Jurisdiction to levy interest cannot be created while giving effect to an appellate order unless a valid basis for the levy already exists.

Interest under section 139(8) could not be levied while giving effect to an appellate order where the original assessment had contained no such levy and the appellate order did not authorise it. Although the return was filed after the due date and tax remained payable, the assessing officer could not initiate a fresh levy at the stage of giving effect to the appellate order because he had become functus officio on that aspect. The levy was therefore held to be without jurisdiction and liable to be set aside in favour of the assessee.

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Issues: Whether interest under section 139(8) of the Income-tax Act, 1961 could be levied by the Income-tax Officer while giving effect to the appellate order, when the original assessment order contained no such levy and the appellate order did not direct charging of interest.

Analysis: The return was filed after the prescribed due date and tax remained payable on the date of filing, so the assessee could not dispute liability merely on merits. However, the levy in question was made only when effect was being given to the appellate order. In the absence of any direction in that appellate order authorising levy of interest, the Income-tax Officer had no subsisting jurisdiction to initiate a fresh levy after passing the original assessment order and had become functus officio on that aspect.

Conclusion: The levy of interest under section 139(8) was without jurisdiction and was liable to be set aside, in favour of the assessee.

Ratio Decidendi: Interest cannot be levied while giving effect to an appellate order unless the appellate order or the original assessment retains a valid jurisdictional basis for such levy; a levy made after the has become functus officio is void.

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