Refund of excess tax on reduced assessment includes interest; Commissioner cannot refuse interest entirely under the statutory scheme.

On a reduction of assessment under section 66(7) of the Income-tax Act, the proviso was construed as requiring refund of excess tax with interest, while leaving the Commissioner only a limited discretion to fix the rate. That discretion had to be exercised reasonably and in accordance with law, and could not be used to refuse interest altogether. A complete denial of interest was treated as inconsistent with the statutory scheme and beyond the Commissioner's authority, and the refusal was held illegal and ultra vires, with reconsideration of the interest claim directed according to law.

---

---

Issues: Whether, on a reduction of assessment under section 66(7) of the Income-tax Act, the Commissioner was bound to refund the excess tax with some interest and could lawfully refuse to pay any interest at all.

Analysis: The proviso to section 66(7) was construed as conferring a duty to refund the overpaid tax together with interest, while leaving to the Commissioner only the discretion to determine the rate of interest. The discretion was required to be exercised reasonably and in accordance with law. A refusal to award any interest was inconsistent with the scheme of the provision and beyond the Commissioner's authority.

Conclusion: The Commissioner could not decline to pay interest altogether. The order refusing interest was illegal and ultra vires and was quashed, with a direction to reconsider the claim for interest according to law.

---