Andhra Pradesh H.C : Whether, on the facts and in the circumstances of the case, the initial assessment made in pursuance of proceeding initiated under s. 147 is a regular assessment for the purpose of charging interest under s. 139 and under s. 217 ?

Counsel Appeared

M. Saryanarayana Murthy, for the Revenue : None, for the Assessee

Y.V. ANJANEYULU, J.:

The Tribunal made this reference under s. 256(1) of the IT Act, 1961 (“the Act”, for short). The reference relates to the income-tax asst. yr. 1976-77 and the following two questions are referred for the consideration of this Court :

“1. Whether, on the facts and in the circumstances of the case, the initial assessment made in pursuance of proceeding initiated under s. 147 is a regular assessment for the purpose of charging interest under s. 139 and under s. 217 ?

2. Whether, on the facts and in the circumstances of the case, an appeal against charging of interest under ss. 139 and 217 is maintainable ?”

The relevant facts may be noticed. The petitioner carries on business in the purchase and sale of timber. For the asst. yr. 1976-77 for which the previous year ended on 31st March, 1976, the petitioner filed a return declaring an income of Rs. 8,990 on 1st June, 1979. The ITO held that the return filed by the assessee on 1st June, 1979, could not be considered as a return under s. 139 of the Act, inasmuch as it was not filed within the time limit specified in s. 139. The ITO, therefore, issued a notice under s. 148 on the basis that the petitioner failed to file its return of income within the time allowed under s. 139. Responding to the notice under s. 148, the assessee informed the ITO that the return already filed on 1st June, 1979, might be treated as one filed in response to the notice by the ITO issued under s. 148. That is how the ITO regularised the assessment proceedings as observed by him in the assessment year. The ITO made an addition to the income returned of Rs. 11,800 on account of deficiency in gross profit and completed the assessment on a total income of Rs. 20,790. Tax was demanded treating the assessee as an unregistered firm. The ITO also claimed interest of Rs. 884 under s. 139 of the Act and Rs. 1,274 under s. 217 of the Act. The aggregate of the tax and interest demanded by the ITO amounted to Rs. 4,828.

The assessee filed an appeal before the AAC. The contention before him was that the levy of interest under ss. 139 and 217 of the Act by the ITO was not authorised by the provisions of the Act and was illegal. The specific claim was the assessment made by the ITO is not an assessment under s. 143(3) or s. 143(4) of the Act but is an assessment under s. 143(3) r/w s. 147(a) of the Act. In that view, it was claimed that the assessment made by the ITO cannot be held to be a “regular assessment” with the result that no interest can be levied either under s. 139(8) or under s. 217 of the Act. The AAC accepted the aforesaid contention and cancelled the levy of interest by the ITO.

4. The Revenue filed an appeal before the Tribunal against the order of the AAC. Two contentions were raised before the Tribunal. The first contention was that on appeal lies against the order of the ITO levying interest under s. 139 and s. 217 and the AAC was, therefore, in error in entertaining the appeal. The second contention alternatively raised was that the levy of interest was legal, inasmuch as the assessment completed by the ITO was a “regular assessment” for the purpose of s. 139(8) and s. 217 of the Act. In a fairly elaborate and well- reasoned order, the Tribunal rejected both the contentions of the Revenue and upheld the order of the AAC. Aggrieved by the Tribunal’s order, the CIT sought a reference under s. 256(1) of the Act of the two questions mentioned in para 1 supra.

We may deal with the second question first. We may refer to the decision of the Supreme Court in Central Provinces Manganese Ore Co. Ltd. vs. CIT (1986) 58 CTR (SC) 112 : (1986) 160 ITR 961 (SC) : TC43R.242. The Supreme Court held that “the levy of interest is part of the process of assessment. Although ss. 143 and 144 do not specifically provide for the levy of interest and levy is, in fact, attributable to s. 139(8) or s. 215, it is nevertheless a part of the process of assessing the tax liability of the assessee. Inasmuch as the levy of interest is a part of the process of assessment, it is open to an assessee to dispute the levy in appeal provided he limits himself to the ground that he is not liable to the levy at all”. In the present case, the assessee claimed that he is not liable to the levy of interest under s. 139(8) and s. 217 of the Act at all. According to him, these provisions do not authorise the levy of interest in the facts and circumstances of the assessee’s case. Thus, there is total denial of liability to interest. In the circumstances, the assessee is entitled to dispute the levy of interest in the appeal filed by him. The Revenue’s contention that the appeal filed by the assessee is not maintainable cannot be accepted. We accordingly answer the second question in the affirmative, that is to say, in favour of the assessee and against the Revenue.

