Pre-amendment section 215 did not permit additional interest on enhanced tax liability after rectification.

Interest under section 215 could not be charged on an enhanced assessment arising from rectification where the relevant period was before the 1 April 1985 amendment to section 215(3). The Tribunal noted that, prior to that amendment, the provision only contemplated refund of interest when tax liability was reduced and did not authorise fresh or additional interest when liability was increased. On that pre-amendment position, the levy was not sustainable, and the order quashing the interest demand was upheld.

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Issues: Whether interest under section 215 of the Income-tax Act, 1961 could be levied after rectification under section 154 when the assessed income was enhanced on the basis of the firm's assessment.

Analysis: The original assessment had been completed under section 143(3) subject to rectification, and the subsequent rectificatory order increased the assessee's tax liability by including share income from the firm. The Tribunal found it unnecessary to decide the controversy whether the order was truly one under section 154 or whether section 215 itself supplied the power, because the amendment to section 215(3) with effect from 1 April 1985 showed that, prior to that amendment, the provision contemplated only refund of interest on reduction of tax liability and not charging of additional interest on enhancement of liability.

Conclusion: The levy of interest under section 215 could not be sustained on the pre-amendment position, and the order of the CIT(A) quashing the levy was confirmed.

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