TMI Blog2003 (5) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Though the interest under section 139(8) and section 215 was chargeable on the basis of income computed under section 154, the Assessing Officer did not charge the same at the time of passing an order under section 154. Subsequently he realised this mistake and issued show cause notice to the assessee proposing to charge interest under sections 139(8) and 215. The assessee submitted a reply stating that since the order under section 154 was the subject matter of appeal before the CIT(A), no rectification of order be passed till the disposal of appeal. However, the Assessing Officer observed that even after allowing the appeal effect on 30-3-1994, there was a liability of charging interest under sections 139(8) and 215. By referring to the provisions of sections 139(8) and 215, the Assessing Officer observed that charging of interest under these sections, was mandatory as the expression used in the sections is "shall". Therefore, this was a mistake of law apparent from record which required to be rectified under section 154. Accordingly, the Assessing Officer charged interest under sections 139(8) and 215. 4. Aggrieved the assessee carried the matter in appeal before the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1998. The rectification in this case thus could have been carried out upto on or before 31-3-1998 which has been carried out on 29th March, 1996 and the same is, therefore, very well within time. Therefore, the plea taken by the Ld. counsel for the assessee is not correct and not based on the facts of the case. The Assessing Officer is justified in passing the rectification order and the appeal of the appellant is dismissed." The assessee is aggrieved by the order of CIT(A). Hence this appeal before us. 5. Ld. counsel for the assessee, Shri P.C. Jain reiterated the submissions made before the authorities below. He submitted that the assessee had filed the return of income on 21-2-1990. The assessment under section 143(3) was completed on 30-11-1990. Therefore, the Assessing Officer could rectify the order under section 154 within a period of four years, i.e. on or before 30-11-1994. However, in this case, the Assessing Officer passed the first order under section 154 on 30-11-1993. As a result, the assessee became liable to interest under sections 139(8) and 215. However, no interest was charged. The interest under these sections was subsequently charged vide order dated 10-6-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to sub-section (3) of section 215, which provides that interest charged under section 215 can be subsequently reduced or increased as a result of order under sections 147, 154, 155,250, 254, 260, 262 or section 263 etc. However, he submitted that interest can be reduced or increased only if it had been charged earlier. In case the interest was not charged at the time of completing assessment, the same could not be revised by passing an order under section 154. He submitted that similar provisions exist under section 139 also. He, therefore, submitted that interest under sections 139(8) and 215 cannot be charged by invoking provisions of section 154 because no interest had been charged at the time of completing assessment under section 143(1). 6. Ld. Departmental Representative for the Revenue, Smt. Sukhvinder Khanna, on the other hand, heavily relied on the orders of the authorities below. She drew our attention to para 4 of the order under section 154 where the Assessing Officer has mentioned that expression used in sections 139(8) and 215 is that the Assessing Officer "shall" charge interest under these sections where such default exists. Thus charging of interest under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs was raised against the assessee. As a result the assessee also became liable for interest under sections 139(8) and 215. It is not the case of the assessee that it was not liable for interest under section 139(8) or 215. Therefore, there was a mistake on the part of the Assessing Officer in not charging interest under sections 139(8) and 215 in the order passed on 30-11-1993. Since there was no mistake in the order passed under section 143(1), the period of limitation should be reckoned from the date of order in which such mistake has happened i.e. order passed under section 154 on 30-11-1993. The scope of section 154 of the Income-tax Act, 1961 is very wide and covers all mistakes of law or facts which are apparent from record and the issue involved is not debatable. The section also provides in-built safeguards. It provides for the issue of notice and ensures the grant of an opportunity to be heard. The action can benefit the assessee as well as the Revenue. Therefore, there is no ground for placing any undue restrictions in the interpretations on the provisions. The power under section 154 can be invoked even when an issue is decided by the Jurisdictional High Court or Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal income as determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source." Explanation 2(b) of section 139(8) further provides as under: "Where as a result of an order under section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 [or an order of the Settlement Commission under sub-section (4) of section 245D] 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 accordingly." Similar are the provisions of section 215 of Income-tax Act, 1961 which are reproduced as under: "Where, in any financial year, an assessee has paid [advance tax (including revised estimate)] and the advance tax so paid is less than seventy five per cent of the assessed tax, simple interest at the rate of [fifteen] per cent per annum from the 1st day of April next following the said financial year upto the date of the regular assessment shall be payable by the assessee upon the amount by which the advance tax so paid falls short of the assessed tax)." Corresponding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion and arguments and are debatable, where two conceivable views are possible fall outside the scope of provisions of section 154 of Income-tax Act, 1961. Reliance in this regard is placed on the judgment of Hon'ble Supreme Court in the case of T.S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50. In order to find answer to the question as to whether it was a mistake of law apparent from record or not, we have to find out the nature of interest leviable under sections 139(8) and 215. 10. In the case of Central Provinces Manganese are Co. Ltd. v. CIT [1986] 160 ITR 961, Hon'ble Supreme Court has held that levy of interest under sections 139(8) and 215 of Income-tax Act, 1961 is part of process of assessment and is compensatory in nature. Therefore, it is open to an assessee to dispute the levy of interest charged under these sections in appeals. 