As regards question No. 1, learned standing counsel for the Revenue initially stated that this question is covered by a decision of this Court is Nizam’s Religious Endowment Trust vs. ITO (1979) 15 CTR (AP) 239 : (1981) 131 ITR 239 (AP), on which the Tribunal placed reliance. He, however, quickly resiled from that stand and urged that the question is not covered by the decision of this Court above referred to and preferred to urge certain matters for consideration.

The ITO charged interest under s. 139(8) on the ground that the assessee did not file its return within the time provided under s. 139 of the Act. He had also levied interest under s. 217 of the Act on the ground that the assessee failed to furnish an estimate of the advance tax payable for the assessment year under consideration. It has been pointed out that the return for the assessment year under consideration was filed by the assessee on 1st June, 1979. Treating the said return as not valid, the ITO initiated proceedings under s. 148 of the Act. Obviously, on the request of assessee to the treat the said return as one filed on response to the notice issued under s. 148, the ITO observed that the return filed by the assessee was “regularised” by issue of a notice under s. 148. On these facts, it must be held that the assessment is made by the ITO under s. 143(3) r/w s. 147 of the Act. The question for consideration is whether interest under s. 139(8) and s. 217 could be levied when the assessment is made under s. 143(3) r/w s. 147.

8. Sec. 139(8) authorised the levy of interest on the amount of tax payable on the total income as determined on “regular assessment”. Similarly, s. 217 of the Act authorised by the levy of interest where on making a “regular assessment”, the ITO finds that the assessee has not filed an estimate of advance tax payable as required by s. 212(3) of the Act. It would, therefore, be seen that the condition precedent for the levy of interest under s. 139(8) as well s. 217 of the Act is that the assessment made should be a “regular assessment”, as defined in s. 2(40) of the Act. It states : “‘regular assessment’ means the assessment made under s. 143 or s. 144. The definition contained in s. 2 of the Act shall prevail unless the context otherwise requires. The assessee’s contention is that the assessment made by the ITO cannot be regarded as a “regular assessment” inasmuch as it is not merely an assessment under s. 143(3) but is an assessment under s. 143(3) r/w s. 147 of the Act. It is urged that no interest can be levied for the above reason. As already indicated, this contention of the assessee was accepted by the AAC as well as by the Tribunal.

9. Learned standing counsel for the Revenue, Sri M. Suryanarayana Murthy, basically urged that the so called “regularisation” of the assessment proceedings by the ITO by issue of a notice under s. 148 was unnecessary and the ITO could very well have completed the assessment under s. 143 (3) on the basis of the return filed on 1st June, 1979, without taking recourse to s. 148. Learned standing counsel, therefore, urged that the assessment made by the ITO must be regarded as one made under s. 143(3) only, notwithstanding the superfluous exercise by the ITO of issuing a notice under s. 148 receiving the return on 1st June, 1979. According to standing counsel, an assessee can file his return at any time and based on such a return, the ITO can always make an assessment. Learned standing counsel found fault with the ITO in this case for treating the return filed by the assessee on 1st June, 1979, as an invalid return and regularising the proceedings by the issuance of a notice under s. 148 of the

