AI Drafter 
TaxTMI 
TaxTMI 
1990 (3) TMI 368
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....come-tax Officer issued notice of demand under section 210 demanding advance tax of Rs. 3,74,948. The assessee sent to the Income-tax Officer on 8-9-1978 an estimate of the current income of Rs. 4,25,000 and the advance tax payable by him thereon was calculated at Rs. 2,69,380. However, he actually paid the advance tax in the sum of Rs. 1,04,777. Thereafter revised estimate was filed by him on 17-3-1979 estimating the total income at Rs. 4,10,000 and calculating the tax payable thereon at Rs. 2,58,980. Thus, after deducting Rs. 1,04,077 paid earlier the balance payable according to the revised estimate was shown at Rs. 1,54,203. Apparently, the assessee landed himself for the liability to pay interest under section 215. However, the Income-tax Officer was silent on the point in the assessment order. The Commissioner of Income-tax took the said assessment order to be erroneous insofar as it was prejudicial to the interests of the revenue. He, therefore, issued a notice to the assessee under section 263 to show cause as to why the assessment order should not be revised." The assessee raised the following objections to the said notice: (1) The assessment order proposed to ....
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....ould not be said that he intended to waive interest payable under section 215. The Tribunal also observed that it was worth-noting that non-charging of interest under section 215 was taken by the ITO as a mistake apparent from the record and he initiated proceeding under section 154 and it must be borne in mind that liability to pay interest under section 215 was automatic and unqualified. It was, therefore, necessary that waiver of such liability by a public officer should not be construed by mere inference from his silence. Waiver of interest under section 215 required application of judicial mind and stating reasons showing as to how the judicial discretion had been exercised. Pendency of proceedings under section 154 was no bar to invoke jurisdiction under section 263 of the Act. The Tribunal also observed: "when an estimate has been validly filed and amount of tax has been paid less than calculated on the basis of that estimate it cannot be said that the advance tax is not paid on the basis of the estimate. Payment of tax on the basis of estimate does not mean payment of exactly the same amount calculated on the basis of the said estimate. It was the short payment ....
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....pass an appropriate order. Section 263, at the material time, stood as under: "263. Revision of orders prejudicial to revenue.- (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Income-tax Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment." 7. It has been argued that the Commissioner has power to cancel any order passed by the ITO if he considers the order to be erroneous insofar as it is prejudicial to the interests of the revenue but the pre-condition for passing any order under section 263 is existence of an erroneous order passed by the ITO. In the instant case no order has been passed by the ITO charging interest under section 215 of the Act. Under such circumstances, the Commissioner was powerless to pass any orde....
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...., development rebate or, as the case may be, other allowance or deduction properly allowable under this Act; or (e)the amount of the refund as determined under sub-section (1) is greater or smaller than the amount of the refund, if any, due under this Act on a proper computation; or (f)the status in which the assessee has been assessed under sub-section (1) is different from the status in which the assessee is properly assessable under this Act;" 9. The jurisdiction of the ITO under section 143(3) of the Act is only to compute the total income or loss of the assessee and determine the sum payable by him or refundable to him on the basis of such assessment. The Explanation to section 143(3) makes it clear that the assessment shall be incorrect or inadequate or incomplete in material respect in the circumstances specified in clause (a), contained therein. This clause does not mention non-levy of interest as a ground for considering an assessment to be incorrect or inadequate or incomplete in material respect. 10. In the instant case, the ITO has computed the total income and determined the amount of tax payable by the assessee. Thereafter he charged interest u....
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....estimate including revised estimate, and the advance tax so paid is less than seventy five per cent of the assessed tax, simple interest at the rate of fifteen per cent per annum from the 1st day of April next following the said financial year up to the date of the regular assessment shall be payable by the assessee upon the amount by which the advance tax so paid falls short of the assessed tax: Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect as if for the words 'seventy five per cent' the words 'eighty-three and one-third per cent' had been substituted. (2) Where before the date of completion of a regular assessment, tax is paid by the assessee under section 140A or otherwise,- (i)interest shall be calculated in accordance with the foregoing provision up to the date on which the tax is so paid; and (ii)thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax as so paid insofar as it relates to income subject to advance tax falls short of the assessed tax. (3) Where as a result of an order under section 154 or section 155 or se....
