ORDER
M.A.A. Khan, Judicial Member
1. These cross-appeals are directed against the order dated 27th March, 1981, whereby the learned CIT(A), Jodhpur, directed the Assessing Officer (AO) to charge interest under Section 217(1 A) of the IT Act, 1961 (the Act) on the tax payable after giving credit for the seized amount of Rs. 92,000. In his appeal, the assessee has challenged the very legality of the liability to pay interest under Section 217. In its appeal, the Revenue has challenged the very maintainability of assessee’s appeal before the learned CIT(A) as also the direction for giving credit of the seized amount against the tax liability of the assessee before charging interest.
2. We heard the learned counsel for the parties at sufficient length and also went through the material placed on our record in the light of the cases relied upon by the parties. The arguments advanced on behalf of the parties require a brief reference to the facts of the case and that we do as hereunder.
3. Shri Kanhaiya Lal Doshi is an old IT assessee returning share income from partnership business of M/s Champa Lal Gordhanlal, Salumber (SLGL) for the last several years. The accounting period, relevant to assessment year 1984-85, which is under consideration ended on 27th April, 1983.
4. During the period between 21st and 23rd of Dec., 1983, a search under Section 132 of the Act was carried on at the residential premises of the assessee. In the course of the search proceedings, the assessee was found in possession of cash amounting to Rs. 92,894.75, gold ornaments and jewellery weighing 8365.599 gms., silver bullion, coins, ornaments – weighing 65,855 kg., FDR Rs. 1,500, advancement to debtors to the extent of Rs. 2,61,310 and evidence regarding investment in immovable properties, animals and vehicles. Documents seized and marked as Exs. 1, 9, 13, 14, 15, 16, 17, 18, 19, 20, 21, 24, 33 and 34, etc., in the course of search proceedings disclosed upon the search party that the assessee had been earning income from money-lending business but not disclosing the same to the Department. On a study of such documents additions were proposed to be made in the following manner:
Rs.
Asst. yr. 1983-84 13,000
Asst. yr. 1984-85 1,02,000
Asst. yr. 1985-86 3,85,000
------------
5,00,000
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5. On assessee’s own statement recorded at the time of search proceedings cash found at Rs. 92,894.75 was considered as representing his income from money-lending business not disclosed to the Department and by his order under Section 132(5), dated 21st March, 1984, the ITO proposed to assess the same in asst. yr. 1985-86. Additions to the already assessed incomes from assessment years 1977-78 to 1983-84 as also for assessment year 1984-85 were also proposed. An appeal under Section 132(12) against the order under Section 132(5) was also disposed of by the CIT on 14th June, 1984.
6. It was in the above background that the assessee filed the return of income for assessment year 1984-85 on 13th/15th Sept., 1985, declaring his income at Rs. 1,27,169 computed in the following manner :
Rs.
(1) Income from business:
50 P. share of profit from R.F. M/s Champalal Gordhanlal,
Salumber, as per computation of the firm 22,305
Investment in money-lending in Svt. year 2039 as per other
under Section 132(12) of the Act dated 14th June, 1984 1,06,584
Less: LIC premium paid 1,28,889
1,720
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1,27,169
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Note: Since no interest was recovered during the year under assessment and the method observed by the assessee is that of receipt basis, no income from interest is shown in the computation of income.
During the pendency of the assessment proceedings the assessee moved an application on 5th Aug., 1986, to the following effect:
5th Aug., 1986
To,
The Income-tax Officer, Spl. Circle, Udaipur
Dear Sir,
Reg. : Shri K.L. Doshi, assessment years 1984-85 and 1985-86
Sub.: Adjustment of tax out of the cash seized for Rs. 92,000 on 22nd Dec., 1983.
With reference to the above named assessee and in connection to the return filed by the assessee from the assessment years 1984-85 and 1985-86 the assessee has requested that the amount of tax of Rs. 61,314 and Rs. 30,686 payable by him under Section 140A of the IT Act, 1961, has been adjusted by the assessee from the cash seized and lying with the Deptt. w.e.f. 22nd Dec., 1983.