Act. If the aforesaid contention had been urged by counsel less familiar with the provisions of the IT Act, we would have disregarded it and not taken note of it. Coming as it does from standing counsel for the Revenue with considerable standing at the Bar, we are startled at the proposition of law sought to be made out. Not only did learned standing counsel argue the matter at considerable length supporting the above proposition but he also sought to rely on a decision of the Supreme Court in State of Assam vs. Deva Prasad Barua (1970) 75 ITR 18 (SC). It is, therefore, necessary to examine the tenability of the contention raised. A return could be voluntarily filed before 30th June, or 31st July, as the case may be, of the relevant assessment year, under s. 139(1) of the Act. Where, however, the ITO serves a notice under s. 139(2) upon the assessee calling for a return of income, the assessee has to file the return, responding to the notice served, within 30 days from the date of service of the notice, or within such time as the ITO may extend the date for furnishing the return from time to time. Where a return is not filed within the time allowed under s. 139(1) or under s. 139(2), a return can still be filed by assessee under s. 139(4). Under this provision, an assessee could file a return at any time before the end of the period specified in cl. (b) of sub-s. (4). In the present case, the assessee did not file a return under s. 139(1) nor was any notice issued under s. 139(2) calling upon the assessee to file a return so that the return filed by the assessee cannot be regarded as one filed under s. 139(2). The return under s. 139(4) for the asst. yr. 1976-77 could be filed by the assessee under sub-cl. (iii) of cl. (b) within two years from the end of the assessment year that is to say, on or before 31st March, 1979. The assessee filed the return only on 1st June, 1979, and, therefore, the return filed cannot be regarded as one filed under s. 139(4) either. It was for this reason that the ITO regarded the return filed by the assessee on 1st June, 1979, as an invalid return and rightly took proceedings under s. 148 for regularising the assessment proceedings. Learned standing counsel, however, contends that even though the return is filed after the time limit enunciated under s. 139(4)(b)(iii), still the return filed by the assessee is a valid return and there was no need for the ITO to ignore the existence of such a return when once it is filled. Without taking recourse to s. 148 of the Act, contends learned standing counsel, the ITO could have the assessment on the basis of the return filed on 1st June, 1979. The proposition made by learned standing counsel is wholly unacceptable and has no support either in law or in the decision of any Court. Indeed, we have not come across any case where such a startling proposition of law has been canvassed by the Revenue. A return filed by an assessee after the expiry of the time limit specified in s. 139 is non est in law and it is not open to the Revenue to take note of such a return and proceed to make an assessment. We may refer to the decision of the Calcutta High Court in CIT vs. Smt. Minabati Agarwalla (1971) 79 ITR 278 (Cal) : TC9R.336, where the matter was considered in great detail. In that case, the assessee filed returns for the asst. yrs. 1953-54 to 1961-62 voluntarily on 9th Aug., 1961. Based on those returns, the ITO completed the assessments on 16th Aug., 1961. The CIT took action under s. 33B of the Act and cancelled all the assessments and directed the ITO to make fresh assessments after making proper enquiries. On appeal against the order of the CIT, the Tribunal held that in so far as the returns for the asst. yrs. 1953-54 to 1956-57 were concerned, since they had been filed on 9th Aug., 1961, that is, beyond the period of four years from the end of the relevant assessment years, those returns were not valid returns under s. 22(3) of the Act and accordingly modified the CIT’s order by cancelling the assessments alotogether and without giving any direction making fresh assessments. On these facts the High Court held that the returns filed by the assessee for the asst. yrs. 1953-54 to 1956-57 on 9th Aug., 1961, were invalid and that no fresh assessments could be made on the basis of the CIT’s order under s. 33B of the Indian IT Act, 1922. We may point out that at the relevant time, a return under s. 22(3) of the Indian IT Act, 1922 [which is analogous to s. 139(4) of the IT Act, 1961], could be filed by an assessee before the assessment is made, within four years from the end of the assessment year. Thus, the returns for the asst. yrs. 1953-54 to 1956-57 could be filed by the assessee on or before 31st March, 1958, 31st March, 1959, 31st March, 1960 and 31st March, 1961, respectively. As the returns were filed only on 9th Aug., 1961, they were regarded as invalid returns and the High Court held that no assessments could be made on the basis of those returns. The decision of the Calcutta High Court demonstrates the inaccuracy of the argument advanced by learned standing counsel for the Revenue.

13. We may refer to the decision of the Punjab and Haryana High Court in Auto & Metal Engineers vs. Union of India (1978) 111 ITR 161 (P&H) : TC9R.152. That was a case where for the asst. yr. 1972-73 the assessee filed a return on 12th May, 1975. The last date for furnishing the return for that assessment year under s. 139(1) was 31st July, 1972. The last date for filing the return under s. 139(4) was 31st March, 1975. Inasmuch as the return was filed on 12th May, 1975 after the expiry of the time limit specified in s. 139(4), the ITO ignored that return and issued notice to the assessee under s. 147(a)/148 of the Act. The assessee filed a writ petition challenging the notice on the grounds, inter alia, that the return had already been filed and was pending and that the assessment for 1972-73 had become time-barred. The High Court held that the return filed on 12th May, 1975, having been filed beyond time the ITO was not unjustified in treating the same as non est. The High Court rejected the ground that the notice under s. 147 could not be issued because the return filed already by the assessee was pending. The facts of this case clearly fit into the facts obtaining in the case of assessee before us and demonstrate the fallacy in the argument of learned standing counsel.

