The assessment order charges interest under s.215 (or s.217, or s.139(8)). Can I appeal against the interest, and if not, how do I get it reduced?
The Supreme Court held that because the levy of interest is a part of the process of assessment, an assessee may dispute it in appeal, but only if he limits himself to the ground that he is not liable to the levy at all; a complaint about the quantum, or about the refusal of relief on the merits, is not within the appeal. The route for reduction is the statutory waiver power — s.215(4), and the corresponding provision for s.139(8) interest — and the Court held that where the assessee has made no application to the Income-tax Officer for reduction or waiver, there has been no improper denial of relief, so no revision petition to the Commissioner can be maintained in that regard either.
Decided by the Supreme Court (R.S. Pathak J and Sabyasachi Mukharji J (judgment delivered by Pathak J)) on 1986-07-15, reported as 1987 AIR 438; 1986 SCR (3) 140; 1986 SCC (3) 461; Civil Appeals Nos. 1338 and 1340 of 1974. It bears on section 215, section 217, section 139(8), section 246, section 264, section 212, section 273 of the Income Tax Act 1961, in Appeals, Assessment & Scrutiny and Revision & Rectification matters.
This is still the decision cited whenever an appellate authority is asked to interfere with an interest charge, and its two limbs have to be kept apart. The first limb is a right: an assessee who says he was never liable to advance tax at all — because his income fell below the threshold, or because he was not a person on whom the obligation lay — can take that ground in appeal, and cannot be turned away on the footing that interest is not appealable. The second limb is a bar: everything short of total denial of liability belongs to the waiver machinery, and the waiver machinery starts with an application to the Assessing Officer. The appellant here had gone straight to the Commissioner under s.264 without ever asking the Income-tax Officer for waiver, and lost for that reason, the Court affirming the Commissioner's rejection 'but on grounds different from those adopted by the Commissioner'. It nonetheless gave the assessee liberty to apply to the Income-tax Officer within six weeks and directed that the applications be disposed of on the merits expeditiously. The decision arises on the pre-1989 scheme — the assessment year was 1967-68, and the interest was under s.139(8) and s.215 — but the reasoning on when an interest levy is appealable is the reasoning courts continue to apply, and the discretion point is what practitioners still rely on. Note that the procedural landscape has moved since: s.246 has been replaced by s.246A for appeals, and the CBDT's power under s.119(2)(a) now supplies the waiver route for s.234A, s.234B and s.234C interest, a route the library covers through CIT v. Anjum M.H. Ghaswala.
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The appellant, a sterling company exporting manganese from mines in Maharashtra and Madhya Pradesh, was assessed for the assessment year 1967-68, the previous year ending 31 December 1966. Interest of Rs 56,391 was levied under s.139(8) and interest of Rs 9,42,336 under s.215, later reduced to Rs 5,07,880, the advance tax paid under s.212 having been less than seventy-five per cent of the assessed tax. The appellant said there was ample justification for the delay in filing the return and for the under-payment. On 22 March 1971 it appealed to the Appellate Assistant Commissioner under s.246(c), raising objections both to the income assessed and to the interest. Advised that the interest grounds were infructuous because orders under ss.139 and 215 were not appealable, it then filed two revision petitions before the Commissioner under s.264. The Commissioner replied that s.264(4)(b) prevented him from revising an order pending in appeal. The appellant applied to the Appellate Assistant Commissioner for permission to withdraw the interest grounds; no order appears to have been made on that application, but the appellate order did not deal with the interest grounds. On 15 October 1971 the Commissioner dismissed both revision petitions on the view that the appellant should have withdrawn the entire appeal, not merely the interest grounds. Writ petitions to the Bombay High Court at Nagpur were rejected in limine on 24 April 1972, and the appellant came to the Supreme Court by special leave. The appellant had at no stage applied to the Income-tax Officer for reduction or waiver of the interest.
