D.P Wadhwa, C.J— In these eight writ applications, we have heard common arguments. The questions raised are with respect to chargeability of interest under Sections 234-A, 234-B and 234-C of the Income Tax Act, 1961 (for short, “the Act”). These sections were inserted by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989. A Bench of this court in Ranchi Club Ltd. v. CTT [1996] 217 ITR 72 (Patna), while interpreting Sections 234-A and 234-B of the Act, held that interest under these sections should not be charged on excess tax as per income determined under Sections 143(3)/144 of the Act and said that interest under Section 234-A was leviable on the tax on the total income as declared in the return. The correctness of this decision has been doubted before us by the Revenue and it has been submitted that the matter be referred to a larger Bench for an authoritative decision.
2. While Section 234-A deals with levy of interest for default in furnishing return of income; under Section 234-B interest has to be levied for defaults in payment of advance tax and under Section 234-C interest is payable for deferment of advance tax. Since the aforesaid decision of this court in Ranchi Club Ltd. v. CIT [1996] 217 ITR 72 really interpreted the provisions of Section 234-A, we may set out the relevant part of this section as under:
“234-A. Interest for defaults in furnishing return of income.— (1) Where the return of income for any assessment year under sub-section (1) or sub-section (4) of Section 139, or in response to a notice under sub-section (1) of Section 142, is furnished after the due date, or is not furnished, the assessee shall be liable to pay simple interest at the rate of two per cent, for every month or part of a month comprised in the period commencing on the date immediately following the due date, and,—
(a) where the return is furnished after the due date, ending on the date of furnishing of the return; or
(b) where no return has been furnished, ending on the date of completion of the assessment under Section 144,
on the amount of the tax on the total income as determined under sub-section (1) of Section 143 or on regular assessment as reduced by the advance tax, if any, paid and any tax deducted or collected at source.
Explanation 1.— In this section, ‘due date’ means the date specified in sub-section (1) of Section 139 as applicable in the case of the assessee.
Explanation 2.— In this sub-section, ‘tax on the total income as determined under sub-section (1) of Section 143’ shall not include the Additional income tax, if any, payable under Section 143.
Explanation 3.— Where, in relation to an assessment year, an assessment is made for the first time under Section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this section.
Explanation 4.— In this sub-section, ‘tax on the total income as determined under sub-section (1) of Section 143 or on regular assessment’ shall, for the purposes of computing the interest payable under Section 140-A, be deemed to be tax on total income as declared in the return.
(2) The interest payable under sub-section (1) shall be reduced by the interest, if any, paid under Section 140-A towards the interest chargeable under this section …”
3. While coming to the conclusion that interest under Section 234-A was leviable on the tax on the total income as declared in the return this court had placed reliance on Explanation 4 to Section 234-A, the decision of the Supreme Court in J.K Synthetics Limited v. Commercial Taxes Officer., AIR 1994 SC 2393; [1994] 94 STC 422 and on the general principle that interest was payable in future only after the dues were finally determined.
4. In this batch of eight writ applications, five pertain to cases of the Ranchi Club itself. The earlier decision in the case of Rancid Club, [1996] 217 ITR 72 (Patna) was with respect to the Assessment Year 1991-92. Now the assessment years involved are 1989-1990, 1990-1991, 1992-1993, 1993-1994 and 1994-1995. In two cases for the assessment years 1989-1990 and 1990-1991, the asscssee is Tej Kumari Devi and in the last eighth case the assessee is Uday Mistana Bhandar and the assessment year involved is 1990-1991.
5. Mr Moitra, learned counsel for the assessee, submitted that the Common issues involved in the writ applications were:
(i) Whether interest under Sections 234-A and 234-B was liable to be charged on the tax payable on the returned income or the assessed income?
(ii) Whether interest was chargeable under these sections only on the tax payable on such returned income which the assessee bona fide and in good faith believed to be the income liable to tax?