We may refer to another decision of the Calcutta High Court in CIT vs. Bissessar Lal Gupta (1976) 105 ITR 684 (Cal) : TC9R.345, which provides authority for the proposition that where an assessee files a return, suo motu, beyond the period specified in s. 139(4), no assessment could be made for that assessment year. This answers adequately the argument advanced by standing counsel that the ITO could have made the assessment on the basis of the return filed on 1st June, 1979, which was clearly beyond the period specified in s. 139(4)(b)(iii).

14. We may refer to yet another decision and that is of the Allahabad High Court in Smt. Parbati Devi vs. CIT (1970) 75 ITR 625 (All) : TC9R.348. That was a case where the assessee filed a voluntary return of her income for 1953-54 on 28th Feb., 1966. According to the law, at the relevant time, the return for the asst. yr. 1953-54 could be filed under s. 139(4) on or before 31st March, 1958. The ITO made an assessment on 1st April, 1966, on the basis of the return filed by the assessee on 28th Feb., 1966. The assessee challenged the assessment made by the ITO on 1st April, 1966, in a writ petition. The High Court upheld the contention on the ground that the voluntary return not having been filed within a period of four years as provided in s. 139(4), there was no valid return which could support the assessment order. The fact that the petitioner had agreed to file a voluntary return as a result of a compromise did not bar her contention that the return filed was barred by time. The High Court accordingly quashed the assessment. The following observations of the High Court at page 628 are relevant : “According to sub-s. (4) of s. 139, a return has to be filed within four years from the end of the relevant assessment year. According to this provision, the return had to be filed within four years from 31st March, 1954.

In the instant case, the voluntary return was filed by the petitioner in the year 1966. The voluntary return was filed beyond the period of limitation mentioned in sub-s. (4) of s. 139 of the Act.

We have seen that under s. 153(1)(c) of the Act, assessment may be made within one year from the date of the filing of a return under sub-s. (4) of s. 139 of the Act. This provision contemplates a valid return under sub-s. (4) of s. 139 of the Act. In the present case, the voluntary return filed by the petitioner was beyond limitation, and was, therefore, invalid. If the return was itself invalid, the return could not support an assessment order under s. 153(1)(c) of Act. The assessment itself would be beyond limitation.”

In the case before us, the voluntary return was filed beyond the period specified in s. 139(4) and no assessment could be made on the basis of that return.

15. Finally, we may refer to the decision of the Supreme Court in CIT vs. Kulu Valley Transport Co. (P) Ltd. (1970) 77 ITR 518 (SC) : TC9R.269. We do not wish to refer in detail to the facts of this case. It is enough if we refer to the finding of the Supreme Court : “Moreover, it is common ground that a voluntary return cannot be filed beyond the period specified in s. 34(3) of the Act.” (Indian IT Act, 1922) The analogous provision in the 1961 Act is s. 153(1)(a)(iii) which specifies the two year period from the end of the assessment year as the period in which an assessment could be made for the assessment year commencing on or after 1969-70. Thus, any return filed after 31st March, 1979, for the asst. yr. 1976-77 would be a return filed beyond the period specified in s. 153(1)(a) (iii) and it is not open to the assessee to file such a return.

