1983 (10) TMI 131 - AT - Income Tax

Tribunal cancels interest levy under Income-tax Act for 1979-80 assessment year

The Tribunal upheld the Commissioner (Appeals) decision to cancel the interest levied under section 217(1A) of the Income-tax Act, 1961 for the assessment ... Appellate Assistant Commissioner Issues:1. Justification of cancelling interest levied under section 217(1A) of the Income-tax Act, 1961.2. Interpretation of provisions of section 217(1A) and section 215(4) of the Act.3. Consideration of waiver of interest under rule 40 of the Income-tax Rules, 1962 without an application from the assessee.Detailed Analysis:The appeal before the Appellate Tribunal ITAT MADRAS-B related to the assessment year 1979-80, where the main issue was the cancellation of interest levied under section 217(1A) of the Income-tax Act, 1961. The revenue contended that the interest should have been reduced proportionately to the relief granted, while the assessee supported the Commissioner (Appeals) decision to cancel the interest entirely. The facts revealed that the income assessed was significantly higher than the returned income primarily due to an addition towards unexplained cash and jewellery. The Commissioner (Appeals) found that the delay in assessment was not attributable to the assessee, and the assessee had cooperated with the department, leading to the cancellation of the interest. The revenue argued that the interest should not have been entirely cancelled but reduced in proportion to the additions deleted. The Tribunal considered the provisions of section 217(1A) and section 215(4) of the Act to determine the applicability of interest in such cases.The Tribunal examined the relevant provisions of section 217(1A) and section 215(4) of the Act. Section 217(1A) mandated payment of interest if the advance tax paid fell short of the assessed tax, while section 215(4) allowed for the reduction or waiver of interest under prescribed circumstances. Rule 40 of the Income-tax Rules, 1962 outlined specific conditions for the waiver of interest by the Income-tax Officer (ITO) without the need for an application from the assessee. The Tribunal analyzed whether the ITO had the authority to waive interest without a prior application from the assessee.The Tribunal referred to a Supreme Court decision in S.A.L. Narayan Row v. Ishwarlal Bhagwandas, which emphasized that the ITO must consider reduction or waiver of interest as provided under the rules, even without an application from the assessee. In the present case, the ITO had not waived the interest despite the circumstances satisfying the conditions under rule 40(1). The Commissioner (Appeals) correctly examined the requirements of rule 40(1) and found that the delay in assessment was not attributable to the assessee, leading to the cancellation of interest. The Tribunal upheld the Commissioner (Appeals) decision, stating that the cancellation of interest was justified in the circumstances, and there was no excess exercise of powers. Consequently, the Tribunal dismissed the appeal of the revenue, affirming the cancellation of interest levied under section 217(1A) for the assessment year 1979-80.