TMI Blog1978 (4) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... tax determined to be payable worked out to be much more than the advance tax paid by the assessee on the basis of its estimate. Since the advance tax paid by the assessee on the basis of its own estimate was less than 75 per cent. of the tax determined on completion of the regular assessment, interest was payable under section 215 of the Act by the assessee. This interest was, however, not charged and included in the notice of demand. As in the opinion of the Additional Commissioner of Income-tax the assessment order, determining the liability, was erroneous and prejudicial to the interest of the revenue, notice was issued under section 263(1) for the assessment years 1968-69 and 1969-70, requiring the assessee to show cause why interest u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case for both the years and referred the following two questions to the High Court for its opinion : " 1. Whether, on the facts and in the circumstances of the case, charging of interest under section 215 is a part and parcel of the order of assessment under section 143(3) ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the orders passed by the Additional Commissioner of Income-tax under section 263(1) were without jurisdiction ?" A review of the relevant provisions of the Act would indicate that Chapter XIV deals with the procedure for assessment. Section 143 confers power on the Income-tax Officer to make assessment. Chapter XVII deals with collection and recovery of tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber Prasad v. Income-tax Officer [1963] 47 ITR 562 (All). If an Income-tax Officer does not calculate interest and make a demand of it, the inevitable result would be that the revenue would be deprived of the interest payable to it. Such an order would substantially affect the legal rights of the revenue, hence the same would be prejudicial to its interest. Under section 263 of the Act the Commissioner of Income-tax can modify the assessment or cancel it by directing the Income-tax Officer to make a fresh assessment order if he considers that any order passed by the Income-tax Officer is erroneous in so far as it is prejudicial to the interest of the revenue. The determination whether or not a particular error is prejudicial raises many c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was followed by the Calcutta High Court in Singho Mica Mining Co. Ltd. v. Commissioner of Income-tax [1978] 111 ITR 231. In this case also, the Income-tax Officer did not charge any interest under section 18A(1) of the Indian Income-tax Act, 1922. The Commissioner considered that this omission to charge interest resulted in causing prejudice to the interest of the revenue and passed an order under section 263 of the Income-tax Act directing the Income-tax Officer to compute and charge such interest. The Calcutta High Court held that as no interest was charged by the Income-tax Officer, which ought to have been done, the error omitting to do so was prejudicial to the interest of the revenue. The next thing which is required to be seen is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only on establishing one of the grounds under rule 46. There is nothing in the order of the Income-tax Officer to indicate that he applied his mind to rule 46 and thereafter waived the interest. It may be true that the power conferred by section 215(4) read with rule 46 was discretionary but it should appear from the order itself whether such discretion was exercised. As held in Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation [1947] 2 All ER 680, 682, 683 (CA) : "........ a person entrusted with a discretion must direct himself properly in law. He must call his own attention to the matters which he is bound to consider. He must exclude from his consideration the matters which are irrelevant to the matter that he has t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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