16. We do not consider it necessary to multiply authorities on this point, as we do not find that a contrary view was taken by any Court, nor was a contention urged to that effect by the Revenue in any case. The law, as far as we can see, is fairly settled without leaving any scope for advancing a contention of the nature that learned standing counsel for the Revenue advanced in the present case. We would refer to the decision of the Supreme Court upon which learned standing counsel relied and reported in State of Assam vs. Deva Prasad Barua (supra). That was a case arising under the Assam Agrl. IT Act, 1939. The assessment year involved in this case is 1955-56. A general notice was issued under s. 19(1) of the Act calling for a return on 13th April, 1955, for that assessment year. A notice under s. 19(2) of the Act—analogous to s. 139(2) of the IT Act, 1961— was also issued on 16th Sept., 1955, calling for a return for the asst. yr. 1955-56. The assessee in that case did not respond to either of the notices. However, a return was filed by the assessee on 31st May, 1958. Sec. 19(3) of the Assam Agrl. IT Act, 1939 (analogous to s. 139(4) of the IT Act, 1961), provides that if any person has not furnished a return within the time allowed by or under sub-s. (1) or sub-s. (2), he may furnish a return at any time before the assessment is made and any return so made shall be deemed to be made in due time under the section. The assessee contended that the assessment made by the Agrl. ITO under s. 20 of the Act (analogous to s. 143 of the IT Act, 1961) was invalid, inasmuch as the return on the basis of which the assessment was made, was not filed before the expiry of the assessment year on 31st March, 1956. It was obvious that under s. 19(3) of the Assam Agrl. IT Act, 1939, a return could be filed within three years from the end of the assessment year, that is to say, a return could be filed on or before 31st March, 1959. In the instant case, a return was filed by the assessee on 31st March, 1958.

The Supreme Court held that the return filed by the assessee was well within time as provided by s. 19(3) and it was open to ITO to make an assessment based on that return under s. 20 of the Assam Agrl. IT Act, 1939. The Supreme Court rejected the contention that the words “at any time” occurring in sub- s. (3) of s. 19 should be given a limited meaning and should be confined to the year of assessment. The Supreme Court rejected the contention that if a return was not filed before the expiry of the relevant assessment year, it would be imperative on the part of the Agrl. ITO to initiate assessment proceedings under s. 30 (analogous to s. 148 of the IT Act, 1961). As the return could be filed under s. 19(3) before the expiry of three years from the end of the assessment year, the Supreme Court held that the return filed by the assessee on 31st March, 1958, was a valid return and the assessment made on the basis of that return was valid. We are unable to see how the facts of this case support the Revenue. Undoubtedly, the return in the case before the Supreme Court was filed before the expiry of the time specified in s. 19(3) of the Act (analogous to s. 139(4) of the Act) and it is perfectly valid to make an assessment based on that return. The facts in the case of the assessee are altogether different as the return was not filed within the time limit specified in s. 139(4). For that reason, the return could not be treated as a valid return. The reliance placed by learned standing counsel on the aforesaid decision of the Supreme Court is thoroughly misplaced.

We may point out that what the ITO did in the present case was absolutely right. Without regularising the assessment proceedings by the issuance of a notice under s. 148 of the Act, the ITO could not have made an assessment on the basis of the return filed on 1st June, 1979, which was beyond the time limit specified in s. 139(4)(b)(iii) of the Act. There is no misunderstanding of the correct provision of law as far as the Revenue is concerned and we wonder how learned standing counsel for the Revenue canvassed before this Court a plea that the ITO committed an error in regularising the assessment proceedings by the issuance of a notice under s. 148. We have to reject the contention in this regard urged by learned standing counsel without the slightest hesitation.

