An assessee can object to the levy of interest under section 139 (1) proviso in course of an appeal to the Appellate Assistant Commissioner of Income tax under section 246 of the Income-tax Act, 1961.

( 1 ) SOMETIMES, in income-tax matters, as in other branches of law, a considerable amount of judicial time is consumed in resolving a purely procedural wrangle. Thus under the Indian Income Tax Act, 1922 as well as its successor Act of 1961, question as to how far an order charging interest is appealable to the Appellate Assistant Commissioner and then to the Appellate Tribunal has engaged considerable attention of the courts and an attempt at legislativc clarification has really not solve the problem. Before proceeding to set out how the difficulty arises the facts of the present reference under section 256 (1) of Income Tax Act, 1961 may be briefly stated.

( 2 ) FOR the assessment year 1962-63 the respondent assesses, M/s. Mahabir Parshad and Sons, a registered firm, had to file its return of income within the time prescribed under section 139 (1 ). i. e. , 30-6-1962. The return was not filed on that date. The asscssee applied for extension of time on 30-11-1962, 19-2-1963 and 30-9-1963. the application on the last date being for extension upto 31-10-1963. The return was, however, actually filed on 20-11-1963. While completing the assessment of the firm for the above assessment year under section 143 (3) of the 1961 Act, the Income-tax Officer directed that interest should be charged under section 139 (1 ). The assessment form which was prepared as a consequence of this assessment order shows that the total income was determined at Rs. 4. 93,557. 00 an3 the tax payable thereon at Rs. 52,476. 84 and interest of Rs. 21,392. 52 under section 139 was added raising the total amount to Rs. 73. 869. 36. From this the advance tax paid (Rs. 25,442. 77) and the provisional tax paid (Rs. 22. 691. 51) were deducted and the net amount payable by the assessee was determined at Rs. 25,735. 08. The notice of demand issued on the same day showed the sum payable by the assessee as having been determined at Rs. 73. 869. 36 and clarifies that, after deduction of advance tax and provisional assessment tax, a balance of Rs. 25. 735. 08 was payable.

( 3 ) THE assessee had returned an- income of Rs. 4,57,369. 00 and the Income-tax Officer had made certain additions to the returned income raising the total income to Rs. 4,93,557. 00 as already stated. The assessee, therefore, filed an appeal before the Appellate Assistant Commissioner against the assessment order. The order of the Appellate Assistant Commissioner shows that there were as many as seven grounds of appeal. Six of them related to disallowances made by the Income-tax Officer and the allocation of the income of the firm among the partners. One of the grounds of appeal was that the Income-tax Officer had erred in charging a penal interest of Rs. 21. 392. 00 for late submission of the return of income. The Appellate Assistant Commissioner dealt with other grounds raised by the assessee but he was of opinion that the point regarding the levy of interest could not be agitated in this appeal as section 246 which enumerates the various orders from which an appeal could be filed to the Appellate Assistant Commissioner docs not provide for an appeal against the levy of interest under section 139. He, therefore, declined to adjudicate on this ground. But notwithstanding this conclusion, he also went into the merits and was of opinion that the levy of interest was justified on the facts and circumstances of the case.

( 4 ) THERE were appeals both by the Income-tax Officer and the assessee to the Tribunal. It was contended on behalf of the assessee that the levy of interest was not valid because (a) the Income-tax ^ Officer had not passed any order levying interest; (b) the Income-tax Officer had not given the assessee an opportunity of showing cause why interest should not be charged: and (c) that in any event the Income-tax Officer should have exercised the discretion vested in him to waive or reduce the interest under section 139 (8) of the Act read with Rule 117a of the Incom