The judgment of the court was delivered by
Tarun Agarwala, J. - We have heard Sri Dhananjay Awasthi, the learned counsel for the appellant. No one appears for the assessee.
2. All the appeal raise the same issue, and for facility, the facts in the appeal for the assessment year 1985-86 is taken into consideration.
3. For the assessment year 1985-86, an assessment order under Section 147/144 of the Income Tax Act, 1961 (hereinafter referred to as the Act) was passed. The operative portion of the order of the Assessing Officer is extracted hereunder:-
"Assessed on total income of Rs. 6,10,850/-. Penalty proceedings u/s 271(1)(1)(a), 271(1)(b), 271(1)(c), 271A, 273(2)(b) are initiated. Issue notice of demand and challan and penalty notices."
4. From the aforesaid, it is clear that the Assessing Officer had not issued any direction for charging interest under Section 139(8) and Section 215 of the Act. Pursuant to the said assessment order, a notice of demand was issued under Section 156 of the Act demanding interest under the aforesaid sections. The assessee, accordingly, moved an application under Section 154 of the Act for rectification on the ground that no interest under Section 139(8) and 215 of the Act could be levied since no such direction was issued by the Assessing Officer in the assessment order. The Assessing Officer rejected the application of the assessee under Section 154 of the Act holding that charging of interest was mandatory and that the Assessing Officer had no discretion in the matter. The Assessing Officer, accordingly, rejected the application holding that there was no mistake apparent from the record. The assessee, being aggrieved by the charging of the interest, filed an appeal and the appellate authority by its order allowed the appeal and quashed the order demanding the interest. The appellate authority held that there has to be a specific order for charging interest in the assessment order and since the Assessing Officer did not levy any interest in the assessment order, no interest could be charged in the notice of demand issued under Section 156 of the Act. The department, being aggrieved, by the order of the appellate authority filed an appeal before the Income Tax Appellate Tribunal, who rejected the appeal and affirmed the order of the appellate authority.
5. The department, being aggrieved by the aforesaid order, has filed the aforesaid appeal under Section 260A of the Act contending that a substantial question of law arises for consideration, namely, that the Tribunal was not justified in holding that interest under Section 215/217 and 139(8) of the Act could not be charged unless specifically mentioned in the assessment order particularly when charging of interest was mandatory.
6. Before proceeding further, it would be necessary to consider the provision of Section 156 of the Act, which is extracted hereunder:-
Notice of demand
"156. When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act, the Assessing Officer shall serve upon the assessee a notice of demand in the prescribe form specifying the sum so payable:
Provided that where any sum is determined to be payable by the assessee or by the deductor under sub-section (1) of section 143 or sub-section (1) of section 200A, the intimation under those sub-sections shall be deemed to be a notice of demand for the purposes of this section."
7. A perusal of the aforesaid provision indicates that tax, interest, penalty or fine is payable in consequence of an order passed under the Act, namely, the assessment order. We are of the view that there has to be a specific order passed by the Assessing Officer charging interest and only thereafter, a notice of demand levying interest could be issued.
8. In Ranchi Club Ltd. vs. Commissioner of Income Tax and others, (1996) 222 ITR 44, the Patna High Court held, that an order of the assessing officer in the assessment order to charge interest has to be specific and clear, namely, that the assessee must know that the assessing officer after applying his mind had ordered charging of interest under a particular Section and that a general order directing that interest would be charged as per Rules or directing that charge interest as per Law was not a specific order for levying interest. The High Court held, that where such general order was passed directing interest to be charged as per Rules, the same would have no effect and that no interest could be leviable. The said decision of the Patna High Court was affirmed by the Supreme Court in Commissioner of Income Tax and others vs. Ranchi Club Ltd. (2001) 247 ITR 209.
9. In Vinod Khurana Vs. Commisioner of Income Tax & another 253 I.T.R. 578, the Punjab & Haryana High Court held that the notice of demand under Section 156 of the Act cannot go beyond the assessment order and that the assessee cannot be served with any such notice demanding interest where the assessment order does not specify charging of any interest. Similarly in Commissioner of Income Tax Vs. Kishan Lal (HUF) 258 I.T.R. 359, the Delhi High Court held that since no direction was issued in the assessment order for charging of interest, the notice of demand could not be issued levying 5 interest under Section 234A, 234B and 234C of the Act. Similar view was reiterated by the Delhi High Court in Commissioner of Income Tax Vs. INSILCO Ltd. 261 I.T.R. 220.
10. In Uday Mistanna Bhandar & Complex 222 I.T.R. 44 (Patna), while analyzing the provisions of Sections 234A, 234B and 234C vis-à-vis Section 156 of the Act, the Patna High Court held that notice of demand claiming interest can be issued only when there is a direction in the assessment order for levying interest. In Smt. Tej Kumari & others Vs. Commissioner of Income Tax & others 247 I.T.R. 210, the Full Bench of the Patna High Court (Ranchi Bench) held that in the absence of any specific order, interest could not be charged or recovered from the assessee.
11. No doubt, the Supreme Court in Commissioner of Income Tax Vs. Anjum M.H. Ghaswala & others, 252 ITR 1 held that the provision of charging interest under Section 234A, 234B, 234C is mandatory for which there is no quarrel to the said proposition. We are, however, of the opinion that levy of interest is mandatory but at the same time the Assessing Officer is specifically required to mention the specific section for charging interest, failing which no interest could be levied.
In Commissioner of Income Tax, Dehradun Vs. M/s Dehradun Club Ltd., 2012 (1) UD 41 a Division Bench in which one of us (Hon'ble Tarun Agarwala, J.) held that since there was no order to charge interest in the assessment order, interest under Section 143B of the Act could not be charged under the notice of demand issued under Section 156 of the Act. Similar view was again given by a Division Bench of this Court in Commissioner of Income Tax, Agra and another Vs. M/s Oswal Exports decided on 1st July, 2014 in Income Tax Appeal No.386 of 2007.
12. We are also of the opinion that a notice of demand is somewhat like a decree in a civil suit, which must follow the order. When a judgment in a civil suit does not specify any amount to be recovered, the decree could not contain such amount. Similarly, when the assessment order does not indicate that interest would be leviable, the notice of demand under Section 156 of the Act levying interest would be wholly illegal since interest is payable in consequence of an assessment order as is clear from Section 156 of the Act itself.
Consequently, we are of the opinion that the notice of demand cannot go beyond the assessment order and the assessee cannot be served with any such notice demanding interest, Further, the assessee must know that he has been charged interest under a particular section of the Act, which must be specify in the assessment order and only thereafter a notice of demand under Section 156 of the Act could be issued.
13. The learned counsel for the appellant has relied upon a decision of the Punjab and Haryana High Court in Dr. P.C. Khurana Vs. Commissioner of Income Tax, Jalandhar, 2012 (211) TAXMAN 43 (Punj & Har.) wherein the Court held that an order levying interest under Section 215 and 139(8) of the Act can be passed by the Assessing Officer under Section 154 of the Act. This decision is not helpful and has nothing to do with the controversy involved in this appeal.
14. In the light of the aforesaid, we are of the opinion that if the assessment order does not specify charging of interest under a specific section then it could not be charged or levied under Section 156 of the Act.
15. For the reasons stated aforesaid, we do not find any merit in the appeal. No substantial question of law arises for consideration.
16. The appeal fails and is dismissed.