The next submission made by learned standing counsel is that even if the assessment is regarded as one made under s. 143(3) r/w s. 147(a), we must still hold that it is a “regular assessment” within the meaning of s. 2(40) of the Act rendering the provisions relating to the charge of interest under ss. 139(8) and 217 of the Act applicable. This contention of learned standing counsel is equally without any substance. In the first place, we must mention that learned standing counsel has not invited our attention to any decision which has taken a contrary view although we have reason to think that perhaps one or two High Courts have taken that view. Except an oral assertion, no authority is placed before this Court to support the proposition that an assessment made under s. 143(3) r/w s. 147 should be regarded as a regular assessment made under s. 143(3) alone. The Tribunal has rejected this part of the Revenue’s contention in an order elaborately written giving cogent reasons and referring to a catena of decisions of High Courts supporting the view that an assessment made under s. 143(3) r/w s. 147 cannot be regarded as an assessment made under s. 143(3) alone. It is not necessary to refer to the long line of cases which have taken this view but we would refer to two or three cases which shed light on this point. We may first refer to the decision of the Punjab & Haryana High Court in Smt. Kamla Vati vs. CIT (1978) 111 ITR 248 (P&H). In the case before the Punjab High Court, an identical contention was raised by the Revenue, that an assessment under s. 143(3) r/w s. 147 should be regarded as an assessment under s. 143(3) alone satisfying the requirements under s. 2(40) of the Act and, therefore, the charge of interest was proper. Rejecting the Revenue’s contention, Chinnappa Reddy O. (Actg. Chief Justice, as he then was) observed as under : “We find it difficult to accept the submission of Shri Awasthy in the face of the definition of the expression ‘regular assessment’ in s. 2(40) of the 1961 Act. It is true that in Deviprasad Kejriwal vs. CIT (1976) 102 ITR 180 (Bom), the Bombay High Court considered the expression ‘regular assessment’ occurring in ss. 18A(5), 18A(6) and 18A(9) of the 1922 Act, to include assessment under s. 34 of that Act but we notice from a perusal of the decision that there were earlier decisions under the 1922 Act, one of the Bombay High Court in Sarangpur Cotton Manufacturing Co. vs. CIT (1957) 31 ITR 698 (Bom) : TC4R.364 and the other of the Madras High Court in Natarajan Chettiar vs. ITO (1961) 42 ITR 29 (Mad) : TC4R.682, which appear to have interpreted the expression ‘regular assessment’ in a different way. In Natarajan Chettiar’s case (supra) Rajamannar, C.J., after referring to the decision of Chagla, C.J. in Sarangpur Cotton Manufacturing Co. vs. CIT (supra) proceeded to hold that an assessment made under s. 34 was not a regular assessment. He observed : ‘If a regular assessment means and signifies an assessment made in the regular course contemplated by the provisions of the Indian IT Act, then surely an assessment under s. 34 is not a regular assessment’. The view expressed by Rajamannar, C.J. was reiterated by the Madras High Court in a later case in Gopalaswami Mudaliar vs. Fifth Addl. ITO (1963) 49 ITR 322 (Mad) : TC4R.686. Thus, the expression ‘regular assessment’ had been understood by some learned judges, including so eminent a judge as Chief Justice Rajamannar, to mean an assessment made in the regular course under s. 23 and not an assessment under s. 34. It appears to us that it is that meaning that has been accepted by the legislature when it defined the expression ‘regular assessment’ in s. 2(40) to mean ‘assessment made under s. 143 or s. 144′. The Kerala High Court has taken the same view in Gates Foam & Rubber Co. vs. CIT (1973) 90 ITR 422 (Ker). The learned judges referred to the two decisions of the Madras High Court in Natarajan Chettiar vs. ITO (supra) and Gopalaswami Mudaliar vs. Fifth Addl. ITO (supra) and to the specific reference made in the 1961 Act to ‘assessment under s. 147′ and held that an assessment under s. 147, that is, assessment, reassessment or recomputation made after resort to s. 147 would not be regular assessment. With respect, we agree with the view expressed by the learned judges of the Kerala High Court.”

The aforesaid observations answer the contention raised by learned standing counsel squarely against the

Revenue.

19. We may then refer to the decision of the Patna High Court in CIT vs. Ram Chandra Singh (1976) 104 ITR 77 (Pat). The following observations may be usefully referred to : “It will be noticed that in s. 273 also the words ‘regular assessment’ have been used. It is clear from the various provisions of the 1922 Act as well as the 1961 Act that a penalty can be imposed for non-furnishing of the estimate of advance tax only in connection with the regular assessment under s. 23 of the 1922 Act or regular assessment under s. 143 or s. 144 of the 1961 Act. As the proceeding for assessment or reassessment under s. 34 of the 1922 Act or under s. 147 of the 1961 Act is not a proceeding in connection with the regular assessment, no penalty can be imposed for non-furnishing of an estimate of the advance tax payable by the assessee. I am fortified in my view by a Bench decision of the Kerala High Court in Gates Foam & Rubber Co. vs. CIT (1973) 90 ITR 422 (Ker).” In the view taken as above, the High Court held that an assessment made under s. 143(3) r/w s. 147 cannot be regarded as a “regular assessment”.