The appeals were dismissed, with no order as to costs. The Court affirmed the Commissioner's orders rejecting the revision petitions, but on grounds different from those adopted by the Commissioner: because the assessee had made no application to the Income-tax Officer for reduction or waiver of the interest under s.139(8) or s.215, no question arose of the relevant authority having improperly denied a reduction or waiver, and so no revision petition could be maintained in that regard before the Commissioner. On the appealability question the Court held that since 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. The Court left it open to the assessee to apply to the Income-tax Officer for waiver or reduction within six weeks, and directed that any such applications be disposed of on the merits expeditiously.
The Court began from the terms of s.246(c), which gives an appeal against an order where the assessee denies his liability to be assessed under the Act, and from the nature of an interest levy as part of the process of assessment; from that it followed that the levy could be taken in appeal, but only on the footing of a total denial of liability to the levy. It then turned to the statutory waiver machinery, setting out the second proviso to s.139(8) as it then stood — 'Provided further that the Income-tax Officer may, in such cases and under such circumstances as may be prescribed, reduce or waive the interest payable by any person under this sub-section' — and the corresponding power in s.215(4), and referring to the prescribed circumstances in rule 117A and rule 40 of the Income-tax Rules, 1962, in the course of setting out the Karnataka High Court's analysis in National Products v. CIT, Mysore. Because the discretion is vested in the Income-tax Officer in the first instance, the Court reasoned that the Commissioner's revisional jurisdiction could be invoked only against an improper denial of that relief, and where no application had been made to the Income-tax Officer there was nothing to revise.
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.
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Handle my notice → Ask a CA on WhatsAppThe Supreme Court held that because the levy of interest is a part of the process of assessment, an assessee may dispute it in appeal, but only if he limits himself to the ground that he is not liable to the levy at all; a complaint about the quantum, or about the refusal of relief on the merits, is not within the appeal. The route for reduction is the statutory waiver power — s.215(4), and the corresponding provision for s.139(8) interest — and the Court held that where the assessee has made no application to the Income-tax Officer for reduction or waiver, there has been no improper denial of relief, so no revision petition to the Commissioner can be maintained in that regard either. This was decided by the Supreme Court (R.S. Pathak J and Sabyasachi Mukharji J (judgment delivered by Pathak J)) and bears on section 215, section 217, section 139(8), section 246, section 264, section 212, section 273 of the Income Tax Act 1961. It is reported as 1987 AIR 438; 1986 SCR (3) 140; 1986 SCC (3) 461; Civil Appeals Nos. 1338 and 1340 of 1974. This is still the decision cited whenever an appellate authority is asked to interfere with an interest charge, and its two limbs have to be kept apart. The first limb is a right: an assessee who says he was never liable to advance tax at all — because his income fell below the threshold, or because he was not a person on whom the obligation lay — can take that ground in appeal, and cannot be turned away on the footing that interest is not appealable. The second limb is a bar: everything short of total denial of liability belongs to the waiver machinery, and the waiver machinery starts with an application to the Assessing Officer. The appellant here had gone straight to the Commissioner under s.264 without ever asking the Income-tax Officer for waiver, and lost for that reason, the Court affirming the Commissioner's rejection 'but on grounds different from those adopted by the Commissioner'. It nonetheless gave the assessee liberty to apply to the Income-tax Officer within six weeks and directed that the applications be disposed of on the merits expeditiously. The decision arises on the pre-1989 scheme — the assessment year was 1967-68, and the interest was under s.139(8) and s.215 — but the reasoning on when an interest levy is appealable is the reasoning courts continue to apply, and the discretion point is what practitioners still rely on. Note that the procedural landscape has moved since: s.246 has been replaced by s.246A for appeals, and the CBDT's power under s.119(2)(a) now supplies the waiver route for s.234A, s.234B and s.234C interest, a route the library covers through CIT v. Anjum M.H. Ghaswala. If it applies to you, the first step is this: Frame the appellate ground as a denial of liability to the levy itself — for example that the assessee was not liable to pay advance tax under s.208 at all, or that s.207(2) disapplied the charge — and not as a complaint that the interest is too high.
