TMI Blog1977 (4) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... in depositing the Tribunal fee may be condoned and appeal may be entertained and heard on merits. 2. 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. 3. This appeal is directed against the order of the CIT passed under s. 263 of the IT Act, 1961 in respect of asst. yr. 1971-72 cancelling the assessment order for the aforesaid year and directing the ITO to make a fresh assessment after applying his mind to the question whether interest is chargeable under s. 217(1A)." 4. The facts giving rise to the aforesaid controversy may be noted. The appellant is a company in liquidation. While filing its return of income for asst. yr. 1971-72,it claimed that it had no income and accordingly, in part I of the return, nil income was shown. But in part IV of the return, the appellant, declared an income of Rs. 12,94,515 which was claimed to be exempt on the various grounds indicated by the assessee in its covering letter referred to by the ITO and which may briefly be noted:- (i) According to the Official Liquidator, after passing of the winding up order, the "und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order, he made a note to the following effect: Office Note: "No action under s.273(c)as the Official Liquidator could not have filed estimate in view of his claim in each year that the income is not taxable. For 1972-73 he filed nil estimate in reply to notice under s.210, Same action under s.217(1A)." 6. It may be noted that the ITO had with the prior permission of the company judge under s. 446 of the Companies Act,1956 served on the assessee a notice under s.210 on 25th Feb., 1971 asking from the Official Liquidator payment of advance-tax amounting to Rs. 5,20,722. The amount was paid by the Official Liquidator on 24th March, 1971 i.e. within the time granted by the Hon ble High Court of Judicature for Rajasthan at Jodhpur. The aforesaid tax was demanded by the ITO on the basis of the completed assessment for the asst. yr. 1965-66. wherein the total income of the company in Liquidation was determined at Rs. 8,01,110.The company in liquidation did not file an estimate under s.212/3(a) either on or before 15th March, 1971 or even thereafter. 7. The CIT on these facts was of the opinion that the ITO has erred to the prejudice of the Revenue by not charging interest under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e written reply. The assessee has not indicated that any circumstance exist for the waiver of interest in terms of r. 40 of the IT Rules, 1962.There is also nothing on record to indicate that at the time of making the original assessment, the ITO had taken any conscious decision to waive interest under s.217(1a).The assessment is, therefore, clearly prejudicial to the interests of Revenue. The same is accordingly cancelled and the ITO is directed to make a fresh assessment after applying his mind to the question whether interest is chargeable under s.217(1A)." 9. The aforesaid order of the learned CIT has been assailed by the assessee before us on several grounds. Firstly it is pointed out that charging of interest is not part of assessment order. Interest is different from tax and the provisions pertaining to the charging of interest are also different from the provisions which authorised levy of tax. Therefore, it is not correct to say that an assessment order is erroneous because, it does not direct the charging of the interest under s.217(a).For charging interest under s.217(1A) a separate order is necessary. For the proposition that interest is separate from tax, reliance is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that had been put forward before him. His order, according to him, was, in fact totally non-speaking order and proceeded on the footing that interest could be charged from the assessee company in liquidation and that what the ITO could do was either to reduce it or to waive it in terms of r. 40.This approach, according to him, was against the law. 12. On behalf of the Department, the learned Departmental Representative supports the order of the learned CIT. According to him, charging of interest under s.215,216 and 217 is part of the assessment procedure. He drew our attention to the wordings of s.143(3) of the IT Act, 1961 wherein the words used are "determine the sum payable" and not "determine the tax payable". The word "sum": according to him, is much wider and takes into its ambit not only tax, but also interest. He also draws our attention to the wordings of s.217(1A)which opens up with the sentence "where, on making the regular assessment, the ITO finds that any such person as is referred to in sub-s.(3A) of s.212 has not sent the estimate referred to therein. "he shall charge interest. According to him, the words "on making the assessment clearly suggest that the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-s(1)shall be deemed to be incorrect, if "the amount of tax payable as determined under sub-s.(1) is greater or smaller than the amount of tax properly payable under this Act by the assessee." To say, therefore, so runs the argument of the counsel, that the words "sum payable" included interest also was not correct, "for if interest charged was also part of the assessment made under s.143(1),this wrong charging should also have been regarded as a mistake for which assessment could be reopened under s.143(2) and finalised under s.143(3):" 16. Our attention is also invited to sub-s.(2) of s.217 which stipulates that "the provisions of sub-ss.(2),(3)and (4) of s.215 applied to interest payable under this section" as they apply to interest payable under that section. According to the learned counsel we have to look at the provisions of sub-s.(4)of s.215 to appreciate the nature of the order to be passed to charge interest under s.217 which are in the following terms.- "In such cases and under such circumstances as may be prescribed, the ITO may reduce or waive the interest payable by the assessee under this section." The order to be passed under sub-s.