Remedial action u/s 33B/263, not u/s 35/154 ofIncome-tax Act, 1961regarding loss of revenue. - Income Tax - 980/CBDT

INSTRUCTION NO. 980/CBDT Dated : July 15, 1976 Section(s) Referred: 33B ,215 ,217 ,263 Statute: Income - Tax Act, 1961 Reference is invited to Board's Circular No. 13-D (XLV-21) of 1966 (F. No. 6/34/65-IT.J), dated the 26th March, 1966 wherein instructions were issued to the effect that wherever the Income-tax Officers have omitted to charge penal interest u/s 18A(6) of the Indian Income-tax Act, 1922, 215 of the Income-tax Act, 1961 or section 18A(8)/217, remedial action should be taken u/s 33B/263, not u/s 35/154. These instructions were issued in the light of the decision of the Supreme Court in the case of S.A.L. Narayana Raw and another Vs. Ishwardas Bhagwandas (57 ITR 149). 2. A number of instances have come to the notice of the Board where interests u/s 139(8), 215,216,217(1) and 217(1A) of the Income-tax Act, 1961 had not been charged and remedial action u/s 263 was also not taken. This resulted in loss of revenue. 3. The Board has examined the question whether remedial action in such cases can be taken independently of the provisions in section 263. The Ministry of Law has advised that the proceedings for charging interest are different and separate from assessment proceedings for the following reasons:- (i) Levy of interest is mandatory. However, power has been given to the Income-tax Officer to reduce or waive the interest in accordance with the conditions prescribed under the relevant rule. Therefore, the view that if interest is not charged at the time of completion of the assessment, it should be deemed to have been waived, appears to be incorrect because no absolute power is vested with the Income-tax Officer, of reducing or waiving the interest. (ii) Interest can be charged only after the tax has been quantified on completion of the regular assessment. (iii) The Income-tax Officer can be said to have considered the question of reducing or waiving interest chargeable under the aforesaid provisions only where a request in this behalf is specifically made before him. 4. The Board desire that in the matter of charging interest under the aforesaid sections, the following course should be adopted:- (i) Order regarding levy of interest should invariably be made along with the assessment order. (ii) However, where for any reasons, an omission has taken place, remedial action should be taken u/s 263, if such action can be, taken u/s 263. (iii) Where action u/s 263 cannot be taken, proceedings for changing interest under a separate order should be initiated by the Income-tax Officer. For this purpose, the Income-tax Officer should issue a show cause notice to the assessee. On receipt of the reply from the assessee, the Income-tax Officer should consider whether there is any case for waiver or reduction of interest leviable u/s 139(8), 215,217(1) and 217(1A) of the Act.