Section 215(3) interest could not be enhanced on rectification orders under sections 154 and 155.

Interest under section 215(3) of the Income-tax Act, 1961, as it then stood, permitted only reduction of interest where a rectification or recomputation order reduced the amount on which interest was payable. It did not authorise levy or enhancement of additional interest on the basis of orders under sections 154 and 155. On that statutory text, the Assessing Officer had no power to increase the assessee's interest liability pursuant to rectification, and the additional interest could not be levied.

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Issues: Whether, for the relevant assessment year, interest under section 215(3) of the Income-tax Act, 1961 could be levied or enhanced pursuant to an order under sections 154 and 155 of the Income-tax Act, 1961.

Analysis: The applicable version of section 215(3) provided only for reduction of interest where, as a result of an order under specified provisions, the amount on which interest was payable stood reduced. The provision, as it then stood, did not authorise levy or increase of additional interest on rectification or recomputation. Since the assessment year in question was governed by that statutory text, the Assessing Officer lacked authority to enhance the interest liability on the basis of the rectification order.

Conclusion: The question was answered in the affirmative, in favour of the assessee and against the Revenue; additional interest under section 215(3) could not be levied pursuant to the orders under sections 154 and 155.

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