The liability of interest under Sections 139(8) and 215 could be restricted up to the date of assessment, and there is a liability of interest in respect of the default found and determined in the assessment proceedings.

V.K. Singhal, J.—The Income Tax Appellate Tribunal has referred the following question of law arising out of its order dated February 1, 1996, in respect of the assessment year 1981-82 under Section 256(1) of the Income Tax Act, 1961 :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that interest under Section 139(8), 215 of the Act levied in the original assessment does not survive when a reassessment is done under Section 148 of the Act particularly in view of the apex court's decision reported in CIT v. Sun Engineering Works P. Ltd. ?"

2. The facts of the case are that there was reassessment under Section 147 of the Income Tax Act in the case of the assessee. The interest charged under Section s 139(8) and 215 was deleted by the Commissioner of Income Tax (Appeals) following the decision given by this court in the case of Charles D'souza Vs. Commissioner of Income Tax, Karnataka-II, (1984) 147 ITR 694 KAR. In the appeal preferred before the Tribunal, it was found that there is another decision in the case of Income-tax Officer and Another Vs. K.L. Srihari (Huf), K.L. Narayana and K.L.A. Padmanabhasa and Another (Huf), (1992) 197 ITR 694 KAR and, accordingly, the order passed by the Commissioner of Income Tax (Appeals) was upheld by the Tribunal. This reference was made in the light of the judgment given in CIT v. Sun Engineering Works P. Ltd.

3. The argument of learned standing counsel for the Department is heard. Learned counsel for the assessee submitted that the judgment given by the apex court in the case of Sun Engineering Works P. Ltd, was an altogether different issue and so far as the question of levy of interest in the reassessment proceedings under Section s 139(8) and 215 is concerned, the matter was considered by this court in the case of Income-tax Officer and Another Vs. K.L. Srihari (Huf), K.L. Narayana and K.L.A. Padmanabhasa and Another (Huf), (1992) 197 ITR 694 KAR, wherein following the decision given in the case of Commissioner of Income Tax, Karnataka-II, Bangalore Vs. Mysore Iron and Steel Limited, ILR (1985) KAR 1499, it was observed that the effect of reopening an assessment is that the original assessment gets totally effaced and if there is effacement of the original assessment order the interest levied thereunder cannot survive. In the case of Commissioner of Income Tax and Excess Profits Tax, Andhra Pradesh Vs. v. Jaganmohan Rao and Others, (1970) 75 ITR 373 SC, it was observed by the court that once proceedings under Section 34 (old Act) are validly initiated the jurisdiction of the Income Tax Officer is not restricted to the portion of the income that escapes assessment.

4. On behalf of the assessee, it is pointed out that the Taxation Laws (Amendment) Act, 1984, have inserted Clause (b) in Explanation 2 of Section 139(8) where it is provided that, where as a result of an order under Section 147 or 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 this Sub-section has been increased or reduced, as the case may be, the interest shall be increased or reduced. In a proceeding under Section 147 no interest is to be charged and, therefore, it should be deemed to have been reduced to nil and the earlier interest will come to an end. It is also pointed out that in the case of ITO v. K. L. Srihari, SLP Nos. 21273-21276 of 1995 decided on March 24, 1998, the decision given in the cases of Commissioner of Income Tax and Excess Profits Tax, Andhra Pradesh Vs. v. Jaganmohan Rao and Others, (1970) 75 ITR 373 SC and Income Tax Officer, Azamgarh and Another Vs. Mewalal Dwarka Prasad, (1989) 176 ITR 529 SC and Commissioner of Income Tax Vs. M/s. Sun Engineering Works (P.) Ltd., AIR 1993 SC 43, were considered. A contention was raised that there is a difference in the views expressed in the later case of Commissioner of Income Tax Vs. M/s. Su