TMI Blog1973 (9) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... C.J.-These references relate to the assessments to income-tax for the three years 1964-65, 1965-66 and 1966-67 of the same assessee. The question is whether the assessee is liable for interest as provided by section 215 (1) of the Income-tax Act, 1961, for short, " the Act ". The Income-tax Officer did not charge interest under the section. His orders which are annexures " A ", " A-1 " and " A-2 " to the paper book are absolutely silent in this regard. The Commissioner of Income-tax purporting to act suo motu. Under section 263 of the Act took the view that this was clearly due to oversight and inadvertence to section 215 of the Act. He, therefore, set aside the assessment orders, annexures " A", " A-1 " and " A-2 " to the extent those orders impliedly failed to charge interest under section 215 of the Act. The arguments that were advanced before the Commissioner by counsel for the assessee to establish that no interest was chargeable in view of rule 40(1) of the Income-tax Rules, 1962, for short, " the Rules ", framed in accordance with section 215(4) of the Act, were not considered by the Commissioner as he was of the view that those matters were in the first instance to be cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvance tax so paid falls short of the assessed tax ...... (4) In such cases and under such circumstances as may be prescribed, the Income-tax Officer may reduce or waive the interest payable by the assessee under this section." The power of the Commissioner to revise the orders passed by the Income-tax Officer is contained in section 263. This section empowers the Commissioner, if he considers the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue, to pass such orders as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. We shall extract section 263(1): " The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, af ter 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impose a penalty, the court would rather lean in favour of the view that the Income-tax Officer had exercised his discretion under the proviso rather than the view that he had overlooked the law. Therefore, it would be impossible to suggest that the absence of any mention in the assessment order with regard to the levying of penal interest must necessarily be ascribed to an error of law on the part of the Income-tax Officer. In our opinion, therefore, there does not seem to be much difficulty in holding that if the proviso was in force, the power of rectification could not have been exercised under section 35 because there was no error apparent on the face of the record. " As is seen from paragraph 4 of the judgment of the Supreme Court in S. A. L. Narayan Row v. Ishwarlal Bhagwandas, it is this decision that had been relied on by the Bombay High Court in the subsequent decision the appeal from which was disposed of by the Supreme Court in the decision reported in [1965] 57 I.T.R. 149. The question therein was whether the Income-tax Officer acting under section 35 of the Indian Income-tax Act, 1922, had the power to rectify an alleged mistake in the order of assessment passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is erroneous, the Commissioner can set aside that order. An order which does not charge interest is on the face of it and prima facie prejudicial to the interests of the revenue, and whether it is erroneous or not will depend upon the grounds, if any, on the basis of which the omission to charge interest is sought to be supported. If these are seen in an assessment order, the Commissioner, before setting aside the order must consider whether those grounds can support the waiver or reduction of interest. He cannot in those circumstances set aside the order refusing to charge interest without at the same time finding that the grounds stated are unrelated or inadequate to support the waiver or redaction of interest. If, on the other hand, the order is silent and does not mention any ground at all, the Commissioner with his wide jurisdiction under section 263 of the Act will be left helpless ; he will not be able to decide whether the discretion vested in the Income-tax Officer has been properly or improperly exercised. In such circumstances two courses, we conceive, are open to the Commissioner under section 263. He can himself decide in revision whether interest should be charged or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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