The appellant, a sterling company exporting manganese from mines in Maharashtra and Madhya Pradesh, was assessed for the assessment year 1967-68, the previous year ending 31 December 1966. Interest of Rs 56,391 was levied under s.139(8) and interest of Rs 9,42,336 under s.215, later reduced to Rs 5,07,880, the advance tax paid under s.212 having been less than seventy-five per cent of the assessed tax. The appellant said there was ample justification for the delay in filing the return and for the under-payment. On 22 March 1971 it appealed to the Appellate Assistant Commissioner under s.246(c), raising objections both to the income assessed and to the interest. Advised that the interest grounds were infructuous because orders under ss.139 and 215 were not appealable, it then filed two revision petitions before the Commissioner under s.264. The Commissioner replied that s.264(4)(b) prevented him from revising an order pending in appeal. The appellant applied to the Appellate Assistant Commissioner for permission to withdraw the interest grounds; no order appears to have been made on that application, but the appellate order did not deal with the interest grounds. On 15 October 1971 the Commissioner dismissed both revision petitions on the view that the appellant should have withdrawn the entire appeal, not merely the interest grounds. Writ petitions to the Bombay High Court at Nagpur were rejected in limine on 24 April 1972, and the appellant came to the Supreme Court by special leave. The appellant had at no stage applied to the Income-tax Officer for reduction or waiver of the interest. The matter was decided on 1986-07-15 by the Supreme Court (R.S. Pathak J and Sabyasachi Mukharji J (judgment delivered by Pathak J)). On those facts the Supreme Court held as follows. The appeals were dismissed, with no order as to costs. The Court affirmed the Commissioner's orders rejecting the revision petitions, but on grounds different from those adopted by the Commissioner: because the assessee had made no application to the Income-tax Officer for reduction or waiver of the interest under s.139(8) or s.215, no question arose of the relevant authority having improperly denied a reduction or waiver, and so no revision petition could be maintained in that regard before the Commissioner. On the appealability question the Court held that since 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. The Court left it open to the assessee to apply to the Income-tax Officer for waiver or reduction within six weeks, and directed that any such applications be disposed of on the merits expeditiously.
The Court began from the terms of s.246(c), which gives an appeal against an order where the assessee denies his liability to be assessed under the Act, and from the nature of an interest levy as part of the process of assessment; from that it followed that the levy could be taken in appeal, but only on the footing of a total denial of liability to the levy. It then turned to the statutory waiver machinery, setting out the second proviso to s.139(8) as it then stood — 'Provided further that the Income-tax Officer may, in such cases and under such circumstances as may be prescribed, reduce or waive the interest payable by any person under this sub-section' — and the corresponding power in s.215(4), and referring to the prescribed circumstances in rule 117A and rule 40 of the Income-tax Rules, 1962, in the course of setting out the Karnataka High Court's analysis in National Products v. CIT, Mysore. Because the discretion is vested in the Income-tax Officer in the first instance, the Court reasoned that the Commissioner's revisional jurisdiction could be invoked only against an improper denial of that relief, and where no application had been made to the Income-tax Officer there was nothing to revise. In the words reproduced by the source cited on this page: "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." The decision followed or applied National Products v. Commissioner of Income-tax, Mysore, [1977] 108 ITR 935 (Karnataka) — referred to and its analysis set out.
