TMI Blog2014 (8) TMI 906X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of refund, refund and interest payable by the Revenue - relying upon Kalyankumar Ray vs. CIT [1991 (8) TMI 291 - SUPREME COURT] - the assessment order dated 22nd March, 1991, had specifically directed levy of interest u/s 217 of the Act and did not specify the sub-section under which the interest should be charged - The direction to specify the sub-section could be read in the order dated 24th July, 1992, when it was directed by the CIT(A) that the AO should pass a speaking order. The order u/s 217 did not form part of the assessment order and it could be made after the regular assessment was made - mere omission on the part of the AO to impose or refer to Section 217 cannot lead to the inference that the AO had waived interest payable without giving reasons for doing so - it follows that the AO did not become functus officio after order of regular assessment was passed and it was permissible and permitted that he could pass an order u/s 217 after he had made regular assessment – the Commissioner was not justified in invoking Section 263 because the AO had failed to mention and state that interest u/s 217 should be levied while passing the regular assessment order - an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .N.S.-1504 demand of ₹ 1,85,11,870/- was raised including interest of ₹ 56,33,066/- under Section 217 of the Act. 4. The assessee filed an application dated 22nd April, 1991 under Section 154 pleading that the tax rate applicable was 55% instead of 60% and credit of TDS of ₹ 24,109/- should be granted. Relief was granted in the order under Section 154 dated 22nd April, 1991, wherein the demand raised was reduced to ₹ 1,69,66,591/- which included interest under Section 217 of ₹ 51,62,762/-. The income tax computation sheet filed on record shows interest under Section 217, which was charged. It does not indicate the sub-section under which the interest had been charged. 5. On appeal filed by the assessee, Commissioner of Income Tax (Appeals) noticed that the appeals filed by the assessee for the assessment years 1986-87 and 1987-88 had been allowed and the substantive addition made in the said years were deleted. Accordingly, the assessee did not have any cause for complaint with regard to the addition of ₹ 1,82,69,610/- in the present year i.e. assessment year 1988-89 and the order of the Assessing Officer was confirmed. Thus, the protective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was observed that the assessee company was required to file an estimate in terms of Section 209-A(1)(b) on or before 15th December, 1987. He accordingly observed that there was default in terms of Section 209-A(1)(b) i.e. requirement to file an estimate of commission income and to pay tax thereon and accordingly, interest was leviable under Section 217. 8. On appeal against the said order, the Commissioner of Income Tax (Appeals) noticed that no credit of tax in the assessment year 1988-89 could be given for the tax paid in the assessment years 1986-87 and 1987-88, though commission income it was held should not be assessed in the assessment years 1986-87 and 1987-88. He rejected the contention of the assessee that payment of self-assessment tax for earlier years should be treated as advance tax paid in this year. He held that interest was rightly charged by the Assessing Officer. He also dealt with the various other contentions of the assessee and rejected the same. He held that the assessee had not filed an estimate of income and for this default, interest under Section 217 had been charged. 9. Before the Tribunal, assessee for the first time came forward with a plea th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee to examine the question of levy of interest under the other provisions of Section 217. 11. The assessee thereafter filled an application under Section 254(2) specifically directed against observations quoted above. The application was opposed by the Revenue pleading that the order of the tribunal was fair as the Assessing Officer was free to examine and levy interest under the other provisions of Section 217. The tribunal while disposing of the application noticed and has recorded in the order dated 7th September, 1998 that the plea that estimate had been filed was taken up for the first time before the Tribunal, and was not taken before the Assessing Officer or even in the relevant columns in the Income Tax Return for the assessment year 1988-89 in which the relevant columns had been simply scored off. The tribunal, therefore, had held in the aforesaid observations that the Assessing Officer was free to examine the question of levy of interest under other provisions of Section 217. The said observation was not a mistake apparent and did not call for rectification under Section 254(2) of the Act. The miscellaneous application was rejected. The assessee thereupon moved an app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be imposed under any other provision of Section 217 of the Act. After examining the said Section, the Assessing Officer had come to the conclusion that the interest was imposable under Section 217(1A). The said order was affirmed in the first appeal. 