THE COMMISSIONER OF INCOME TAX vs. M/S.NARSHIBHAI MULJIBHAI & CO.

ITR/49/1996HC GujaratGJHC24021729199622 September 2006Author: HONOURABLE MR. JUSTICE D.H.WAGHELA,HONOURABLE MR. JUSTICE R.S.GARG6 pages
AI SummaryAllowed

What were the facts?

The assessee, M/s. Narshibhai Muljibhai & Co., had its assessment for Assessment Year 1985-86 completed under section 143(1) at a total income of Rs.69,460/-. Subsequently, the Assessing Officer disallowed an outstanding sales tax liability of Rs.1,79,444/- under section 43B, initiating proceedings under section 154. This disallowance was added to the income, leading the Assessing Officer to charge interest under section 215. The CIT (Appeals) deleted the interest, holding that it could only be charged during a regular assessment and not in proceedings under section 154. The Income Tax Appellate Tribunal upheld this decision. The Revenue then filed an application under section 256(1) for a reference to the High Court.

What did the High Court hold?

The High Court held that the Assessing Officer was justified in directing the payment of interest under section 215. The Tribunal was not justified in its conclusion that interest could not be charged under section 215 because the order under section 154 was not a regular assessment. The reasoning was based on the amendment to section 215(3) which came into effect from 1.4.1985. This amended provision specifically covers orders made under section 147, section 154, section 155, section 250, or section 254, etc. It provides for the increase or reduction of interest if the amount on which interest was payable is increased or reduced. Following established legal principles, as articulated in the cited judgments, an amendment brought into force on 1st April of the Assessment Year governs the proceedings for that year. Therefore, the amended section 215 was applicable to the assessment proceedings for AY 1985-86. The reference was answered in favour of the Revenue.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in holding that the order under section 154 is not a regular assessment and thereby deleting the interest charged under section 215 of the Act? Assessee's contention: Not recorded as the assessee was served but did not appear. Revenue's contention: The Tribunal erred by not noting that section 215(3) was amended and brought into the statute book effective from 1.4.1985 by the Taxation Laws Amendment Act, 1984. Therefore, this amended law should govern the assessment for the year 1985-86. The Revenue relied on the Supreme Court judgment in Karimtharuvi Tea Estate Ltd. v. State of Kerala (1966) 60 ITR 262 and a Gujarat High Court judgment in CIT vs. Nirmal Textiles (1997) 224 ITR 378, stating that amendments effective from 1st April of the Assessment Year govern the proceedings for that year. The Supreme Court's observations in Modi Industries Ltd. v. Commissioner of Income Tax and Anr. (1995) 216 ITR 759 were also cited.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 143(1),Section 43B,Section 154,Section 215,Section 215(3),Section 147,Section 155,Section 250,Section 254

AI-generated summary — verify with the full judgment below

ITR/49/1996 1/6 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 49 of 1996 For Approval and Signature: HONOURABLE MR.JUSTICE R.S.GARG HONOURABLE MR.JUSTICE D.H.WAGHELA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= THE COMMISSIONER OF INCOME TAX - Applicant(s) Versus M/S.NARSHIBHAI MULJIBHAI & CO. - Respondent(s) ========================================================= Appearance : MR MANISH R BHATT with Mrs Mona Bhatt for Applicant(s) : 1, SERVED BY RPAD - (N) for Respondent(s) : 1, ========================================================= Date : 22/09/2006 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE R.S.GARG)

1.

The Income Tax Appellate Tribunal, Ahmedabad Bench 'C', at the inst

The order continues below.

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