1988 (7) TMI 55 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of Section 217(1A) of the Income-tax Act.
2. Consideration of the petition under Rule 40 of the Income-tax Rules.
3. Examination of Rule 40(4) in the context of waiver of interest.
4. Reference to the Inspecting Assistant Commissioner without notice or hearing.
5. Alleged mistaken impression by the Commissioner regarding the price of tea.
6. Disparity in waiver of interest among different tea producers.

Issue-wise Detailed Analysis:

1. Applicability of Section 217(1A) of the Income-tax Act:
The petitioner argued that Section 217(1A) of the Income-tax Act is inapplicable for the levy of interest. The Income-tax Officer initially levied interest under Section 217(1A), but later communicated that the interest was levied under Section 215. The court noted that the assessment order dated March 13, 1980, indicated the levy under Section 217(1A), which was unauthorized.

2. Consideration of the petition under Rule 40 of the Income-tax Rules:
The petitioner contended that the petition under Rule 40 was not properly considered. The Income-tax Officer and the Commissioner considered the matter under Rules 40(1), 40(4), and 40(5). The court observed that the Income-tax Officer waived interest after one year from the date of filing the return, which was deemed illegal.

3. Examination of Rule 40(4) in the context of waiver of interest:
The petitioner claimed that Rule 40(4) was not adequately considered. The court found that no relief was given under Rule 40(4) by the Income-tax Officer, and the Commissioner did not effectively address this in the revisional order.

4. Reference to the Inspecting Assistant Commissioner without notice or hearing:
The petitioner argued that the reference to the Inspecting Assistant Commissioner was made without notice or hearing, violating the principles of natural justice. The court held that the decision rendered by the Inspecting Assistant Commissioner without notice or hearing was unfair and void. Consequently, the order passed by the Income-tax Officer relying on this decision was also infirm. The court emphasized that both the Income-tax Officer and the Inspecting Assistant Commissioner must exercise their quasi-judicial functions fairly and reasonably, ensuring that affected parties are given an opportunity to be heard.

5. Alleged mistaken impression by the Commissioner regarding the price of tea:
The petitioner contended that the Commissioner proceeded on a mistaken impression regarding the price of tea. However, the court did not adjudicate this issue and left it open for further consideration.

6. Disparity in waiver of interest among different tea producers:
The petitioner argued that interest was completely waived for other tea producers in similar circumstances. The court noted that this specific averment was not denied by the Revenue in their counter-affidavit. However, the court did not adjudicate this issue and left it open for further consideration.

Conclusion:
The court quashed the orders passed by the Income-tax Officer (Exhibit P-4) and the Commissioner (Exhibit P-8) due to the fundamental infirmity of absence of notice and hearing by the Inspecting Assistant Commissioner. The Income-tax Officer was directed to pass fresh orders in accordance with the law and the observations made in the judgment. All other contentions raised by the petitioner were left open for further adjudication. The original petition was allowed with the aforementioned directions.