1975 (6) TMI 5 - HC - Income Tax

Summary

Issues Involved:
1. Merger of the assessment order with the appellate order.
2. Competence of the Commissioner to revise the assessment order u/s 263.
3. Charging of penal interest u/s 217 of the Income-tax Act, 1961.
4. Exercise of discretionary power by the Income-tax Officer u/r 48(1) of the Income-tax Rules, 1922.

Summary:

1. Merger of the Assessment Order with the Appellate Order:
The Tribunal held that the assessment order dated 4th March 1966 did not merge entirely with the order of the Appellate Assistant Commissioner. The merger was only in respect of the issues adjudicated upon in the appeal. The levy or non-levy of interest was not in issue in the appeal, thus the Commissioner could validly revise this issue u/s 263 of the Income-tax Act, 1961.

2. Competence of the Commissioner to Revise the Assessment Order u/s 263:
The Tribunal upheld that the Commissioner was competent to pass the order u/s 263 on 31st October 1967. The Supreme Court's authority in Singh Engineering Works Private Ltd. [1970] 78 ITR 90 was cited, establishing that interest could be levied under section 217 of the Income-tax Act, 1961, despite the original mention of section 18A(8) of the Indian Income-tax Act, 1922. The Tribunal directed the Income-tax Officer to charge interest under section 217 after considering reduction or waiver as per rule 40 of the Income-tax Rules, 1962.

3. Charging of Penal Interest u/s 217 of the Income-tax Act, 1961:
The Tribunal found that the Income-tax Officer had not exercised his discretion to waive the interest, and there was no evidence to establish such waiver. The Tribunal directed that the penal interest should be charged u/s 217 of the new Act only after considering whether there was a case for reduction or waiver as provided for in rule 40 of the Income-tax Rules, 1962.

4. Exercise of Discretionary Power by the Income-tax Officer u/r 48(1) of the Income-tax Rules, 1922:
The Tribunal concluded that the Income-tax Officer did not apply his mind to the question of waiving interest. The Tribunal's finding that there was no exercise of discretion by the Income-tax Officer was upheld, and this question was answered in the negative and in favor of the revenue.

Conclusion:
The High Court answered all the questions in favor of the revenue, affirming the Tribunal's findings. The assessment order merged with the appellate order only in respect of the issues adjudicated upon, and the Commissioner was competent to revise the assessment order u/s 263. Penal interest should be charged u/s 217 after considering reduction or waiver, and the Income-tax Officer did not exercise his discretion to waive the interest. There was no order as to costs.