(4) of s.215 would, accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Act, 1961, the Commissioner has been given the power to "call for and examine the record of any proceeding under this Act and if he considers that any order passed therein by the ITO is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment." In the present cases, as we have seen from the notice of the CIT dt. 18th June, 1974, the commissioner did call for the record of the ITO and on perusal of it, he discovered that "the ITO while completing the assessment for the asst. yr. 1971-72 failed to charge interest under s. 217(1A)". This knowledge the learned CIT got not only from the perusal of the assessment form but even from the assessment order itself wherein by way of an office note the ITO had indicated the reasons, extracted by us above, on account of which, in his opinion, interest under s. 217(1A) was not chargeable nor was penalty under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d counsel for the assessee that in order to charge interest a separate order is invariably necessary and that charging interest is not part of the assessment order. 19. In the case of Shantilal Rawji vs. MC.Nair IV ITO, E-Ward, Bombay and another (8), the Bombay High Court had also proceeded on the footing that not charging interest under s. 18A(6) was a mistake in the assessment order and that this mistake could be rectified under s. 35 in terms of the law which existed prior to 1st April, 1952(The same mistake, however, could not be rectified after the 5th proviso to s. 18A has been inserted in May, 1953 with retrospective effect from 1st April, 1952 and which must, therefore, be deemed to have been the part of the Act on the date of the assessment order. It was argued in that case on behalf of the assessee that inasmuch as the ITO had not dealt with the question of charging interest under s. 18A(6) in his assessment order, no rectification could have been done. Their Lordships repelled this argument by observing:- "An error of law may consist of deciding a particular point contrary to the clear provisions of a statute. It may be equally due to law and says so in his assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rging of interest is part of assessment order. For example at page 160, the following observations appear:- "The ITO in the present case on the language used in the statute as it stood on the date of making the order of assessment, was bound to impose liability for payment of interest under sub-s.(6). But for some reason which cannot be ascertained from the record he did not impose that liability. It was only when in the course of audit this lacuna was pointed out, that the ITO commenced proceeding under s. 35 of the IT Act for rectification of the order of assessment". Again at page 162, adverting to the decision of Venkatachalam s case referred to above their Lordships observed: "This Court in M.K. Venkatachalam vs. Bombay Dyeing and Mfg. Co. Ltd., held in dealing with a case arising under the second proviso to s. 18A(5)which was also inserted by Act 25 of 1953 with retrospective operation from 1st April,1952) that the ITO has power under s. 85 of the Act to rectify a mistake in the assessment, even though the mistake was the result of a legal fiction arising from the retrospective operation given to the Amending Act." The aforesaid case law leave in our mind no doubt tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 246 would not confer the right to appeal to the assessee on this point. Let us look at the said clause. It reads as follows:- (c)"any assessee aggrieved by any of the following orders of an ITO may appeal to the AAC against such order. a............................ b............................. c)an order against the assessee where the assessee denies his liability to be assessed under this Act or any order of assessment under sub.s. (3) of s. 143 or s. 144, where the assessee determined, or to the amount of loss computed, or to the status under which he is assessed." It will be clear from the aforesaid section that it does not stop at the words "any order of assessment under sub-s.(3)of s. 143 or s. 144". It spells out the various aspects of the aforesaid orders which can be appealed against in the clauses which immediately follow the aforesaid phrase. For example, an appeal against any of the orders under s. 143(3),/144 can be filed if the assessee objects to the amount of income assessed or the amount of tax determined or to the amount of loss computed or to the status under which he is assessed. The legislature has in its wisdom omitted to make any reference to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cided by the CIT. He has merely directed the ITO to afresh apply his mind to the question as to whether or not on facts and in the circumstances of this case, interest is chargeable from the assessee under s. 217(1A)or as to whether there existed any facts which would bring the case of the assessee under any of the exemptions mentioned in r. 40, of the IT Rules. Unless a decision on merit is taken on the point, it would be difficult to adjudicate upon the correctness of otherwise of the decision that would be taken by the ITO. 25. The contention of the assessee that the Official Liquidator was not under an obligation to voluntarily file an estimate under s. 212(3A)when according to his bonafide belief the realisation made by him by carrying on the business for beneficial winding up are not liable to tax, has, in our opinion, considerable merit s. 212(3A) requires an assessee to file its own estimate of its current income in case he is of the opinion that "by reason of the current income being likely to be greater than the income on which the advance-tax payable by him under s. 210 has been computed or for any other reason, the amount of advance tax computed in the manner laid dow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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