1993 (3) TMI 35 - HC - Income Tax

Summary

Issues Involved:
1. Competency of appeal against the order of rectification u/s 154.
2. Rectification of the original order of assessment u/s 154.
3. Obligation of the Income-tax Officer to consider section 215(4) and rule 40 before charging interest u/s 215.

Summary:

Issue 1: Competency of Appeal Against the Order of Rectification u/s 154
The court addressed whether an appeal against a rectification order u/s 154 is competent under section 246(f). It was argued that section 246 does not provide for an appeal against an order passed u/s 215. However, the court noted that the appeal in question was against a rectification order u/s 154, not directly against an order u/s 215. The court held that section 246(f) has a broad interpretation, and the levy of interest is part of the assessment process. Consequently, the order u/s 154 was appealable, and the Tribunal was correct in its view.

Issue 2: Rectification of the Original Order of Assessment u/s 154
The Tribunal held that the original order of assessment could not be rectified u/s 154 as there was no mistake apparent on the face of the record. The court discussed the automatic nature of interest liability u/s 215 and the discretion conferred upon the Income-tax Officer to reduce or waive interest. The court disagreed with the Tribunal, stating that the Income-tax Officer is not obliged to consider reduction or waiver of interest at the time of determining its payability. Thus, the Tribunal's holding that the original order could not be rectified was incorrect.

Issue 3: Obligation to Consider Section 215(4) and Rule 40 Before Charging Interest u/s 215
The court examined whether the Income-tax Officer must consider section 215(4) and rule 40 before charging interest u/s 215. It was argued that an application by the assessee is necessary for invoking discretion u/s 215(4). The court disagreed, stating that there is no requirement for an application by the assessee in section 215(4) or rule 40. The Income-tax Officer can and should exercise discretion if the record or circumstances justify it, even without an application from the assessee. The court also noted that the omission to pass an order for levying interest could lead to an inference of waiver, supporting the Tribunal's view.

Conclusion:
Questions 1 and 2 were answered in the affirmative, against the Revenue and in favor of the assessee. Question 3 was answered in the negative, in favor of the Revenue and against the assessee. The reference was disposed of accordingly with no order as to costs.