14. In order to decide the other question, whether or not interest under Section 217(1A) could have been imposed, we would like to reproduce paragraphs 18 and 19 of the impugned order dated 22nd February, 2001, which read as under: 18. Our view gains strength from the terminology employed by the Tribunal in its order. It indicates that the observation cannot constitute a finding or a direction. In order to constitute a direction there must be a mandate of the higher authority where the lower authority is left free whether or not to take an action, it cannot be a direction. The Hon'ble Supreme Court, in the case of Rajendra Nath Vs. CIT 120 ITR 14 were concerned with an identical situation wherein the first Appellate Authority had observed that the 1TO was free to take action to assess the excess in the hands of the co-owners. the said observation, it was held, cannot be construed to be a direction because such observati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge or levy interest under Section 217. In the assessment order and the computation sheet, the relevant sub-section of Section 217 was not mentioned or stated. The said sub-section was only mentioned in the subsequent order dated 16th January, 1995 passed by the Assessing Officer under Section 143(3) read with Section 250. It is only then, when the Assessing Officer for the first time had applied his mind on whether the interest should be levied under Section 217(1) or 217(1A). The direction given by the first appellate authority against the original assessment order to pass a speaking order on levy of interest under Section 217, given in the order dated 24th July, 1992 has attained finality. The assessee cannot now question and state that the original assessment order was defective as the sub-section to Section 217 applicable was not stated. Further the first appellate authority while directing the Assessing Officer to pass a speaking order on levy of interest, had given power and authority to the Assessing Officer to impose interest but after giving reasons. This meant that the Assessing Officer had the right to reconsider the question of levy of interest under Section 217 and als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, the Income-tax Officer first draws up an order assessing the total income and indicating the adjustments to be made, directs the office to compute the tax payable on that basis and then approves of it, either immediately or some time later, no fault can be found with the process, though it is only when both the computation sheets are signed or initialled by the Income-tax Officer that the process described in section 143(3) will be complete. In this context, one may take notice of the fact that, initially, rule 15(2) of the Income-tax Rules prescribed Form No. 8, a sheet containing the computation of the tax, though there was no form prescribed for the assessment of the income. This sub-rule was dropped in 1964. Thereafter, the matter has been governed by Departmental instructions. Under these, two forms are in vogue. One is the form of what is described as the assessment order (I. T. 30 or I. T. N. S. 65). The other is what is described as the Income-tax Computation Form or Form for Assessment of Tax/ Refund (I. T. N. S. 150). The practice is that, after the assessment order is made by the Income-tax Officer, the tax is calculated and the necessary columns of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 217 of the Act and did not specify the sub-section under which the interest should be charged. The said direction to specify the sub-section could be read in the order dated 24th July, 1992, when it was directed by the Commissioner of Income Tax (Appeal) that the Assessing Officer should pass a speaking order. Incidentally, interest under both sub-section (1) and (1A) to Section 217 for the defaulted amount, is alternative but at same/similar rate. 19. We would like to mention and refer two decisions of the high courts in support of what we have opined and held. Bombay High Court in Ratan Lal Dhondiram vs. CIT, Poona [1983] 141 ITR 363 (Bom) had examined the question whether failure to mention that interest would be imposed or levied under Section 217 would be fatal and amounts to waiver of interest under the said Section. It was noticed that the assessment order in the said case was silent on whether or not interest should be waived, reduced for the reasons or grounds mentioned in Rule 40 of the Income Tax Rules, 1962. Reference was made to decision of Karnataka High Court in CIT vs. Executors of the Estate of Late H.H. Rajkuverba Dowager Maharani Saheb of Gondal [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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