(iii) Whether interest could be levied merely through a notice of demand under Section 156 of the Act where there was no specific order in the assessment order that interest was leviable and for charging such interest?
(iv) Whether mere insertion of the words in the assessment order “charge interest, if any” or “charge interest as per rules” was sufficient for charging interest through the notice of demand?
(v) Whether appeal lay against the order for charging interest under Sections 234-A and 234-B of the Act?
Mr Mortra did not challenge the vires of Sections 234-A and 234-B as the validity had been upheld in the earlier Bench decision of this Court in Ranchi Club [1996] 217 ITR 72. Mr Moitra strongly relied on the aforesaid decision in support of his first two submissions.
6. To understand the rival contentions better it will be advantageous to refer to some of the proceedings before the income tax authorities in each of these matters.
CWJC No. 3287 of 1995(R)—Uday Mistana Bhandar (Assessment Year 1990-1991):
7. Assessment order is dated September 22, 1994. The operative portion of the order reads:
“Assessed under Sections 143(3)/251 on total income at Rs 87,060 charge interest, if any. Issue D.N and challan.”
Then as per notice of demand under Section 156 of the Act, interest is charged under Section 234-A at Rs 8854 and that under Section 234-B at Rs 16,756. The petitioner challenges the assessment order and the notice of demand.
CWJC No. 2732 of 1995(R)—Tej Kumari Devi (Assessment Year 1989-1990):
8. Assessment order is dated July 7, 1994, and is under Section 143(3) of the Act on the total income of Rs 1,80,040. In the assessment order there is specific order to charge interest under Sections 234-A, 234-B and 234-C. However, as per notice of demand under Section 156, interest under Section 234-A is charged at Rs 84,332 and that under Section 234-B at In 93056. When the assessee filed the appeal challenging this charging of interest, the Commissioner of Income Tax (Appeals) in his appellate order dated December 15, 1994, observed as under:
“The next objection of the appellant is regarding the charging of Interest, under Sections 234-A and 234-B of the Income Tax Act. According to learned counsel the appellant was not liable to pay any interest. In my opinion any order for charging interest under Sections 234-A and 234-B is not an appealable order. I, therefore, refrain from making any comment on chargeability of the interest under these two sections in the case of the appellant. However, I direct the Assessing Officer to examine the appellant's claim and take appropriate decision in the matter.”
CWJC No. 2780 of 1995(R)—Tej Kumari Devi (Assessment Year 1990-1991):
9. Regular assessment was made under Sections 143(3)/144-A on a total Income of Rs 12,89,760. There was a specific order to charge interest under Sections 234-A, 234-B and 234-C of the Act. The interest charged under these sections respectively was Rs 94,304, Rs 5,72,864 and Rs 15,156. The appeal filed against the assessment order was partly allowed by the order dated March 3, 1994, by the Commissioner of Income Tax (Appeals) and after giving effect to the appellate order interest charged under Sections 234-A and 234-B was levied in the sum of Rs 15,980 and Rs 55,930, respectively.
10. Out of the remaining five cases which are of Ranchi Club in the cases for the assessment year 1992-1993 [CWJC No. 3494 of 1995(R)], the Assessment Year 1993-1994 [CWJC No. 3527 of 1995(R)] and the Assessment Year 1994-1995 [CWJC No. 3609 of 1995(R)], the operative portions of the orders read as under:
“Assessed under Section 143(3) of the Income Tax Act, 1961, on total income of (as determined in each case). Issue demand notice, challan and copy of order and charge interest, if any.”
In the demand notices interest has been charged under Sections 234-A, 234-B and 234-C.
11. In CWJC No. 3562 of 1995(R), the assessment year is 1990-1991. After arriving at the total income, the operative portion of the order reads as under:
“Penalty proceedings under Section 271(1)(c) is initiated. Charge interest as per rules.
Assessed under Section 143(3). Issue D.N, etc., tax as per ITNS-150 enclosed.”
