1983 (9) TMI 54 - HC - Income Tax

Summary

Issues involved: Whether the order of the Additional Commissioner of Income-tax u/s 263 directing the ITO to levy interest u/s 139(1)(iii) is valid in law?

Summary:
The High Court of BOMBAY considered a case where the Additional Commissioner directed the Income Tax Officer (ITO) to levy interest under proviso (iii) to section 139(1) of the Income-tax Act, 1961. The assessee, a firm, filed its return of income for the assessment year 1967-68 after the due date without any extension application. The ITO completed the assessment without mentioning interest under section 139. The Additional Commissioner found this omission prejudicial to the Revenue's interests and directed the ITO to levy interest. The Tribunal held that without a specific order by the ITO regarding interest, section 263 was not applicable. The Revenue sought a reference to the High Court.

Section 139(8) mandates the payment of simple interest if the return is filed after the due date. The ITO has the discretion to reduce or waive the interest under prescribed circumstances as per Rule 11A of the Income Tax Rules, 1962. Section 263 empowers the Commissioner to correct any erroneous order prejudicial to Revenue's interests by the ITO.

Referring to legal precedents, the Court highlighted a case where the failure to charge interest was deemed erroneous and prejudicial to Revenue. The Court agreed with a previous judgment that the ITO's failure to consider charging interest was prejudicial to Revenue's interests, giving jurisdiction to the Commissioner u/s 263 to revise the order.

The Court rejected the argument that the liability to pay interest must be imposed by a separate order, citing a judgment that penalty proceedings are separate from assessment proceedings. Ultimately, the Court ruled in favor of the Revenue, affirming the Additional Commissioner's direction to levy interest.

In conclusion, the Court upheld the validity of the Additional Commissioner's order and directed the assessee to pay the costs of the reference to the Revenue.