The aforesaid amount of Rs. 92,000 together with the interest on it must have been called from the CIT’s account of income-tax and would have been adjusted in the amount of tax as mentioned above for the assessment years 1984-85 and 1985-86. As note to that effect was made by the assessee while filing the return of income for the assessment years 1984-85 and 1985-86. If the amount has not been called for from the CIT’s account, the same may please be called for and be adjusted against the tax payable by the assessee for the assessment years 1984-85 and 1985-86 at the earliest.
7. The Assessing Officer made the assessment order on 29th Aug., 1986, computing the total income of the assessee at Rs. 5,38,717.
8. In that order, the Assessing Officer charged interest under Section 217 at Rs. 1,18,685. Here it may be mentioned that the assessee had filed the estimate of his current income at Rs. 20,585 on 1st Sept., 1983, and paid advance tax of Rs. 1,604 on 1st Sept., 1983 and 5th Dec., 1983 in instalments of Rs. 802 each.
In regard to the charge of interest under Section 217 the assessee adopted two courses. In the first place, the assessee prayed for waiver thereof by moving a petition under rule 40 of IT Rules, 1962 (the Rules) before the IAC who did not accept the prayer of the assessee and dismissed his petition. In the second place, the assessee challenged the charge of interest under Section 217 before the CIT(A) by raising a ground in the memorandum of appeal filed before the CIT(A) against the assessment order dt. 29th Aug., 1986. While upholding various additions but reducing the assessed income to Rs. 3,62,232 as against Rs. 5,40,437 assessed by the Assessing Officer, the learned CIT(A) vide his order dt. 3rd Aug., 1988 remitted the issue relating to the charge of interest under Section 217 to the Assessing Officer with the following observations :
I have considered the facts and pleadings of the learned counsel. I find that the ITO has not discussed in the order the default for which interest has been charged (the advance tax cover is not on record) such as :
(1) Failure to file a statement of advance tax as per Section 209A(1)(a);
(2) Estimate of advance tax or in lieu of statement as per Section 209(A)(2);
(3) Failure to file an estimate as per Section 209A(4) or estimate as per Section 212(3A).
The order of the ITO for charge of interest under Section 217 is, therefore, not a speaking one. Further, advance tax cover is not on record and in the absence thereof true position is not ascertainable. Moreover, the learned counsel has cited that the CIT, Jodhpur, assured at the time of settlement that no penal interest would be charged, and in support of this contention, he has filed an affidavit of the then counsel of the appellant. It is not ascertainable from the record submitted to me as to whether such assurance was given at any stage by the CIT. Under the circumstances, I feel that the issue needs to be redetermined after ascertaining all relevant facts. 1, therefore, remit this issue to the ITO. The ITO is directed to consider all relevant facts and to redetermine the charge of interest under Section 217 according to law after affording due opportunity to the appellant. The ITO is also directed to pass a speaking order for the chargeability of interest under Section 217.
9. In the set aside proceedings, the Assessing Officer discussed the issue relating to charge of interest under Section 217 at great length and quantified the same at Rs. 85,239 as against Rs. 1,18,685 charged by him in the original assessment order. The assessee again appealed to the CIT(A) against charge of interest under Section 217. The CIT(A) upheld the charge of interest under Section 217(1 A) and directed the Assessing Officer to give credit of the seized amount of Rs. 92,000 against assessee’s liability for tax before charging interest under Section 217. Aggrieved by such order of the CIT(A), both the parties are now before the Tribunal placing their grievance before it in the following manner:
Grounds raised in assessee’s appeal (ITA 1179/91)
The learned CIT(A) erred in law and on facts of the case in confirming the levy of interest under Section 217 whereas the appellant submits that no interest under Section 217 is leviable and rather the appellant denies his liability of interest under Section 217 in toto. The appellant had furnished its statement of advance tax well in time and paid the taxes due thereon and as such no interest under Section 217 is leviable.
The learned CIT(A) has further erred in law and on facts of the case in sustaining the levy of the ground of depositing lesser tax but for the fault no interest is chargeable under Section 217. The levy of interest is, thus, illegal and deserves to be deleted. The appellant prays your honour’s indulgence to add, amend or alter any of the ground(s) on or before the date of hearing before your honour.