In the notice of demand, interest has been charged under Sections 234-A, 234-B and 234-C.
12. In the fifth case of Ranchi Club, CWJC No. 3782 of 1995(R), the assessment year is 1989-1990. We do not find the assessment order though a notice of demand under Section 156 has been filed. It is stated that a sum of Rs 1,80,379 is payable as per details on the reverse of the notice. The are, however, no such details. The assessee has filed the income tax computation form in which, however, there is a mention of the amount of interest charged under Sections 254-A, 234-B and 234-C. Though in the other writ applications, there is a challenge to the order charging interest, with respect to interest charged in this writ application [CWJC No. 3782 of 1995(R)], the prayer is that judgment be given in terms of the earlier decision of this Court in Ranchi Club Ltd. v. CIT [1996] 217 ITR 72 (Patna).
13. So far as Issues (iii) and (iv) raised by Mr Moitra are concerned, we see no difficulty in setting aside the notices of demand claiming interest under any of these Sections 234-A, 234-B or 234-C.
14. Section 156 of the Act is as under:
“156. Notice of demand.—When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act, the assessing officer shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable.”
15. From bare reading of Section 156 it is clear that notice of demand claiming interest can be issued only when there is order in the assessment order levying interest. Except in the cases of the assessee Tej Kumari Devi [CWJC No. 2732 of 1995(R) and CWJC No. 2780 of 1995(R)] there is no order in any of the assessment orders levying interest under any of the Sections 234-A, 234-B or 234-C. To use the expression “charge interest, if any” or “charge interest as per rules” cannot be read to mean that the assessing officer has passed orders “charge interest under all the aforesaid sections”. The order to charge interest has to be specific and clear, as for that matter any order to charge any tax, penalty or fine. It is different thing as in the case of Tej Kumari Devi where there is an order levying interest but it left the calculation to the office. The assessee must be made to know that the assessing officer after applying his mind has ordered the charging of interest and under which of the sections of the Act. Interest is payable under various provisions like for default or delay in furnishing the return of income [Sections 139(8) and 139(9)] and also under the various sections for default in payment of advance tax (Sections 215, 216, 217, 234-B and 234-C). A notice of demand is somewhat like a decree in a civil suit which must follow the order. When a judgment does not specify any amount to be charged under any particular section, the decree cannot contain any such amount. Similarly when the assessment order is silent If any interest is leviable, the notice of demand under Section 156 of the Act cannot go beyond the assessment order and the assessee cannot be served with any such notice demanding interest.
16. We, therefore, do not feel any difficulty in coming to the conclusion that the notices of defraud in CWJC Nos. 3609 of 1995(R), 3287 of 1995(R), 3562 of 1995(R), 3494(R) of 1995 and 3527 of 1995(R), have to be quashed so far these relate to charging of interest under Sections 234-A, 234-B or 234-C of the Act. We get support for the view which we have taken from the decisions of the Calcutta High Court in Monohar Gidwany v. CIT [1983] 139 ITR 498 and CTT v. Wlliard India Ltd. [1993] 202 ITR 423 andthat of the Gauhati High Court in CLT v. Namdang Tea Co. India Ltd. [1993] 202 ITR 414.
17. A preliminary objection was raised by Mr Debi Prasad, learned counsel for the Revenue, that the petitioners in these cases could have questioned the levy of interest under Sections 234-A, 234-B and 234-C in the quantum appeal filed by them. We do not think we should go into this question particularly when the Commissioner of Income Tax (Appeals) in one of the appeals has observed that the order charging interest under Sections 234-A, 234-B or 234-C was not an appealable order. On the analogy of the decision of the Supreme Court in Central Provinces Manganese Ore Co, Ltd. v. CIT [1986] 160 ITR 961 (SC), it could certainly be said that in the quantum appeal the assessee could challenge the levy of interest otherwise it is apparent that there is no provision of appeal against the charging of interest under any of these sections. An appeal is a statutory right and when the statute does not give such a right it cannot be said that an appeal could be filed against the charging of interest. We do not think the assessee in the quantum appeal is bound to challenge the charging of interest though he may do so. He can certainly challenge levy of interest In a writ jurisdiction. This objection by the Revenue, therefore, fails.