11. In the case of Kalyankumar Rayv. CIT [1991] 191 ITR 634, Hon'ble Apex Court has again held that "assessment" is one integrated process involving not only the assessment of the total income but also determination of the tax. Latter is as crucial as the former. The Income-tax Officer has to determine, by an order in writing, not only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take apparent from record. Therefore, the provisions of section 154 shall apply. Reliance is placed on the judgment of Apex Court in the case of ITO v. Ashok Textiles Ltd. [1961] 41 ITR 732, judgment of Punjab and Haryana High Court in the case of India Woollen Textile Mills (P.) Ltd. v. CIT [1978] 111 ITR 205 and the judgment of Patna High Court in the case of Bihar State Road Transport Corpn. 13. Ld. counsel for the assessee has relied on the judgment of Delhi High Court in the case of CIT v. Kishan Lal [1980] 124 ITR 19 where relying on the judgment of Apex Court in the case of CITv. Ranchi Club Ltd. [2001] 247 ITR 209, it was held that if there were no directions in the earlier order for charging of interest under sections 234A and 234B of Income-tax Act, 1961, levy of interest was not justified. In this case Hon'ble Supreme Court has not passed a detailed speaking order because reliance was placed on the judgment of Supreme Court in case of Ranchi Club Ltd., But this issue came to be considered by the Punjab Haryana High Court in the case of Vinod Khurana v. CIT [2002] 253 ITR 578 where the High Court also considered the judgment of Supreme Court in the case of Ranchi Club ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isdiction to waive the interest under rule 117A without the approval of IAC. Hon'ble Patna High Court held that failure to charge interest did not amount to waiver as waiver was a deliberate act. The omission to charge interest under section 139(8) is a mistake of law apparent from record and therefore, the same is rectifiable under section 154. The High Court also observed that the Assessing Officer was bound to levy interest under section 139(8). This decision was followed by the Patna High Court in the cases of M.N. Sen Gupta Co. and Shree Laxmi Trading Co. In both the cases, interest was chargeable under section 139(8) and the amount of interest exceeded Rs. 1,000 and therefore, it was held that the Assessing Officer could rectify such error under section 154. The same High Court in the case of Tiwary Bechar Co. also took the same view. This issue also came to be considered before the Gujarat High Court in the case of Ramjibhai Hirjibhai Sons. In this case also the Assessing Officer did not charge interest under section 139(8) of Income-tax Act, 1961 for late submission of the return at the time when he completed the assessment. Later the Assessing Officer rectified the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation order. Later he found that the assessee was also liable to interest in view of the fact that it failed to pay an advance tax under section 18A of old Income-tax Act. It was contended that the issue being debatable, fell outside the scope of provisions of section 154. On these facts, Hon'ble Supreme Court held the order of rectification passed by the Income-tax Officer was not without jurisdiction. The Income-tax Officer had power under section 35 of old Income-tax Act, (Now under section 154) to rectify such error and charge interest by way of rectification order. 18. Further in the case of Indian Woollen Textile Mills (P.) Ltd., Hon'ble Punjab Haryana High Court has held that assessment completed overlooking the statutory provisions of Income-tax Act, 1961, can be considered as an error apparent on record and can be rectified under section 154 of Income-tax Act, 1961. 19. In the case of Bihar State Road Transport Corpn., the facts of the case were that as a result of rectification, assessee's income resulted into positive figure and as a result the assessee became liable for interest under section 217. On these facts Patna High Court held that interest under section 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to move an application for waiver. Failure to charge interest would show that the Assessing Officer had waived the interest under rule 40 even if the assessee had not filed the application. Hon'ble High Court also considered the judgment in the case of Ramjibhai Hirjibhai Sons and the same was not overruled by the High Court. The High Court merely mentioned that this issue whether the interest could be waived even without there being any application from the assessee was not before the High Court. Considering the fact that one of the circumstances mentioned in Rule 40 where interest could be waived was applicable, the High Court held that interest could be considered to have been waived without there being application from the assessee. But in this case nowhere the assessee has even contended that its case was covered under the provisions of Rule 117 A or Rule 40. Therefore, this judgment is on its own facts and is not applicable to the facts of the present case. 21. Moreover, Their Lordships of Supreme Court in the case of Anjum M.H. Ghaswala have held that expression used in sections 234A, 234B and 234C "shall" cannot be interpreted as "may" and therefore, it is mandatory to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest was leviable at the time of passing an assessment order as in the instant case, and as a result of subsequent rectification order, interest under sections 215 and 139(8) amounting to Rs. 7.00 lakhs becomes payable. Let us take another case, where interest of Rs. 1,000 is charged at the time of completing the assessment and as a result of subsequent order, interest of Rs. 50,000 becomes payable. If the levy of interest is upheld in a later case and not in first case, it would amount to defeating the object of section. The Legislature could have never intended to create such distinction. Such narrow interpretation of the provisions of Act cannot be accepted. Thus we are of the considered opinion that expression "increase" would also cover from zero to upward and it is not necessary that interest could be increased only if it had been charged at the time of completing the assessment. Hence, this submission is also rejected. 24. Last but not the least, it must be mentioned that as per the order dated 30-11-1993 passed under section 154, the assessee had become liable for interest under sections 139(8) and 215. Neither before the authorities below nor before us, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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