In Revenue’s appeal (ITA 1180/91):
On the facts and in the circumstances of the case, the CIT(A) has erred in entertaining an appeal against charging of interest under Section 217 as no appeal against such levy is provided under Section 246(2) of the IT Act, 1961, and the proper course was to seek waiver of interest from Assessing Officer or Dy. CIT.
(ii) erred in directing to charge interest under Section 217(1A) payable after giving credit for the seized amount of Rs. 92,000 ignoring the fact the said section does not permit calculation of interest in the manner as directed in the appellate order.
In the nature of grievance of the parties, the dispute relating to the very maintainability of assessee’s appeal before the CIT(A) goes to the very root of the proceedings. It would, therefore, be necessary and convenient too to take up Revenue’s appeal first for decision.
10. The case of Revenue in its first ground of appeal is that the order of the Assessing Officer charging interest under Section 217 of the Act was not an appealable order and, therefore, the learned CIT(A) could not have entertained an appeal under Section 246(2) of the Act against such order. In this behalf it was submitted that by filing the estimate of his current income at Rs. 20,585 and paying advance tax of Rs. 1,604 on 1st Sept., 1983, and 5th Dec., 1983, in respect thereto the assessee had accepted his very liability to pay advance tax under Section 209(2) and since the advance tax so paid by him fell short by more than 33.33% of the advance tax payable on the current income as returned by him on 15th Sept., 1985 but he had failed to send an estimate of such income and advance tax-payable thereon as per provisions of Section 209A by 15th March, 1984, the liability to pay interest under Section 217 unquestionably arose. It was further submitted that the assessee himself accepted such liability to pay interest under Section 217 by seeking waiver/reduction thereof under rule 40 of the Rules before the IAC. In view of such established facts, and assessee’s own conduct, the levy of interest was not at all in dispute so as to make subject of an appeal before the CIT(A). In support of such contentions reliance was placed on Supreme Court decision in the case of Central Provinces Manganese Ore Co. Ltd. v. CIR [1986] 160 ITR 961.
11. In reply Mr. N.M. Ranka, the learned counsel for the assessee, urged that in the first round of appeal against the original assessment order, the assessee had challenged the very levy of interest under Section 217 of the Act and such a plea was entertained by the learned CIT(A) and now no challenge can be made against the maintainability of the same plea in the second round of appeal. The learned counsel further submitted that levy of interest being a part of the process of assessing the tax liability of an assessee, may be challenged in appeal against the order of assessment and the assessee did exactly the same in the first round of appeal. In support of such contentions, reliance was placed on IAC v. Cement Distributors Ltd. [199l] 36 ITD 363 (Delhi),Dunlop India Ltd. v. Asst. CIR [1992]41 ITD 582 (Cal.), [1981] 129 ITR 825(sic), Southern Roadways Ltd. v. CIT [1981] 130 ITR 545 (Mad.)(FB), Bihar State Road Transport Corporation v. CIT [1984] 149 ITR 208 (Pat.)(FB), CIT v. Devichand Panmal [1986] 160 ITR 545 (Raj.), Central Provinces Manganese Ore Co. Ltd.’s case (supra), Barmer Disposal Auto Parts v. CIT [1987] 163 ITR 690 (Raj.), Golecha Properties (P.) Ltd. v. CIT [1988] 171 ITR 47 (Raj.) and Taylor Instrument Co. (India) Ltd. v. CIT [1992] 198 ITR 1 (Delhi).
11A. Regarding the proceeding under rule 40 of the Rules taken by the assessee for waiver or reduction of interest, Mr. Ranka submitted that the exercise of such a right by the assessee did not adversely affect his right to challenge the levy of interest in an appeal filed under Section 246 before the CIT(A). According to Mr. Ranka, both the rights co-exist together and an assessee may seek both the remedies simultaneously or alternatively.
11B. After having given our thoughtful consideration to the arguments advanced before us by the learned counsel for the parties and on making a study of the cases relied upon by them, we are of the opinion that in the facts and circumstances of the case the learned CIT(A) had no jurisdiction to entertain an appeal under Section 246(c) of the Act on the lone ground of chargeability of interest under Section 217 against the order of the Assessing Officer passed under Section 143(3)/250 on 27th Jan., 1989.