18. A great deal of arguments were addressed oh the correctness of the decision of this Court in Ranchi Club Ltd. v. CIT [1996] 217 ITR 72, Mr Moitra said that the decision rightly held that interest under Section 234-A or 234-B could be charged only on the tax payable on the returned income and not on the tax payable on the assessed income. Mr Debi Prasad said that the learned judges in the earlier case did not properly interpret the expression “be deemed to be tax on total income as declared in the return” as contained in Explanation 4 to sub-section (1) of Section 234-A. He gave an example that if in a given case the returned income was Rs 50,000 and the assessed income Rs 1,00,000 then under the deeming provision as contained in Section 234-A interest can be calculated on the amount of assessed income i.e Rs 1,00,000. He submitted that the Explanation was for the purpose of calculation of interest.
19. The Act provides for filing of a return of income under Section 139. The return of income can be called for under sub-section (1) of Section 142 and Section 147 of the Act. In cases where the total tax liability of the year exceeds Rs 1,500, the assessee has to pay tax in advance as per various provisions contained in Sections 208 to 210 of the Act. Under Section 140-A, the assessee will make his own assessment and pay the remaining tax (as reduced by the advance tax already paid, if any) and also interest payable under Sections 234-A, 234-B or 234-C. Under Section 234-A, it may be noticed, that if the assessee is caught within the mischief of this provision, then the interest on the prescribed rate has to be paid on the amount of tax on the total income as determined under sub-section (1) of Section 143 or the regular assessment under sub-section (3) of Section 143 as reduced by the advance tax, if any, paid and any tax deducted or collected at source.
20. The question which arises for consideration is as to how the assessee would pay interest under Section 234-A when he had not even filed a return of income. It will appear that in a case like this there would be no question of determination of the amount of tax on the total income as determined under Section 143(1) or on regular assessment, because the event of determination of income either under Section 143(1) or on regular assessment could follow only after the return had been filed.
21. It will appear to us that for the limited purpose of enabling the assessee to pay the interest payable by him along with the self-assessment tax to be paid under Section 140-A of the Act, Explanation 4 has been inserted to give a different meaning to the word “tax” on the total income as determined under sub-section (1) of Section 143 or on regular assessment. The deeming provision under Explanation 4, to our mind, means that the assessee's income either under Section 143(1) or on regular assessment shall be deemed to be the returned income of the assessee under Section 140-A and he has to pay interest on the basis of tax calculated on the assessed income. We also feel that the ratio of the Supreme Court decision in J.K Synthetics Limited case, AIR 1994 SC 2393, may not, perhaps, be fully applicable while interpreting Section 234-A read with Explanation 4, thereto. We are, therefore, inclined In agree with Mr Debi Prasad that the decision of this Court in Ranchi Club Limited v. CIT [1996] 217 ITR 72 needs reconsideration and, accordingly, we refer the following question to a larger Bench in CWJC No. 3287 of 1995(R), CWJC No. 2732 of 1995(R) and CWJC No. 2780 of 1995(R):
“Whether interest under Sections 234-A and 234-B read with Explanation 4 is liable to be charged on the returned income or assessed income?”
Thus while we refer the aforesaid question to a larger Bench in the cases of Uday Mistanna Bhandar [CWJC No. 3287 of 1995(R)] and Tej Kumari Devi [CWJC No. 2732 of 1995(R) and CWJC No. 2780 of 1995(R)], we will allow the writ applications filed by the Ranchi Club Limited [CWJG Nos. 3494 of 1995(R), 3527 of 1995(R), 3609 of 1995(R), 3562 of 1995(R) and 3782 of 1995(R)].
S.K Chattopadhyaya J.— I agree.