20. Reference may also be made to the Allahabad High Court in CIT vs. Smt. Jagjit Kaur (1980) 126 ITR 540 (All). The following observations are instructive : “Sec. 2(40) defines ‘regular assessment’ meaning the assessment made under s. 143 or s. 144. This definition is made subject to the context in the Act, that is, if there is contextual claim to the contrary, the context will prevail over the definition clause. We do not find anything in the context of s. 273(b) which would impel us to hold that the words ‘regular assessment’ as occurring in s. 273(b) could not be read as required by s. 2(40) as applying to assessments made under s. 143 or s. 144. The Kerala High Court in the case of Gates Foam & Rubber Co. vs. CIT (1973) 90 ITR 422 (Ker) has taken the same view. Counsel for the Revenue urged that inasmuch as s. 2(8) defines the word ‘assessment’ as including reassessment and inasmuch as s. 2(40) does not define the word ‘assessment’, the definition of assessment contained in s. 2(8) should be read into s. 2(40). This line of reasoning may have been fruitful in case s. 2(40) did not specifically mention assessments made under s. 143 or s. 144. Thus, s. 2(40) brands only assessments made under s. 143 and s. 144 as regular assessments. We would, therefore, not be justified in engrafting cases of reassessment in s. 2(40). Mr. Gulati, appearing for the Revenue, also urged that under the old Act there were a string of cases where the view was taken that s. 18A(9) of the old Act, applied to assessments made under s. 34 and that in cases where no return was filed and no previous assessment was made were taken to be cases of regular assessment. We do not think that any useful purpose would be served by referring to those cases, for the old Act did not contain any provision corresponding to s. 2(40) of the new Act. Thus, inasmuch as s. 2(40) confines a regular assessment to one made either under s. 143 or s. 144, we cannot read the ‘regular assessment’ as occurring in s. 273 as applying to assessments made under s. 147(a). The lacuna, if any, in the Act can be corrected only by a legislative enactment, and not by a process of judicial interpretation. The Punjab High Court in Smt. Kamla Vati vs. CIT (1978) 111 ITR 248 (Punj) has taken the same view, and so has the Patna High Court in the case of CIT vs. Ram Chandra Singh (1976) 104 ITR 77 (Pat).”

We may finally refer to the decision of this Court in Nizam’s Religious Endowment Trust’s case (supra). The Tribunal relied on the above decision of this Court as concluding the matter in dispute against the Revenue. In that case before this Court, the same question regarding the scope of “regular assessment” had arisen for consideration. This Court held that only assessments made by the ITO under s. 143 or s. 144 are regular assessments and it is not permissible to expand the scope of the expression to include appellate orders and consequential orders passed by the ITO. The principle applies with equal force to orders passed by the ITO under s. 143 r/w s. 147. The Tribunal quoted extensively from the judgment of this Court in order to bring home to the Revenue that matters stood concluded by the decision of this Court against the Revenue. On a careful consideration of the decision of this Court, we hold that the Tribunal is correct in holding that the above decision of this Court is a direct authority to support the proposition that only orders passed by the ITO under ss. 143 and 144 could be considered as regular assessments within the meaning of s. 2(40) of the Act and it is not possible to expand the scope of the expression “regular assessment”, to include other orders. We are in respectful agreement with the view taken by this Court in the above case and also the view taken to the same effect by other High Courts to which we have referred above.

As the assessment made in the present case is one under s. 143(3) r/w s. 147, the charge of interest by the ITO was unauthorised and the AAC and the Tribunal came to the correct conclusion that the interest charged by the ITO should be quashed.

Before concluding, we must refer to one contention raised by learned standing counsel. He invited our attention to Expln. 2 inserted after s. 139(8) by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1st April, 1985. The Explanation reads : “Where, in relation to an assessment year, an assessment is made for the first time under s. 147, the assessment so made shall be regarded as a regular assessment for the purposes of this subsection.”

Learned standing counsel submitted that this Explanation, although added prospectively from 1985-86 assessment year, should be held to be applicable to the pre-existing legal position and, therefore, the assessment made in the present case for the first time under s. 147 should be regarded as regular assessment. We are unable to agree. The legislature is fully aware of the decisions to the contrary effect of several High Courts. If the intention of the legislature is to nullify the effect of the contrary decisions in this regard, it would have provided for retrospective operation of the Explanation. On the other hand, the legislature deliberately makes the Explanation effective only from 1985-86 assessment onwards. We see no reason why we should hold that the same position prevails for the asst. yr. 1976-77 in the present case. We reject the contention of learned standing counsel in this regard.

We accordingly answer question No. 1 referred to us in the negative, that is to say, in favour of the assessee and against the Revenue.

With regard to the second question, we have already answered it in the affirmative, that is to say, against the Revenue and in favour of the assessee.

25. As none appeared on behalf of the respondent- assessee, we make no order as to costs.

[Citation : 169 ITR 646]