11C. The question whether an order charging interest under Section 139(8)/215/217 is or is not an appealable order under Section 246(c) of the Act seem to have arrested the attention of various High Courts quite often and led to conflict of opinions amongst them. [1943] 10 ITR 603 (Guj.)(sic), National Products v. CIT [1977] 108 ITR 935 (Kan), CIT v. B. Kempanna [1980] 126 ITR 825 (Kar.), [1992] 198 ITR 961 (sic), Addl. CIT v. Mustakhusein Gulamhusein Ghia [1983] 143 ITR 951 (Bom.), Bihar State Road Transport Corporation’s case (supra) appear to have favoured the view that the expression “denies his liability to be assessed” occurring in the language of Section 246(c) covers not only the total denial of liability but also partial denial of liability and since the denial of liability to pay interest would be a partial denial to be assessed under the Act, an appeal against the order of assessment contending that the assessee is not liable to tax, would lie under Section 246(c). This view proceeds on the principle that an appeal is the rehearing of the original lis and the power of the appellate authority in this respect is co-terminus with that of the original authority. Therefore, the appellate authority would be competent to entertain an appeal from an order levying interest, [1959] 36 ITR 363 (sic), IAC v. T. T. Vasu [1992] 43 ITD 8 (Mad.), K.B. Stores v. CIT [1976] 103 ITR 505 (Gau), Vidyapat Singhania v. CIT [1977] 107 ITR 533 (All.), Addl. CIT v. Allahabad Milling Co. [1978] 111 ITR 111 (All), CIT v. Geeta Ram Kali Ram [1980] 121 ITR 708 (A11)(FB), U.P. Hotel & Restaurants Ltd. v. CIT [1981] 127 ITR 660 (All)and CIT v. P.S. Jain Motors (P.) Ltd. [1981] 130 ITR 842 (Punj. & Har.), on the other hand, appear to have subscribed to the view that Section 246 does not provide for any appeal against an order levying interest.
12. The conflict in the opinions on the point, however, now stands set at rest by the apex Court’s decision in the case of Central Provinces Manganese Ore Co. Ltd. (supra). After examining the relevant provisions of Section 215 of the Act and rule 40 of the Rules, their Lordships observed that:
It is not correct to refer to the levy of interest as a penalty. The expression “penal interest” has acquired usage, but is in fact an inaccurate description of the levy. Having regard to the reason for the levy and the circumstances in which it is imposed it is clear that interest is levied by way of compensation and not by way of penalty. The IT Act makes a clear distinction between the levy of a penalty and other levied under that statue. 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 provisions 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 Sub-section (8) of Section 139 or under Section 215, it is nevertheless a part of the process of assessing the tax liability of the assessee. Where the ITO considers that there is a case for levying interest under Sub-section (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.
13. The above observation, in fact, approve of the view of the Rajasthan High Court expressed in Golecha Properties (P.) Ltd. ‘s case (supra) by Verma, C.J., as his Lordship then he was, that liability to pay interest under Section 139(8) and Section 215(4) is attracted automatically by operation of law without the further requirement of any order to that effect.
14. Regarding the pertinent question as to whether orders levying interest under Section 139(8) and under Section 215 are appealable under Section 246 of the Act, their Lordships of the Supreme Court observed that ‘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 under Section 143(3) or 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 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 pay at all’.
15. Approving the commonly held view of the Karnataka High Court in National Products’ case (supra) and by the Gujarat High Court Bhikhoobhai N. Shah v. CIT [1978] 114 ITR 197 on the legal position of the question posed, their Lordships finally held that:
In cases where the jurisdictional facts attracting the penalty cannot be disputed, for example, that the return has been furnished under Section 139 with delay, it will be question merely of satisfying the relevant authority that there are circumstances calling for a reduction or waiver of the interest. If an opportunity to do so has not been made available to the assessee before the order levying interest is made, it will be open to the assessee to apply to the ITO after such order has been made to show that a reduction or waiver of interest is justified.
