The main legal point established in the judgment is that interest under sections 139(8) and 215 cannot be charged in reassessment proceedings under section 148 of the Income Tax Act, 1961, and the liability of interest could be restricted up to the date of assessment.

V.K. Singhal, J.--The Tribunal has referred the following question of law arising out of its order dated 1-2-1996, 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 in CIT v. Sun Engineering Works (P) Ltd. . ?

2. The facts of the case are that there was reassessment under article 147 of the Income Tax Act in the case of the assessee. The interest charged under sections 139(8) and 215 was deleted by the Commissioner (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 (Appeals) was upheld by the Tribunal. This reference was made in the light of the judgment given in Sun Engineering Works (P) Ltd. v. CIT.

3. Argument of the 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 Engg. Works (P) Ltd. was on altogether a different issue and so far as the question of levy of interest in the reassessment proceedings under sections 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 by the Court that once the proceedings under article 134 (old Act) are validly initiated the. jurisdiction of the NO is not restricted to the portion of the income that escapes assessment.

4. On -behalf of the a is pointed o t that assessee, it is point out that the Taxation laws (Amendment Act), 1984, have inserted clause (b) in Explanation 2 of article 139(8) where it is provided that, where as a result of an order under article 147 or article 154 or S. 155 or article 250 or article 254 or article 260 or article 262 or article 263, tax on which interest was payable under these sections has been increased or reduced, as the case may be, the interest shall be increased or reduced. In a proceeding under article 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 NO Vs. K.L. Srihari, SLP 21273-,2176/95.

5. Learned counsel for the assessee has brought to our notice that in the assessment order dated 24-9-1984, directions were given for charging of interest under sections 139(8) and 215 of the Act besides other penalty proceedings. It is submitted that in the meantime 1 6 1 t he 1 re was an appeal and in pursuance of appeal order dated 31-1-1986 the liability of tax was determined vide order dated 13-2-1986. The reassessment was framed on 17-7-1987, in which the interest on F.D. of Rs. 14,589 which was not included in the income earlier was offered by the assessee 'and, therefore,. the proceedings under article 1 147 were initiated. It is submitted that under article 147 there is 'no liability of interest. In this regard various judgments have been relied on: the point that at the relevant time there was no liability under article 147 of interest.

6. The Rajasthan High Court in Commissioner of Income Tax Vs. Mannalal Nirmal Kumar, (1992) 198 ITR 556 Raj, C