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Issues involved: Interpretation of provisions u/s 139(1) of the Income-tax Act, 1961 regarding levy of interest, jurisdiction of Additional Commissioner u/s 263, and impact of Appellate Assistant Commissioner's order on interest calculation.
Judgment Summary: The High Court of Karnataka was tasked with deciding on the interpretation of certain provisions of the Income-tax Act, 1961. The case revolved around the question of whether the Additional Commissioner of Income-tax had the authority to direct the Income-tax Officer to levy interest u/s 139(1)(iii) of the Act. The assessment year in question was 1964-65, where the assessee, a firm, initially filed a return showing a total income of Rs. 97,469, later revised to Rs. 1,61,375. The Income-tax Officer assessed the total income at Rs. 1,93,990 without charging interest under section 139(1)(iii) for the delay in filing the return. The Appellate Assistant Commissioner subsequently reduced the assessable income by Rs. 12,000, leading to a final order. The Additional Commissioner then sought to revise the Income-tax Officer's order under section 263, citing failure to charge interest as prejudicial to the Revenue. The Tribunal ruled in favor of the assessee, stating that the Additional Commissioner was precluded from taking action u/s 263 as the assessment order had merged with the Appellate Assistant Commissioner's order. The Court analyzed section 139(1) which allows for extension of return filing dates and interest levies. It noted that interest, if applicable, forms part of the assessment order and must be reduced if the assessable income is lowered. As the Appellate Assistant Commissioner's order was final, any interest calculation should be based on the revised tax amount. Therefore, the Additional Commissioner lacked jurisdiction to proceed u/s 263. The Court upheld the Tribunal's decision, ruling in favor of the assessee and ordering the Department to cover the costs. In conclusion, the Court affirmed that the Additional Commissioner exceeded authority in directing interest levy under section 139(1)(iii) and upheld the Tribunal's decision, emphasizing the impact of the Appellate Assistant Commissioner's order on interest calculations.
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