[Emphasis supplied]
16. It has thus been finally laid down by the Supreme Court that in the cases where the existence of jurisdictional facts cannot be disputed, liability to interest would stand attracted automatically. “Jurisdictional facts” mean those facts, the existence of which confers jurisdiction upon an authority to do an act. If the existence of such facts are not in dispute, no challenge to the jurisdiction of that authority to do that act can be given. A challenge to the mode or manner or extent of the exercise of the jurisdiction may vitiate the act done, but that would not tantamount to a challenge to the very jurisdiction of that authority to do that particular Act. It would be a case of irregular exercise of the jurisdiction and not that of doing that act without jurisdiction.
17. Jurisdictional facts, for the purpose of levy of interest under Section 217 of the Act are :
(i) not sending a statement of advance tax payable or the estimate in lieu of such statement by a person who is liable to pay advance tax and who has been previously assessed by way of regular assessment, or;
(ii) not sending an estimate of his current income and the advance tax payable by him on the current income by a person who is liable to pay advance tax but who has not been previously assessed by way of regular assessment, or;
(iii) not sending an estimate of advance tax payable and failing to pay advance tax on such estimated income on or before the date on which last instalment is payable by a person who is liable to pay advance tax and whole current income exceeds and/or is likely to exceed by more than 33 1/3% of the amount of advance tax payable by him on his income as earlier estimated by him.
18. If the jurisdictional facts, as enumerated above exist in a given case, the liability to interest under Section 217 shall stand attracted automatically. In such a case though the liability to pay interest, being a part of the process of assessment, would affect his liability to be assessed under the Act. Yet no challenge to that part of the process of assessment could be given by way of an appeal under Section 246(c) in view of the law laid down by the Supreme Court and also in view of the intention of the Legislature expressed in the very scheme of Section 217.
19. Sub-section (2) of Section 217 makes the provisions of Sub-sections (2), (3) and (4) of Section 215 applicable to interest payable under it. Sub-section (4) of Section 215 r/w rule 40 of the Rules provides that the ITO may reduce or waive the interest payable by the assessee. Section 273A(1)(iii) as it stood at the relevant time, provided that the CIT may, in his discretion, whether on his own motion or otherwise, reduce or waive the amount of interest paid or payable under Section 139(8) or Section 215 or 217. Thus, Section 273A(1)(m) gave a further remedy to the assessee to seek reduction or waiver of the interest under Section 217. Above all Section 264 makes provisions for revision of an order passed by the ITO and such order may include an order charging interest under Section 217. Thus, the Legislature has given ample rights to an assessee to seek proper remedy against the charge of interest under Section 217. In view of such remedies available to the assessee under the Act, the Legislature could have in its wisdom not thought it proper to make an order under Section 217 appealable in those cases wherein the jurisdictional facts cannot be disputed.
20. Now coming to the merits of the instant case, we find that it is not in dispute that the jurisdictional facts which cannot be disputed are that:
(i) the assessee is a person who is liable to pay advance tax and who has been previously assessed by way of regular assessment,
(ii) the assessee did send an estimate of his current income at Rs. 20,585 on 1st Sept, 1983, and pay two instalments of advance tax payable thereon of Rs. 1,604 on 1st Sept., 1983, and 5th Dec., 1993.
(iii) a search under Section 132 was carried out on 23rd-25th Dec., 1993 in the case of the assessee.
(iv) in the course of search the assessee was found amongst other assets, in possession of cash amounting to Rs. 92,894.75.
(v) that the assessee had been earning income from moneylending business which was not disclosed to the IT Department.
(vi) that the assessee did not revise his estimated income and pay advance tax payable by 15th March, 1984.
(vii) that the income from moneylending business had not been disclosed to the Department.
(viii) that the assessee returned his income for the year under consideration at Rs. 1,27,169 on 13th/15th Sept., 1985 against Rs. 20,585 estimated.
21. The existence of the above mentioned jurisdictional facts which admit
of no dispute attract the provisions of Section 217 automatically. Once the
provisions of section 217 stood so attracted automatically, to the case of
the assessee, there remained, as held by the Supreme Court in the case of
Central Provinces Manganese Ore Co. Ltd. (supra), merely the question of
satisfying the relevant authority that there were circumstances calling for
a reduction or waiver of the interest. We, therefore, hold that no appeal
lay under Section 246(c) in this case against levy of interest under section
217 of the Act.
