1996 (4) TMI 109

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....rest under sections 139(8) and 217 of the Income-tax Act, 1961 ? 2. Whether, on the facts and circumstances of the case, the Tribunal is justified in deleting the interest charged by the Income-tax Officer ? " The assessee was assessed in the status of an unregistered firm for the assessment year 1977-78. It filed a return of income on September 30, 1979, which was due on July 31, 1977. The Income-tax Officer charged interest under section 139(8) of the Act amounting to Rs. 43,179. The interest was also charged under section 217 of the Act which amounted to Rs. 64,774. The assessee filed an appeal before the Commissioner of Income-tax (Appeals), against the quantum of income determined by the Income-tax Officer as well as against the ....

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...., we find that the questions involved in the present case are no longer res integra in view of the decision given by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961 (SC). In this case, the Supreme Court observed as under (page 965) : " At the very outset, it is necessary to consider the nature of the levy of interest under sub-section (8) of section 139 and under section 215. It is not correct to refer to the levy of such interest as a penalty. The expression 'penal interest' has acquired usage, but is in fact an inaccurate description of the levy. Having regard to the reason for the levy and the circumstances in which it is imposed, it is clear that interest is levied by way of compensation and no....

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.... automatic as was noticed by Chagla C. J. in Jagdish Prasad Ramnath's case [1955] 27 ITR 192 (Bom), under the Act, such levy is not automatic ; discretion is vested in the Income-tax Officer to waive or reduce penal interest in the cases and circumstances mentioned in rule 117A and rule 40 of the Income-tax Rules, 1962. If the case of the assessee falls within the scope of the said Rules, the Income-tax Officer is bound in law to consider whether the assessee was entitled to waiver or reduction of interest. It is, therefore, clear that levy of penal interest under sections 139 and 215 is part of the assessment. When such penal interest is levied, the assessee is 'assessed', meaning thereby, he is subjected to the procedure for ascertaining ....