It was decided by the Supreme Court on 1986-07-15 and is reported as 1987 AIR 438; 1986 SCR (3) 140; 1986 SCC (3) 461; Civil Appeals Nos. 1338 and 1340 of 1974. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 215, section 217, section 139(8), section 246, section 264, section 212, section 273, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The appeals were dismissed, with no order as to costs. The Court affirmed the Commissioner's orders rejecting the revision petitions, but on grounds different from those adopted by the Commissioner: because the assessee had made no application to the Income-tax Officer for reduction or waiver of the interest under s.139(8) or s.215, no question arose of the relevant authority having improperly denied a reduction or waiver, and so no revision petition could be maintained in that regard before the Commissioner. On the appealability question the Court held that since 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. The Court left it open to the assessee to apply to the Income-tax Officer for waiver or reduction within six weeks, and directed that any such applications be disposed of on the merits expeditiously. It arises in Appeals, Assessment & Scrutiny and Revision & Rectification matters, on section 215, section 217, section 139(8), section 246, section 264, section 212, section 273 of the Income Tax Act 1961, and was decided by R.S. Pathak J and Sabyasachi Mukharji J (judgment delivered by Pathak J). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Where the real complaint is hardship or reasonable cause, do not put it in the appeal. Make a written application to the Assessing Officer under the applicable waiver provision first, setting out the circumstances relied on. Do not go to the Commissioner in revision before that application has been made and decided. On this decision, without an application there is no improper denial of waiver for the revisional authority to correct. If an appeal is already pending on the assessment, remember the trap the appellant fell into here: the Commissioner took the view that s.264(4)(b) barred revision while the appeal was pending, and withdrawing only the interest grounds from the appeal did not satisfy him. Decide at the outset which forum is to carry the interest point. For years governed by s.234A, s.234B and s.234C rather than s.139(8) and s.215, use the CBDT's s.119(2)(a) route for waiver and read this decision for the appealability principle only.
Validity check could not be completed. Validity check could not be completed: no search for later treatment of this judgment was run this pass, so nothing is certified about whether it has been followed, distinguished or doubted. Two things do need to be said about its reach rather than its authority. It was decided on the pre-1989 advance tax interest scheme (s.215 and s.217 with s.212 estimates) and on s.139(8), all of which have since been displaced for later years by s.234A, s.234B and s.234C; and the appellate provision it construes, s.246(c), has since been replaced by s.246A. The appealability principle and the requirement to seek waiver from the assessing authority first are what the decision is cited for. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment was read at https://indiankanoon.org/doc/549701/ (plain document URL, which returned raw text). Its paragraphs are NOT numbered — the report runs as continuous prose in the Supreme Court Reports style — so no paragraph locator is given anywhere in this entry, and any citation of a paragraph number for this judgment should be treated as fabricated. The header block, the opening 1500 words and the closing passage through to the disposal line ('Appeals dismissed.') were transcribed from the plain document URL; the appealability passage and the waiver passages were transcribed separately through https://indiankanoon.org/docfragment/549701/ with three different search phrases, and the key quote came back in identical words on two of those independent fetches. One caution about the report: it reproduces at length a passage from the Karnataka High Court's judgment in National Products v. CIT, Mysore [1977] 108 ITR 935, introduced by the words 'In this connection we may usefully refer to the decision of the Karnataka High Court'. Sentences from that quoted passage — including a passage beginning 'If the assessee denies his liability to be assessed under the Act, he has a right of appeal to the Appellate Assistant Commissioner' and one stating that discretion to waive is vested in the Income-tax Officer under rules 117A and 40 — are the Karnataka High Court's words as reproduced, not the Supreme Court's own, and are not quoted as the Supreme Court's in this entry. I did not retrieve the text of rule 40 or rule 117A of the Income-tax Rules, 1962 (the departmental /w/rule-40 URL returns a SEBI regulation), so nothing is stated here about their contents or current status. Later treatment was not checked: no search for decisions applying, distinguishing or doubting this judgment was run this pass. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeals were dismissed, with no order as to costs. The Court affirmed the Commissioner's orders rejecting the revision petitions, but on grounds different from those adopted by the Commissioner: because the assessee had made no application to the Income-tax Officer for reduction or waiver of the interest under s.139(8) or s.215, no question arose of the relevant authority having improperly denied a reduction or waiver, and so no revision petition could be maintained in that regard before the Commissioner. On the appealability question the Court held that since 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. The Court left it open to the assessee to apply to the Income-tax Officer for waiver or reduction within six weeks, and directed that any such applications be disposed of on the merits expeditiously.
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