22. The argument that since the ground challenging the levy of interest
was entertained by the learned CIT(A) in the first round of appeal and the
issue was remitted to the Assessing Officer for his decision afresh, the
same ground raised in the second round of appeal is required to be
entertained seems to be misconceived. Raising a ground relating to levy
of interest under Section 217 in an appeal preferred against the assess
ment order without challenging the jurisdictional facts attracting such
levy automatically would confer no jurisdiction upon the appellate
authority to entertain an appeal under Section 246(c) against the order
charging interest under Section 217. What the learned CIT(A) did in that
respect was to observe that the order regarding charge of interest was not
a speaking order and, hence, he directed the ITO to redetermine the same
after giving an opportunity to the assessee. In compliance of such direc
tions, the Assessing Officer reconsidered the entire issue. The plea taken
by the assessee was that in the course of the hearing of his petition under
Section 273A(1)(iii) for reduction or waiver of interest the learned CIT had
assured him that no interest would be charged under Section 217. This
plea itself suggests that what the assessee was pressing for was the
reduction in or waiver of the interest and not the very levy of interest itself.
The plea taken by the assessee did not succeed and the interest was
neither reduced nor waived. Such order of the Assessing Officer in the
set aside proceedings would not be appealable under Section 246(c) of the
Act. The first ground raised by Revenue in its appeal must, therefore,
succeed.
23. Relying upon the cases reported in Jaipur Metals & Electricals Ltd. v. CIT [1974] 97 ITR 721 (Raj.), CIT v. Bharat Machinery & Hardware Mart [1982] 136 ITR 875 (Guj.), CIT v. Birla Cotton Spg. & Wvg. Mills Ltd. [1985] 155 ITR 448 (Cal.), CIT v. Golcha Properties (P.) Ltd. [1988] 169 ITR 493 (Raj.), CIT v. Off Shore India Ltd. [1994] 209 ITR 473 (Cal.), it was urged by Mr. Ranka that the assessee entertained a bona fide belief that no interest under Section 217 would be leviable in view of the seizure of Rs. 92,000 in the course of search proceedings held on 21st/23rd Dec., 1983, i.e., much before the date of third instalment of paying advance tax on 15th March, 1984. This argument cannot justify the entertainment of appeal under Section 246(c) by the learned CIT(A) against the order of charging interest under Section 217. Raising the plea of bona fides in the commission of a default would simply suggest an effort on the part of the assessee to satisfy the relevant authority that there existed circumstances calling for a reduction or waiver of the interest charged. By its very nature such a plea can be taken only when the liability to the charge has arisen and has been admitted. Reduction in or waiver of the charge can be pleaded only when the charge itself has come into existence. It means that if an assessee disputes the jurisdictional facts, attracting the levy of interest under Section 217 he has a right of appeal under Section 246(c). But if he seeks reduction in or waiver of the interest, he has no such right and his remedy lies by way of a petition under Section 215(4) r/w rule 40 and/or under Section 273A(1)(iii) or under Section 264. Both the rights cannot co-exist together as the question of reduction and/or waiver would arise only when the liability to pay the interest has been established and is no more in dispute. The argument raised thus does not demolish the objection of Revenue in its first ground.
24. Now coming to the second ground in Revenue’s appeal, we find that in para 6 of his order under Section 132(5) the ITO had passed the following order:
6. Since the liability created as above in terms of Sub-sections (ii) and (iia) of Section 132(5) exceeds the value of the seized assets, the seized assets are hereby ordered to be retained in order to satisfy the liability.
25. The above order was passed by the Assessing Officer in compliance of the mandate contained in the provisions of Section 132(5) r/w Section 132B of the Act. By his order dated 21st March, 1984, passed under Section 132(5) of the Act, the ITO had created the tax liabilities of the assessee pertaining to assessment years 1977-78 to 1985-86 and held that since the liability created for those years in terms of Clauses (ii) and (iia) of Sub-section (5) of Section 132 exceeded the value of seized asset, the assets were being retained in order to satisfy such liability. That apart, the provisions of Clause (iii) of Sub-section (5.) of Section 132 empowered him to retain the seized asset with a view to satisfy any existing liability under the Act or more of the Acts specified in Clause (a) of Sub-section (1) of Section 230A.
