Court upholds jurisdiction of Additional Commissioner of Income-tax. Lack of discretion prejudicial to revenue. Application dismissed.

The court held that the Additional Commissioner of Income-tax had jurisdiction to issue a notice u/s 263 despite the confirmation of the assessment order by the Appellate Assistant Commissioner. Regarding the discretion of the Income-tax Officer u/s 139(8) to waive interest, the court found that the lack of charging interest without proper discretion was prejudicial to revenue, allowing the Commissioner to revise the order. As a result, the application was dismissed, the rule nisi discharged, and the interim order vacated, with a stay granted for six weeks.

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Issues Involved:
1. Jurisdiction of the Additional Commissioner of Income-tax u/s 263 after the order of the Appellate Assistant Commissioner.
2. Discretion of the Income-tax Officer u/s 139(8) regarding waiver of interest.

Summary:

1. Jurisdiction of the Additional Commissioner of Income-tax u/s 263:
The petitioner challenged the notice u/s 263 of the Income-tax Act, 1961, issued by the Additional Commissioner of Income-tax, West Bengal-III, for the assessment year 1968-69. The petitioner argued that since the assessment order was confirmed by the Appellate Assistant Commissioner, the Additional Commissioner had no jurisdiction to issue any notice or pass any order u/s 263. The court examined whether the order of the Income-tax Officer merged with the order of the Appellate Assistant Commissioner. It was noted that the appeal was from the assessment order and not specifically about the interest waiver. The court referred to the Supreme Court's observations in Commissioner of Income-tax v. Amritlal Bhogilal & Co. Ltd. and State of Madras v. Madurai Mills Co. Ltd., concluding that the question of interest waiver was not the subject-matter of appeal and thus did not merge with the order of the Appellate Assistant Commissioner. Therefore, the Commissioner retained jurisdiction to revise the order of the Income-tax Officer.

2. Discretion of the Income-tax Officer u/s 139(8):
The petitioner contended that the discretion exercised by the Income-tax Officer u/s 139(8) to waive the interest could not be interfered with by the Commissioner u/s 263. The court noted that the Income-tax Officer did not charge interest as required by proviso (iii) to sub-section (1) of section 139, and there was no evidence of the exercise of discretion or application of mind to the facts of the case. The court emphasized that the exercise of discretion must be manifest and based on objective factors. Since the interest was not charged, the order was prejudicial to the interest of the revenue, giving the Commissioner jurisdiction to revise the order. The court referred to the Kerala High Court's observations in Commissioner of Income-tax v. Cochin Malabar Estates Ltd. to support this view.

Conclusion:
The application was dismissed, the rule nisi was discharged, and the interim order was vacated. The court granted a stay on the operation of this order for six weeks from the date.

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