest is separate from tax though it might be included in the sum to be determined payable by or refundable to the assessee. This also appears to be the view of the Bombay High court (1977 (108) ITR 961) from the manner in which their Lordships have considered, examined and expla ned its own decision in 1965 (56) ITR 269, Gujarat High Court's decision in 1975 (100) ITR 603 and other High Court's decisions.
14. It may not be out of place to observe that recently the question of appealability of levy of interest under s. 139 and s . 214 again came up for consideration before the Gujarat High Court. Their Lordships have, by their decision dt. 7th Sept., 1977 in the case of Shri Bhikubhai N. Shah vs. CIT 1978 CTR 172 (still unreported) held :
"In the light of the discussion set out hereinabove, our conclusion, therefore, is as follows :
(1) No appeal lies merely against the order levying penalty interest either under s. 139 o r und er s. 215 o r und er s. 217 if in the appeal the assessee challenges the quantum of penal interest or failure on the part of the ITO to waive penal interest or reduce penal interest.
(2) If, however, the assessee denies his liability to pay penalty interest at all (a) on the ground that he was not liable to pay advance tax at all in the case of levy of penal interest under s. 215 or 217 or (b) contends that the conditions for the exercise of the power to levy penal interest under s. 139 did not exist in his case, it would be open to his to challenge the order levying penalty interest because in such an eventuality he would be challenging his liability to be assessed and would be denying his liability to be assessed of all to penal interest.
(3) Even if the appeal before the AAC the only ground taken is regarding the levy of penal interest, it would be open to him that being the appeal against the order of regular assessment, to take all points which may legitimately not only reduce the taxable income or the tax to be paid or regarding the proper head under which the income should fall, but also consequentially reduce the quantum of penalty interest, but no right of appeal has been given to the assessee to appeal simply against the quantum of penalty interest."
It may be stated that their Lordships had, besides other case laws the benefit of full bench decision of the Bombay High Court in 108 ITT 961. The Al
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lahabad High Court has also considered this issue once again in the case of CIT vs. Allahabad Milling Co. 1978 (111) ITR 111 (All). Their Lordships, it may be stated, have reiterated that no appeal is provided by the legislature against an order levying interest under s. 215 of the IT Act, 1961 and that when that is so, it is difficult to accept the contention that in an appeal filed against an order of assessment on other grounds, it is open to the assessee to challenge the chargeability of interest under s. 215(3) . Having regard to the above discussion, we hold that non-granting of interest under s. 214 is not appealable under s. 246 . 15. Before concluding, we may observe that Shri N.Y. Tamhane had also contended that even if it was assumed that an appeal against non-granting of interest under s. 214 was competent : (1) The present appeal, which was filed against the ITO's order dt. 31st Dec., 1974 (as distinct from the order dt. 18th Dec., 1974 in which the refund payable to the assessee was determined for the first time and against which no appeal was filed for non-granting of interest under s. 214 ) was incompetent. (2) The amount of refund payable determined as a result of the orders of the ITO dt. 18th March, 1974 and 31st March, 1974 was not a refund of advance tax paid in excess of the amount of tax determined on regular assessment within the meaning of s. 214 and therefore, the assessee was not entitled to interest under s. 214 . (3) Assuming the assessee was entitled to interest under s. 214 of on the amount of refund payable determined as a result of the orders of the ITO dt. 18th March, 1974 and 31st Dec., 1974, the interest, if any, would be payable upto the date of regular assessment only which, in this case would be the first assessment made by the ITO under s. 143 i.e. the order dt. 30th Dec., 1972.Shri Dastur, the learned Counsel for the assessee, had repelled each and every contention raised by the Departmental Representative in this behalf. In particular, he had placed reliance on the Calcutta High Court's decision in the case of Chloride India Ltd. vs. CIT 1977 (106) ITR 38 (Cal) and the Supreme Court decision in the case of ITO vs. M.R. Vidyasagar 1962 (44) ITR 732 at 737 (SC). However, in the view we have taken on the main issue. viz the competency of appeal for non-granting of interest under s. 214 , we do not consider it necessary to refer to the rival contentions in detail and to finally express ourselves on the points raised. 16. In the result, the Departmental appeal stands allowed.