1977 (4) TMI 62 - AT - Income Tax

Issues Involved:
1. Delay in filing the appeal.
2. Validity of the CIT's order under Section 263 of the IT Act, 1961.
3. Jurisdiction of the CIT under Section 263.
4. Whether interest under Section 217(1A) is part of the assessment procedure.
5. Applicability of Rule 179 of the Companies (Court) Rules, 1959.
6. Obligation of the Official Liquidator to file an estimate under Section 212(3A).

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was filed 14 days late because the Tribunal fee was initially sent via demand draft, which was not accepted. The delay was condoned as it was explained that the mistake was bonafide and corrected promptly. "After hearing the learned Departmental Representative, we are of the opinion that on the facts stated as above, the delay deserves to be condoned, and so we hereby condone it."

2. Validity of the CIT's Order under Section 263:
The CIT's order under Section 263 canceled the assessment order for the year 1971-72 and directed the ITO to reassess whether interest was chargeable under Section 217(1A). The assessee argued that the CIT erred in his decision as charging interest is separate from the assessment order. "The CIT, therefore, issued to the assessee a notice under s.263 of the IT Act, 1961 on 18th June, 1971 stating inter alia his reasons."

3. Jurisdiction of the CIT under Section 263:
The CIT had jurisdiction to initiate proceedings under Section 263 as the ITO's failure to charge interest under Section 217(1A) was deemed erroneous and prejudicial to the interests of the Revenue. "In our opinion he did have jurisdiction."

4. Whether Interest under Section 217(1A) is Part of the Assessment Procedure:
The Tribunal held that charging interest under Section 217(1A) is part of the assessment procedure, supported by various judicial decisions. "The controversy as to whether or not the charging of interest under s. 217(1A) is part of the assessment procedure and as such a necessary part of the assessment order, has to be decided against the assessee."

5. Applicability of Rule 179 of the Companies (Court) Rules, 1959:
The Tribunal found that Rule 179 applies only to claims admitted to proof and not to the current income of a company in liquidation. "We, therefore, see no merit in the assessee's contention that interest could not be charged by the ITO under s. 217(1A) on account of the operation of r.179 of the Companies (Court) Rules."

6. Obligation of the Official Liquidator to File an Estimate under Section 212(3A):
The Tribunal agreed with the assessee that if the Official Liquidator believed the income was not taxable, there was no obligation to file an estimate under Section 212(3A). "Inasmuch as this is precisely the reason given by the ITO at the foot of his assessment order, there was apparently no order in it."

Conclusion:
The Tribunal allowed the appeal, holding that the CIT had misdirected himself in law regarding the obligation of the Official Liquidator to file an estimate and the applicability of Rule 179. "In the result, the appeal succeeds."

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