JUDGMENT
A.L. Bahri, J.
1. This is a petition filed under Section 256(2) of the Income-tax Act, 1961, by the Commissioner of Income-tax, for a direction to the Income-tax Appellate Tribunal to refer the question of law along
with statement of the case to this court. The following question of law is sought to be referred :
“Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in deleting interest charged under Section 215 of the Income-tax Act, 1961, ignoring the fact that charging of interest is compensatory in nature and not a penal one ?”
2. The Tribunal, vide its order dated September 9, 1992 (annexure P-2), declined to refer the aforesaid question to this court for adjudication, as no referable question of law arises in the facts of the case.
3. The facts leading to the question aforesaid are brief. The assessee, Messrs. Gurkartar Steels (P.) Ltd. was supposed to pay advance income-tax. While framing the assessment, the Income-tax Officer, vide order dated January 14, 1987 (annexure P-3), held that advance income-tax was not paid and hence the assessee was liable to pay interest under Section 215 of the Act. An appeal was filed against the aforesaid assessment, which was disposed of on July 18, 1987, vide order (annexure P-4). Although the appeal was partly allowed, however, on the point of imposition of interest under Section 215 of the Act, it was observed that there existed reasonable ground for waiver of interest and since the assessee did not deny its liability, merely because of certain circumstances which had arisen after filing of the estimate of advance tax the liability arose, thus declining the relief in this respect. The assessee took up the case before the Appellate Tribunal, who, vide order annexure P-5 dated February 6, 1992, allowed the relief to the assessee, observing as under :
“In paragraph 5 of the impugned order, the learned first appellate authority has held the stand of the assessee to be reasonable but yet he has observed that, ‘. . . . this may be reasonable ground for waiver of interest but since the appellant does not deny its liability, merely because of certain circumstances which have arisen after filing of the estimate of advance tax that liability has arisen but not foreseen by the appellant.’ The reasoning of the learned first appellate authority as such seems to be that the assessee does not deny its liability but this is not borne out from the grounds of appeal taken by the assessee before the learned first appellate authority. The assessee has taken grounds on merits as also denied his liability of subjecting the assessee to charge of interest inasmuch as the assessee in ground No. 3 has specifically mentioned that, ‘. . . . has wrongly charged interest under Section 215.’ In view of the facts stated in the order of the learned first appellate authority as also the contentions raised before us, we direct that no interest would be charged from the assessee under Section 215.”
4. The question for consideration at this stage is as to whether the assessee was disputing his liability for charging of interest or he was claiming waiver or reduction in the amount of interest. As would appear from the order of the Tribunal referred to above, the assessee was denying his liability from the very beginning in the assessment proceedings. He went up to the Tribunal. The assessee, on material being produced that for certain reasons necessary machinery could not be installed during the accounting year and hence could not claim necessary deductions and on that account the advance tax paid was as per estimate prepared and in consequence no interest could be levied. It was not his case, as has been observed by the Tribunal, that he was admitting his liability and wanted to claim waiver or reduction in the amount of interest that he was supposed to make a claim for that before the Income-tax Officer separately. The position of law is quite clear as laid down by the apex court in Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961, wherein it was observed as under (at page 966) :
“The Income-tax Act makes a clear distinction between the levy of a penalty and other levies under that statute. Interest is levied under Sub-section (8) of Section 139 and under Section 215 because, by reason of the omission or default mentioned in the relevant provision, the Revenue is deprived of the benefit of the tax for the period during which it has remained unpaid. The very period for which interest is levied under the relevant provision points to the nature of the levy. If that is borne in mind, it will be apparent that the levy of interest is part of the process of assessment. Although Section 143 and Section 144 do not specifically provide for the levy of interest and the levy is, in fact, attributable to subsection (8) of Section 139 or Section 215, it is nevertheless a part of the process of assessing the tax liability of the assessee. Where the Income-tax Officer considers that there is a case for levying interest under subsection (8) of Section 139 or under Section 215, what he does in practice is to make an order levying such interest after completing the assessment of the assessee’s total income and the tax payable by him.”
5. It was further observed as under (at page 966) :
“Now, the question is whether orders levying interest under Subsection (8) of Section 139 and under Section 215 are appealable under Section 246 of the Income-tax Act. Clause (c) of Section 246 provides an appeal against an order where the assessee denies his liability to be assessed under the Act or against any assessment order under Sub-section (3) of Section 143 or Section 144, where the assessee objects to the amount of
income assessed or to the amount of tax determined or to the amount of loss computed or to the status under which he is assessed. 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.”
6. It was further observed as under (at page 967) :
“It is, therefore, clear that levy of penal interest under Sections 139 and 215 is part of the assessment. When such penal interest is levied, the assessee is ‘assessed’, meaning thereby, he is subjected to the procedure for ascertaining and imposing liability on him. If the assessee denies his liability to be assessed under the Act, he has a right of appeal to the Appellate Assistant Commissioner against the order of assessment. Where penal interest is levied under Section 215 by the order of assessment, the assessee may altogether deny his liability to pay such interest on the ground that he was not liable to pay advance tax at all or that the amount of advance tax determined by the Income-tax Officer as payable ought to be reduced. In either case, he denies his liability, wholly or partially, to be assessed. Similarly, where interest is levied under Section 139 of the Act, the assessee may deny his liability to pay such interest on the ground that the return was not belated or that the penal provision was not attracted at all to his case. In such a case also, he denies his liability to be assessed to interest.”
7. Learned counsel for the petitioner-Department has tried to argue while making reference to the orders passed by the Income-tax Officer and the Commissioner of Income-tax that assessment of interest has been framed separately under Section 215 of the Act and the question of waiver or reduction could not be taken up in appeal filed against the original assessment framed on the return. This contention cannot be accepted in view of the legal position already explained above in the case of Central Provinces Manganese Ore Co. Ltd. [1986] 160 ITR 961 (SC). When assessment on the return was framed, liability was imposed qua the interest which could legitimately be challenged in appeal and ultimately the Appellate Tribunal on the facts of the case held that interest could not be levied. The decision of the Tribunal is based on facts and no question of law arises, which could be referred under Section 256 of the Act. The petition is dismissed.