TMI Blog1993 (3) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 215(4) and rule 40 and that having not been done, the order under section 154 cannot be held as valid ?" The assessee filed a return of his income on July 29, 1969, and the assessment order was made on January 18, 1972. It appears that some time before January 15, 1976, the Income-tax Officer noticed that whereas the assessee had filed an estimate showing the advance tax payable as nil, the tax that was determined on regular basis was Rs. 1,25,915 and the tax deducted at source was Rs. 79,961. Thus, on 75 per cent. of the difference of Rs. 45,954, i.e., on the amount of Rs. 34,470, interest at the rate of 9 per cent. was payable under section 215 of the Act. A notice was, therefore, issued to the assessee and then by an order dated January 15, 1976, the Income-tax Officer computed the interest payable by the assessee at Rs. 8,703. The contention raised by the assessee before the Income-tax Officer that the Income-tax Officer who passed the assessment order should be deemed to have waived interest was not accepted by the Income-tax Officer on the ground that there was nothing on record to show that interest was waived. Aggrieved by that order, the assessee preferred an app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question as to whether in order passed under section 215 is appealable or not really does not arise for our consideration. What we have to consider is as to whether the impugned order, being an order passed under section 154, would fall within the purview of section 246(f) as it then stood. It is only with respect to that provision that we have to decide whether the appeal filed by the assessee before the Appellate Assistant Commissioner was maintainable. What was contended on behalf of the Revenue was that, unless the rectification order has the effect of enhancing the assessment or reducing the same, it is not appealable. In our opinion, section 246(f) cannot be interpreted so narrowly. If we accept the contention raised on behalf of the Revenue, that would amount to interpreting the word "assessment" in a very narrow sense. The words which we find in the section are "having the effect of enhancing the assessment" and not "having the effect of enhancing the assessment made under section 143 or 144 of the Act". The word "assessment" has a very wide import. The Madras High Court in N. V. N. Nagappa Chettiar v. ITO [1958] 34 ITR 583, has held that levying interest is a part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worded and also the case law clearly indicate that interest becomes payable by the assessee as a result of operation of law and it is not made dependent upon the discretion of the Income-tax Officer. The discretion which is conferred upon the Income-tax Officer is not with respect to determination of payability of interest but with respect to reduction or waiver of interest payable by the assessee. While deciding whether interest under section 215(1) is payable by the assessee or not, what the Income-tax Officer has to consider is as to whether the required conditions are satisfied or not. He would be under no obligation to consider whether interest should be reduced or waived. Such a question would arise only after payability of interest is determined. The point of time when he has to decide whether to reduce or waive the interest would be subsequent. The Income-tax Officer would, therefore, be under no obligation to consider that which he is required to consider at a subsequent stage while taking a decision with respect to what is to be decided earlier. Therefore, in our opinion, the Tribunal was wrong in holding that, before charging interest under section 215, the Income-tax Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law and, therefore, the occasion for the authority to decide this question would arise only when the assessee invokes that power by a proper application setting out the grounds on which reduction or waiver of interest is sought. This was the solitary decision on which the learned advocate for the Revenue relied for his extreme proposition that, for invoking exercise of discretion under section 215(4), an application by the assessee is necessary and the Income-tax Officer has no power to act suo motu. Neither section 215 nor rule 40 provides for the making of an application by the assessee. Merely because payability of interest is automatic in the sense that it becomes payable by operation of law, it would not be proper, in our opinion, to read into section 215(4) or rule 40, the requirement of making an application to the Income-tax Officer for reduction or waiver of interest. The Legislature has specified certain circumstances under which the Income-tax Officer has to consider whether to reduce or waive interest. One of these circumstances is whether a person is, under section 163, treated as an agent of another person and is assessed upon the latter's income. Before treating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Officer was under an obligation to levy penal interest and as the assessee had not moved the Income-tax Officer to condone or waive the penal interest under section 139(8) read with rule 117A of the Rules, it was open to the Income-tax Officer to initiate rectification proceedings and levy interest as omission on his part at the time of original assessment was apparent from the record. Thus, the context in which the said observations came to be made was quite different. While justifying the action of the Income-tax Officer in initiating rectification proceedings, it was observed that the said action of the Income-tax Officer was not improper as the assessee had not moved him to condone or waive the interest. This court was not called upon to examine whether, for condonation or waiver of penal interest, an application by the assessee is a must or whether the Income-tax Officer can suo motu exercise that power. In the case of Central Provinces Manganese Ore Co. Ltd. [1986] 160 ITR 961, the Supreme Court has observed that, since the assessee had made no application to the Income-tax Officer for reduction or waiver of the interest under section 139(8) or under section 215, no qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in CIT v. H. H. Rajkuverba Dowager Maharani Saheb of Gondal (Executors of the Estate of late) [1978] 115 ITR 301, was relied upon. In that case, it was held that the proceedings under sections 215 and 217 are quasi-judicial in nature. Therefore, an order has to be passed by the Income-tax Officer to give effect to section 217. An order under section 217 can be made only after the regular assessment is made. "Regular assessment" defined under section 2(40) means the assessment made under section 143 or section 144. It, therefore, does not include an order made under section 215 or section 216 or section 217 of the Act. Section 217(1) read with section 215(1) lays down that the computation of interest payable under section 217 is possible only after the tax due on the basis of regular assessment is determined and the amount of tax deductible in accordance with sections 192 to 194, 194A and 195 is adjusted. Moreover, if an order passed under section 215 or section 216 or section 217 formed part of an order of assessment, it would have become appealable under section 246(c) itself and there would have been no need to enact section 246(m) providing for appeal against an order under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (at page 443) : "If this proviso was in force, it is clear that the Income-tax Officer had the discretion to reduce or waive the interest payable by the assessee. Therefore, looking at the record and looking at the assessment order, it could not be said that the Income-tax Officer had failed to discharge his statutory obligation. A discretion having been vested in the Income-tax Officer by the proviso, it was open to the Income-tax Officer not to impose the penalty, and there is nothing on the record to show that the failure to, impose the penalty was due to a failure to discharge his obligation under section 18A(6) and not to the exercise of the discretion under the proviso. If a particular position is arrived at which can be explained by one or other action being taken by the Income-tax Officer, it is impossible to contend that for the purpose of section 35, we must assume that that position was arrived at by the Income-tax Officer having taken one particular action and that that action was contrary to law. Rather the assumption should be that the Income-tax Officer acted in accordance with law rather than contrary to law. The assumption should also be that the Income-tax Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances as an act of waiver. For taking this view, the Madras High Court followed its earlier judgment in City Palayacot's case [1980] 122 ITR 430. As a general proposition, it can be said that an act of waiver being a conscious act, no inference of waiver can be drawn from an omission or inaction. But, as pointed out by the Bombay High Court, as the omission is not by a person ignorant of law but by the Income-tax Officer who must be presumed to be and who is also otherwise likely to be well conversant with the relevant provisions of sections 215, 216 and 217, then such an inference can be drawn. If the Income-tax Officer does not pass an order for levy of interest even where levy of interest is mandatory, then only two inferences are possible. One is that he forgot to pass such an order or that he had decided to waive the interest because we cannot assume or infer that, even though he was aware of the said provision, he deliberately did not pass that order. An intention to act contrary to law cannot ordinarily be inferred. We cannot also draw an inference that he forgot to pass an order. That being the state of his mind, the successor Income-tax Officer cannot definitely say ..... X X X X Extracts X X X X X X X X Extracts X X X X
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