TaxTMI 
TaxTMI 
1980 (7) TMI 66
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.... certain expenses amounting to Rs. 3,574 by the ITO. The AAC, by his order dated 27th March, 1971, accepted the assessee's appeal in part and allowed reduction of Rs. 2,000 in the total income of the assessee. The Addl. Commissioner thereafter served a notice under s. 263 of the Act on 28th September, 1972, on the assessee to show cause why the assessment be not set aside as it was prejudicial to the revenue. The assessee objected. By his order dated 7th November, 1972, the Addl. Commissioner overruled the objection and held that the order of the ITO under s. 143(3) was erroneous and prejudicial to the revenue as it was passed without charging interest under s. 217(1A) and without initiating penalty proceedings under s. 273(c). The assessee filed an appeal against the order of the Addl. Commissioner which was allowed by the Tribunal on 23rd February, 1974, on the reasoning that the order of assessment passed by the ITO merged in the order of the AAC and, therefore, the Addl. Commissioner had no jurisdiction to interfere in revision under s. 263 of the Act. The power of revision conferred on the Commissioner by s. 263 of the Act to call for and examine the record of any proceedin....
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....ver interest was passed without disturbing the order of assessment. In the instant case, the Addl. Commissioner in revision set aside the order of assessment passed by the ITO. The case of the Calcutta High Court is, therefore, distinguishable and is not applicable. We will again refer to the decision of the Calcutta High Court for examining the question whether the Commissioner can pass an order in revision directing the ITO to compute and recover interest without disturbing the order of assessment. The ITO's jurisdiction to impose penalty under s. 273(c) of the Act arises if he " in the course of any proceeding in connection with the regular assessment " is satisfied that the assessee has without reasonable cause failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of sub-s. (3A) of s. 212. The words " in the course of any proceeding " have been the subject-matter of interpretation by the Supreme Court and it is settled that the necessary satisfaction conferring jurisdiction on the ITO to impose penalty has to be reached before the passing of the order of assessment [See CIT v. S. V. Angidi Chettiar [1962] 44 ITR 739 (SC) and D. M. ....
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....t any such person as is referred to in sub-s. (3A) of s. 212 has not sent the estimate referred to therein ". Two things are thus necessary for the exercise of the power to charge interest: (1) the ITO has to find that any such person as is referred to in sub-s. (3A) of s. 212 has not sent the estimate referred to therein ; and (2) this finding has to be given on making the regular assessment. There has been some debate before us as to the meaning of the; words on making the regular assessment ". It was submitted by the learned standing counsel that these words mean that the requisite finding has to be reached at the time of making the assessment in the assessment order itself and the computation of interest chargeable under s. 217(1A) becomes part of the assessment order under s. 143(3). The learned counsel for the assessee, however, submitted that the words " on making the regular assessment " mean " soon after passing the assessment order ". It was also pointed out that under r. 40 read with s. 215(4) the ITO has not only to find that there is a failure to send the estimate but also to see whether there are circumstances which require reduction or waiver of interest. According t....
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....der under s. 217(1A) even after the making of the order of assessment and that the necessary finding that the assessee has failed to submit the estimate for purposes of advance tax need not be recorded in the assessment order, the position then would be that the order of assessment would not be a bar for taking action under s. 217(1A) and, therefore, it would not be possible to say that the order is prejudicial to the revenue on the ground that interest has not been charged therein. We have earlier pointed out that the jurisdiction in revision under s. 263 arises only when the Commissioner finds that an order of the ITO is erroneous in so far as it is prejudicial to the interest of the revenue. The existence of an order prejudicial to the revenue is the very foundation of the revisional jurisdiction exercisable by the Commissioner. A complete absence of any order under s. 217(1A) will not bring the case within the revisional jurisdiction. So, in either view, the Addl. Commissioner, on the facts and in the circumstances of the instant case, was not competent to direct the charging of interest under s. 217(1A). In the Calcutta case, Singho Mica Mining Co. Ltd. v. CIT [1978] 111 IT....