ITR No. 1 of 2002 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITR No. 1 of 2002 Date of Decision: 9.9.2010 The Commissioner of Income-tax, Jalandhar ....Petitioner. Versus Sh. K.D. Prabhakar (HUF), Phagwara ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Vivek Sethi, Standing Counsel for the petitioner-Revenue. AJAY KUMAR MITTAL, J. This order will dispose of six references, namely, Income- tax Reference Nos.1, 4, 19, 21, 25 and 27 of 2002 as the questions of law involved therein are common. In order to appreciate the issue, few facts need to be noticed and the same have been taken from Income-tax Reference No.1 of 2002. Pursuant to the directions of this Court, in Income-tax Case No.46/98 dated 14.11.2000 in the case of C.I.T. Jalandhar Vs. Sh. K.D. Prabhakar (HUF), the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (in short “the Tribunal”) has referred the following question of law that arose out of the consolidated order of the Tribunal dated 26.11.1997 in ITA Nos. 487 to 495 (ASR)/1996 in respect of the assessment years 1974-75 to 1982-83 for its opinion: “Whether on the facts and in the circumstances of the case, the Ld. ITAT is right in law in reversing the ITR No. 1 of 2002 -2- order of the Ld. DCIT(A) who upheld the order of the A.O. passed under Section 154 holding that no mistake was apparent from records in so far as charging of interest under Section 139(8) was concerned, for the assessment year 1975-76?” The assessment, in respect of assessment year 1975-76 was originally completed at total income of Rs.11,850/- plus agricultural income of Rs.400/-. After about one and half decade during the assessment proceedings for the assessment year 1990-91, it came to the notice of the assessing officer that the assessee had received additional compensation on account of acquisition of his land, as well as interest thereon, by virtue of a judgment dated 12.07.1988 of this Court. Consequent upon this, the assessee furnished returns of income for the assessment years 1984-85 to 1990-91 disclosing the fact of interest income as also the amount of capital gain arising out of the said acquisition of land. The assessing officer, however, formed a view that since the interest was allowed by the Court right from the assessment year 1974-75 to the date of payment of additional compensation which was received during the assessment year 1990-91, the same was assessable for the respective assessment years on accrual basis in view of the decision of the apex Court in 181 ITR 400(SC). On the basis of the said view, the assessing officer initiated proceedings under Section 147 and served notices under Section 148 upon the assessee, in respect of assessment years 1974-75 to 1983- 84. In response to notices, the assessee made returns declaring income of Rs.36,900/- plus agricultural income of Rs.400/- for the ITR No. 1 of 2002 -3- assessment year in question i.e. 1975-76 under protest and ultimately, the assessment was completed under Section 143(3) on 19.08.1993 at the aforesaid total taxable income. The assessing officer charged interest under Section 139(8) at Rs.2,948/- and against the charging of the interest, the assessee moved an application dated 28.07.1995, under Section 154 of the Act for the assessment years 1974-75 to 1982-83 wherein it was stated that interest was not chargeable from him as it was not charged from other similarly situated co-owners, namely, Amrit Lal Prabhakar and Raghunandan Lal Prabhakar. It was submitted that in the case of these co-owners the CIT(A) had held that such interest was not chargeable and, therefore, the same view is applicable to the case of the assessee also. But the submissions made on behalf of the assessee were not given any weight and consequently, the assessing officer rejected the application under Section 154 vide order dated 12.09.2005. Since the order passed by the assessing officer non- suited the assessee, he preferred appeal before the CIT(A), Jalandhar. The appellate Authority dismissed the assessee’s appeal vide order dated 30.03.1996 while dismissing the other appeals relating to assessment years 1974-75 to 1982-83. The assessee preferred appeal before the Tribunal. The appeal of the assessee was allowed vie order dated 26.11.1997 thereby setting aside the order of the CIT(A) and restoring the matter back to the file of the assessing officer with the directions to decide the application of the assessee moved under Section 154 of the Act afresh. It is how the question as noticed above came to be referred to this Court for its opinion. ITR No. 1 of 2002 -4- We have heard learned counsel for the petitioner and perused the record. Learned counsel for the petitioner-Revenue very fairly submitted that this Court in Commissioner of Income Tax V. K.D. Prabhakar (HUF), (2009) 313 ITR 443 (P&H), had decided identical question against the Revenue in the cases of the present assessee itself relating to the assessment years 1976-77 and 1980-81 wherein it was held as under:- “It is evident from the impugned order that the Tribunal has placed reliance on Expln. 2 to Section 139(8) of the Act, which was added by the Taxation Laws (Amendment) Act, 1984, w.e.f. Ist April, 1985. It may be pertinent to make a reference to Expln. 2 appended to Section 139(8) of the Act and the same reads as under:- “Explanation 2- Where, in relation to an assessment year, an assessment is made for the first time under Section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this sub-section. (b) Where as a result of an order under Section 147 or Section 154 or Section 155 or Section 250 or Section 254 or Section 260 or Section 262 or Section 263 or Section 264, the amount of tax on which interest was payable under the sub-section has been increased or reduced, as the case may be, the interest shall be increased or seduced accordingly, ITR No. 1 of 2002 -5- and - (i) in a case where the interest is increased, the ITO shall serve on the assessee, a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be a notice under Section 156 and the provisions of this Act shall apply accordingly; (ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded. The aforementioned, Explanation was added w.e.f. 1st April, 1985 and the circular issued by the CBDT shows that it was to apply in relation to the assessment year 1985-86 and subsequently. The relevant part of the circular [No.397 dated 16th October, 1984-Ed.] issued by the CBDT, as reported in (1985) 152 ITR 29 reads as under: 15.4 Under the existing provisions contained in Clause (b) of Section 139(8), interest payable by an assessee for delay or default in furnishing the return of income is required to be reduced in cases where the tax on which the interest was payable has been reduced as a result of an order under Sections 154, 155, 250, 254, 260, 262 or Section 264 of the Act. This clause has been substituted by a new Clause (b) which provides that where as a result of any of the orders specified in that clause, the amount of tax on which interest was payable has been increased or ITR No. 1 of 2002 -6- reduced, the interest shall be increased or reduced, accordingly. In a case where the interest is increased, the ITO shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable and such notice of demand shall be deemed to be issued under Section 156 of the Act and the provisions of the Act shall apply, accordingly. In cases where such interest is reduced, the excess interest paid, if any, shall be refunded to the assessees. 15.5. These amendments take effect from 1st April 1985, and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years. There is, thus, no doubt left that no notice with respect to the assessment years 1976-77 and 1980-81 could have been issued and the view taken by the Tribunal is unassailable. Accordingly, we uphold the view taken by the Tribunal.” In view of the above, the question referred by the Tribunal is decided against the Revenue and in favour of the assessee. The references stand disposed of accordingly. (AJAY KUMAR MITTAL) JUDGE September 9, 2010 (ADARSH KUMAR GOEL) rkmalik/gbs JUDGE