26. Assets seized and retained as per provisions of Section 132(5) are required to be dealt with in accordance with the provisions of Section 132B of the Act which reads as under :
132B(1) : The assets retained under Sub-section (5) of Section 132 may be dealt with in the following manner, namely :
(i) The amount of the existing liability referred to in Clause (iii) of the said sub-section and the amount of the liability determined on completion of the regular assessment or reassessment for all the assessment years relevant to the previous years to which the income referred to in Clause (i) of that sub-section relates (including any penalty levied or interest payable in connection with such assessment or reassessment) and in respect of which he is in default or is deemed to be in default may be recovered out of such assets.
(ii) If the assets consist solely of money or partly of money and partly of other assets the ITO may apply such money in the discharge of the liabilities referred to in Clause (i) and the assessee shall be discharged of such liability to the extent of the money so applied.
(iii) The assets other than money may also be applied for the discharge of any such liability referred to in Clause (i) and remains undischarged and for this purpose such assets shall be deemed to be under distraint as if such distraint was effected by the ITO under authorisation from the CIT under Sub-section (5) of Section 226 and the ITO may recover the amount of such liabilities by the sale of such assets and such sale shall be effected in the manner laid down in the Third Schedule.
(2) Nothing contained in Sub-section (1) shall preclude the recovery of the amount of liabilities aforesaid by any other mode laid down in this Act.
(3) Any assets or proceeds thereof which remain after the liabilities referred to in Clause (i) of Sub-section (1) are discharged shall be forthwith made over or paid to the persons from whose custody the assets were seized.
(4)(a) The Central Government shall pay simple interest at the rate of 15% p.a. on the amount by which the aggregate of money retained under Section 132 and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in Clause (iii) of Sub-section (5) of that section exceeds the aggregate of the amounts required to meet the liabilities referred to in Clause (i) of Sub-section (1) of this section.
(b) such interest shall run from the date of the order under Sub-section (5) of Section 132 to the date of the regular assessment or reassessment referred to in Clause (i) of Sub-section (1) or, as the case may be, to the date of last of such “assessments or reassessments.
27. A reading of the provisions contained in Section 132B(1) makes it clear that the Legislature has specifically laid down the manner in which the assets retained under Section 132(5) are to be dealt with. Sub-section (2) of Section 132B permits other modes also which may be adopted for making recovery of the amount of liabilities. Sub-section (3) directs to forthwith make over the assets or proceeds thereof which remain after the liabilities referred to in Clause (1) of Sub-section (1) are discharged. Sub-section (4) casts an obligation on the Central Government to pay simple interest @ 15% p.a. on the amount by which the aggregate of money retained under Section 132 and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in Clause (iii) of Sub-section (5) of Section 132 exceeds the aggregate of the amounts required to meet the liabilities referred to in Clause (i) of Sub-section (1) of Section 132B. Sub-clause (b) of Sub-section (4) of Section 132B speaks of the date of commencement of the interest payable by the Central Government. It may thus be appreciated that the subject of application of the retained assets has been dealt with quite specifically and exhaustively and the manner of application of the retained asset should not lightly be disturbed by other authorities.
28. The direction of the learned CIT(A) to the Assessing Officer to charge interest under Section 217(1A) on the tax payable after giving credit for the seized amount of Rs. 92,000 is not in line with the provisions of Section 132B r/w Section 132(5)(ii), (iia) and (iii) of the Act for more than one reasons. Firstly, it is an unascertained liability the very levy of which was challenged by the assessee. Secondly, if the liability becomes ascertained, it may or may not attract interest which is again subject to waiver or reduction. Thirdly, a liability to pay interest which is likely to undergo different kinds of challenges before it becomes finally payable and is dependent upon the flexible character of tax liability cannot take precedence for discharge over the past and/or existing tax liabilities which may be quite ascertained. The grievance of Revenue in second ground is, therefore, also correct and consequently the directions of the learned CIT(A) to the Assessing Officer to charge interest under Section 217(1A) on the tax payable after giving credit for the seized amount of Rs. 92,000 is hereby vacated.
