TMI Blog1978 (4) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... sirability and the beneficial effects of such certainty in law as may be possible. Unfortunately, there are not infrequent instances where what should have been clear and certain, by applying well-established canons of statutory construction becomes befogged by the vagaries, if one may use a possibly strong word, without disrespect, of judicial exposition divorced from these canons." These are the opening words of the learned Chief justice in his judgment in Ganpat Ladha v. Sashikant Vishnu Shinde (Civil Appeal No. 1717 of 1975 on the file of the Supreme Court of India decided on 21-2-1978), AIR 1978 SC 955, 956. These words are equally relevant to the cases before us. The question before us relates to the power of the CIT under s. 163 of the Income-tax Act, 1961 (hereinafter referred to as " the Act "), to issue direction to the ITO to pass an order levying interest under s. 217(1) of the Act, in a case where no action has been taken by the ITO yet to exercise his power under s. 217(1). The facts are briefly these : In each of these cases, the ITO concerned passed an order of assessment under s. 143(3) of the Act, but that order did not state anything about the liability of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take action under s. 263. The only question which arises for consideration before us is, whether in each of these cases there was an order passed by the ITO which along with the other factors referred to above would clothe the Commissioner with the jurisdiction to make an order under s. 263 of the Act. It is not disputed that in all these cases there was no express order under s. 217 made by any of the ITOs either levying interest or reducing or waiving it. It is however, argued by Sri S. R. Rajasekharamurthy, learned counsel for the revenue, that the very inaction on the part of the ITO concerned under s. 217 is tantamount to an order made by him which was prejudicial to the interest of the revenue and the Commissioner had jurisdiction to make an order under s. 263. At this stage, we consider it appropriate to refer briefly to the history of the provisions with which we are concerned. s. 217 of the Act imposes the liability on an assessee who has not sent an estimate of his income as required by law to pay interest at the prescribed rate on the advance tax which he was liable to pay. S. 18A of the Indian Income-tax Act, 1922 (hereinafter referred to as " the 1922 Act "), co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel for the revenue and for the assessees, the following points arise for consideration : (i) Whether the Income-tax Officer is required to make an order under ss. 215, 216 and 217 of the Act to give effect to the said provisions ? (ii) Whether an order made under s. 215 or s. 216 or s. 217 of the Act forms part of an assessment order ? (iii) Whether it is possible to assume that where no express order is passed by the ITO under s. 215 or s. 216 or s. 217 an order which is subject to the jurisdiction of the Commissioner under s. 263 of the Act is deemed to have been passed ? Prior to the amendment of s. 18A of the 1922 Act by incorporation of the fifth proviso to sub-section (6) thereof by the Indian Income-tax (Amendment) Act, 1953, with effect from April 1, 1952, the ITO could pass an order, if we can use that expression, " mechanically " determining the interest payable by an assessee whose case came within the scope of sub-s. (6) or sub-s. (8) of s. 18A in addition to the tax assessed because the provisions of s. 18A before that amendment were almost similar to the provisions of s. 8 of the U. P. Sales Tax Act, 1948, which came up for consideration before the Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder sub-s. (8) the sixth sub-section is to be applied mutatis mutandis. If sub-s. (6) is applicable the discretion which is contemplated under the fifth proviso read with r. 48 is open not only in cases arising under sub-ss. (2) and (3) of s. 18A but also in cases arising under sub-s. (8). There is nothing to show that in applying sub-s. (6) any of the provisos are to be left out. The eighth sub-section no doubt uses the word 'shall' but in the context of sub-s. (6) and the fifth proviso the word can only be read as mandatory if the relief under the proviso is not given." Later, in the course of the same decision, the Supreme Court observed : " The question is not whether penal interest was payable or not but whether an opportunity had to be given to the appellants as required by the proviso to s. 35 to show cause against the demand for penal interest. If this opportunity was not given the High Court should have acted to rectify that error. The authorities acting under the Indian Income-tax Act have to act judicially and one of the requirements of judicial action is to give a fair hearing to a person before deciding against him. In a recent case of the House of Lords, CIR v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e regular assessment is made. The expression " regular assessment " had not been defined in the 1922 Act. But under the Act it is defined in s. 2(40) as follows: " ' Regular assessment' means the assessment made under section 143 or section 144. It does not include an order made under s. 215 or s. 216 or s. 217 of the Act. It is further seen from s. 217(1) read with s. 215(1) that the computation of interest payable under s. 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 ss. 192 to 194, 194A and 195 is adjusted ss. 192 to 194, 194A and 195 appear in Chap. XVII of the Act providing for collection and recovery of tax. Moreover, if an order passed under s. 215 or s. 216 or s. 217 formed part of an order of assessment it would have become appealable under s. 246(c) itself and there would have been no need to enact s. 246(m) providing for appeal against an order under s. 216 only. In view of the above, it cannot be said that an order made under s. 215 or s. 216 or s. 217 forms part of an order of assessment. It has to be passed only after the regular assessment is made. We shall now advert t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the part of the ITO could be construed as an order which was revisable under s. 33B of the 1922 Act was not either mooted or decided. The High Court of Kerala which had occasion to consider a similar question in CIT v. Cochin-Malabar Estates Ltd. [1974] 97 ITR 466 also came to the conclusion that the enunciation made by the Supreme Court in S. A. L. Narayan Row's case [1965] 57 ITR 149, only emphasised the effect of the retrospective amendment of s. 18A and did not do anything beyond that. The High Court of Kerala, however, further went into the question whether the CIT could call upon the ITO in exercise of his power under s. 263 to levy interest under s. 215 when the order of assessment was silent about it and held that it was open to the Commissioner to do so as the order of assessment was prejudicial to the revenue. In that connection, the Kerala High Court observed as follows : " If an order is prejudicial to the interests of the revenue and if it 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 up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed it may be possible to hold that an omission to make a reference to the penal interest payable under any of those sections would amount to an order which is erroneous and which is amenable to the jurisdiction of the Commissioner under s. 263 of the Act. We are of the opinion that because an order under s. 215 or s. 216 or s. 217 can be passed only after regular assessment is made and because the ITO will not become functus officio in so far as those provisions are concerned on making an order of regular assessment an omission to make a reference to interest payable under those provisions in the order of regular assessment cannot amount to an order waiving it. In cases of this nature there may be other provisions of law which enable the departmental authorities to ask the ITO who has not taken action under those sections after an order of regular assessment is passed to pass appropriate orders in accordance with law. It may also be possible for the ITO himself even now to pass an order under s. 217 in accordance with law after giving reasonable opportunity to the assessee concerned to make his representations including those failing under r. 40 of the Income-tax Rules, 1962. But ..... X X X X Extracts X X X X X X X X Extracts X X X X
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