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....has sent,- (a)under sub-section (1) of section 209A, a statement, or (b)under section 209A or section 212, an estimate or a revised estimate, of the advance tax payable by him, but does not pay any instalment in accordance therewith on the date or dates specified in section 211, he shall be deemed to be an assessee in default in respect of such instalment or instalments. (2) If any assessee does not pay on the specified date any instalment of advance tax that he is required to pay under section 210 and does not, on or before the date on which any such instalment as is not paid becomes due, send under sub-section (1) or sub-section (2) of section 212 an estimate or a revised estimate of the advance tax payable by him, he shall be deemed to be an assessee in default in respect of such instalment or instalments." 13. Section 221 provides that when an assessee is in default in making payment of tax, he shall, in addition to the amount of the arrears and the amount of interest payable under sub-section (2) of section 220, be liable, by way of penalty, to pay such amount as the ITO may direct. 14. The question that has arisen in the instant case is whethe....
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.... proceeding nor is there any provision that interest must be calculated and levied in the assessment order itself. The position is made clear by section 246 of the Act, which provides for appeal against an order passed by the ITO. Section 246 lays down that any assessee aggrieved by any of the orders passed by the ITO may appeal to the AAC against such order. The orders against which appeals will lie have been enumerated in clauses (a) to (o) of section 246. Clauses (c), ( d), ( e) and (m) are relevant for this purpose and are as under: "246. Appealable orders.- (a) and (b ) ****** (c) an order against the assessee, where the assessee denies his liability to be assessed under this Act or any order of assessment under sub-section (3) of section 143 or section 144, where the assessee objects to the amount of income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed; (d) an order under section 146 refusing to reopen an assessment made under section 144; (e) an order of assessment, reassessment or recomputation under section 147 or section 150;" It will be seen from sub-clau....
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....er sub-section (8) of section 139 or section 215 cannot be subject of an appeal under clause (c) of section 246. That is a matter which can appropriately be dealt with by the Commissioner in the exercise of his revisional jurisdiction. 17. Therefore, the view of the Supreme Court is that the assessee has no right of appeal on the question of reduction of interest, but the assessee can deny his liability to pay any interest at all under section 215 in an appeal. In order to arrive at this conclusion the Supreme Court has drawn a fine distinction between 'Assessment' and an assessment order under sub-section (3) of section 143 or section 144. The assessee has a right of appeal against an order where he denies 'his liability to be assessed under this Act' under section 246(c). Therefore, he can prefer an appeal denying his liability to pay any interest at all under section 215. This right of appeal is not to be equated with the right of appeal that the assessee has to prefer an appeal against any order of assessment under sub-section (3) of section 143 or section 144 in which case he can take all the points including the point reduction of the liability to pay tax o....
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.... cannot include an order charging interest under section 215. Therefore, the Supreme Court has drawn a clear distinction between an order under section 215 and an order under section 143(3). Although an order under section 215 may be treated as part of the assessment process, taking the word 'assessment' in its widest sense, it will not form part of assessment order under section 143(3). That is the reason why against the order charging interest under section 215 the assessee can prefer an appeal denying his liability to be assessed and on no other ground whereas all the points included in an assessment order under section 143(3) may be agitated in appeal before the appellate authority. 20. That a separate order will have to be passed for charging interest under section 215 has clearly been stated by the Supreme Court in the case of Central Provinces Manganese Ore Co. Ltd. ( supra): "Although section 143 and section 144 do not specifically provide for the levy of interest and the levy is, in fact, attributable to sub-section (8) of section 139 or section 215, it is nevertheless a part of the process of assessing the tax liability of the assessee. Where the Incom....
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.... liability to pay income-tax which is created by charging section 4. In fact rule 119A makes it clear that interest may be payable in respect of the amount of tax, penalty or any other sum. The procedure and method of calculation of interest has been provided in Rule 119A. 22. Strong reliance was placed on a decision of this Court in the case of Premchand Sitanath Roy v. Addl. CIT [1977] 109 ITR 751 . In that case the ITO failed to charge any interest while passing the assessment order for the assessment year 1968-69. According to the assessee, the ITO was satisfied with the explanation giving by the assessee that the delay in filing the return was due to the death of the partners of the assessee-firm. The ITO had, therefore, waived the interest. The assessment order was, however, totally silent on the question of interest. On appeal, the AAC confirmed the order of assessment. Therefore, the Additional Commissioner issued a notice under section 263 to show cause why the order of assessment should not be revised as it did not disclose any reason for waiver of interest. The assessee filed a writ petition challenging the said notice. It was contended for the petitioner that (a ) th....