29. In view of the above discussion, Revenue’s appeal has to be allowed.
30. Now coming to assessee’s appeal, the grounds of which have already been reproduced above, we may conveniently observe and hold on the basis of the discussion made hereinabove that those have no merits at all. Suffice it to say, that the facts and circumstances of the case as discussed above, clearly established the foundational facts and, therefore, fully justified the charge of interest under Section 217 of the Act. In fact, by making the petition for waiver or reduction of the interest under Section 217, the assessee had admitted such liability. That means that the foundational facts attracting interest under Section 217 were no more subject of any dispute and, therefore, the assessee had sought waiver or reduction of the liability to pay interest.
31. That apart, the liability to pay interest under Section 217 stood clearly attracted in this case for the obvious reason that the assessee had filed the estimate of his current income at Rs. 20,585 on 1st Sept., 1983 and also paid advance tax of Rs. 1,604 on 1st Sept., 1983 and 5th Dec., 1983. But though thereafter in consequence of a search on 21st and 23rd Dec., 1983, it was known that he had been earning taxable income from money-lending business, yet he returned his income at Rs. 1,27,169 on 13th/15th Sept., 1985 and was finally assessed at an income of Rs. 3,62,232. Even after the detection on 21st/23rd Dec., 1983 of his income from money-lending business, the assessee did neither send to the ITO an estimate of his current income and the advance tax payable by him on the current income nor pay the amount of advance tax by instalment to be revised under Section 209A(5). In view of such facts of the case and such conduct of the assessee, we find no force in the grounds raised in assessee’s appeal.
32. In the course of his arguments, Mr. Ranka had advanced a number of arguments which we have dealt with while deciding Revenue’s appeal as those were relevant for the decision of the appeal. One of the arguments raised by Mr. Ranka and which remains to be considered was that after issuing notice to charge interest under Section 217(1) the IT authorities [the learned CIT(A)] could not have charged interest under Section 217(1A) of the Act. We find no substance in this argument.
33. In the first place, we would like to observe that no such ground was raised in the grounds of appeal filed before the Tribunal. No permission of the Tribunal was also sought to raise such a ground which materially and adversely affected the rights and interests of the adversary. The point was stressed in the course of arguments only and which we allowed to be raised as the learned Departmental Representative was fair enough to state that he would answer such an argument too. What we expect of the parties is to raise specific grounds in the memorandum of appeal particularly when decision on such grounds may affect the decision of the case. It is necessary to do so to protect the interest of the assessee adversely which might be taken by surprise. Even if a ground has not been raised in the memorandum filed, permission of the Tribunal be sought to raise such a ground. This would facilitate the adversary to prepare itself on the ground raised with the permission of the Tribunal.
34. Be that as it may, the issue in the appeal was in respect of assessee’s liability to pay interest under Section 217. This issue in various aspects was well within the knowledge of the assessee and he was denying his very liability to such levy, without disputing the existence of the foundational facts attracting such liability. At one stage of the proceedings, he had even sought waiver or reduction of such liability. With such facts coming out from the record, it cannot be now entertained that he was disputing his liability under Section 217(1) only and not under Section 217(1A). We, therefore, hold that the assessee very well knew the nature of his default punishable under Section 217(1 A) and that was why he did not raise any specific ground in the grounds of appeal filed before the Tribunal. That apart from the history of the litigation we gather and hold that before levying the charge of interest under Section 217(1A) the assessee was given proper opportunity of being heard and he was not at all prejudiced in his defence. Above all, we gave him full opportunity to show cause as to why order of the CIT(A) to pay interest under Section 217(1) may not be upheld and we heard his learned counsel on the point at length. Above all, we find that the nature of liability being interest chargeable under Section 217(1A), has not changed and even if it be assumed that it had changed, we heard the assessee on that aspect and hold that interest under Section 217(1A) has rightly been directed to be charged in this case.
35. To sum up, we hold that neither of the two grounds raised in assessee’s appeal hold water. The appeal of the assessee has to be dismissed.
36. In the result assessee’s appeal fails and is dismissed. However, Revenue’s appeal succeeds and is allowed.