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Issues: Assessment order under Income-tax Act, imposition of interest under section 217, applicability of section 154, waiver of interest under rule 40, delay in assessment, Tribunal's decision, reference under section 256(2).
Analysis: The High Court judgment pertains to an assessment order passed by the Income-tax Officer for the assessment year 1970-71, where no interest was initially charged under section 217 of the Income-tax Act, 1961. Subsequently, an order was issued imposing a demand of Rs. 22,080 under section 217, invoking sections 154 and 155 of the Act. The power to waive interest is governed by rule 40 of the Income-tax Rules, 1962, allowing the Income-tax Officer to reduce or waive interest. Notably, the assessment in question was significantly delayed, being conducted more than two years after the return was filed, a factor considered for waiving interest under rule 40, although not addressed in the review order. Upon appeal, the Appellate Assistant Commissioner upheld the Income-tax Officer's order, but the Tribunal overturned it, ruling that it was not a case covered by section 154. The Tribunal's decision was based on the absence of a mistake in failing to charge interest. The case was then brought for reference under section 256(1) of the Act, which was denied, leading to a petition under section 256(2) seeking reference on specific questions challenging the Tribunal's decision. The High Court opined that interest could not be charged under section 217 unless specific conditions were met. The Tribunal correctly held that section 212(3) needed to be satisfied for interest to be imposed, limiting interest charges to certain individuals. The delay in assessment satisfied one condition of rule 40, indicating a basis for waiving interest. The complexity of the case, including the interdependence of income from multiple sources, rendered it unsuitable for section 154 application, as it hinged on factual considerations rather than legal questions. Ultimately, the High Court rejected the reference application, emphasizing the need for factual clarity on rule 40 and section 217's application at the relevant time. The judgment underscored that the case's intricacies necessitated a factual assessment, precluding a purely legal determination. The parties were left to bear their own costs in light of the judgment's disposition.
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