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Issues:
- Assessment of income and interest under Income-tax Act - Waiver of interest under rule 40(5) of Income-tax Rules - Jurisdiction for reduction of waiver under rules 40 and 117A of Income-tax Rules Assessment of Income and Interest under Income-tax Act: The petitioner, who held a license for an arrack blending and bottling unit, underwent assessment for the years 1984-85 and 1985-86 following a settlement petition with the Commissioner of Income-tax. The Income-tax Officer levied interest under sections 139(8) and 215 of the Act for both years. The petitioner sought waiver of interest, arguing that the assessments were based on the settlement and that there was an understanding with the Department regarding interest waiver. The Income-tax Officer partially reduced the interest, leading to the petitioner filing a petition under section 264 of the Income-tax Act, which was dismissed. The petitioner contended that the amnesty scheme should apply to his case, and the interest should be waived due to delays in assessment not caused by him. Waiver of Interest under Rule 40(5) of Income-tax Rules: The petitioner filed waiver petitions under rule 40(5) of the Income-tax Rules seeking to waive interest levied under sections 215 and 139(8) based on the settlement with the Commissioner. The Income-tax Officer partially reduced the interest, prompting the petitioner to file a petition under section 264 of the Income-tax Act seeking complete waiver. The Commissioner dismissed the petition, stating there was no jurisdiction for further reduction under rules 40 and 117A. The petitioner challenged this decision in the present writ petitions. Jurisdiction for Reduction of Waiver under Rules 40 and 117A of Income-tax Rules: The petitioner argued that the Commissioner's order dismissing the waiver petition was illegal and contrary to law. The petitioner cited a decision by the Andhra Pradesh High Court regarding the proper procedure for levying interest under the Income-tax Act, emphasizing the need for the Income-tax Officer to consider representations for waiver or reduction of interest before formal charging. The petitioner sought a similar order in his case. The respondent contended that the waiver of interest is a discretionary power and that the benefit granted to the petitioner was reasonable, citing a Supreme Court judgment. The High Court found that the respondent had not given the petitioner an opportunity to show cause before levying interest and quashed the order regarding the waiver of interest, remanding the case back to the respondent for proper consideration within three months. In conclusion, the High Court directed the respondent to reconsider the waiver petitions filed by the petitioner in accordance with the law, emphasizing the need for a fair and reasonable exercise of discretion in such matters.
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