1978 (4) TMI 62 - HC - Income Tax

Summary

Issues involved: Assessment of advance tax, charging of interest under section 215, jurisdiction of Additional Commissioner u/s 263, discretion of Income-tax Officer to waive interest u/r 46(1).

Assessment of advance tax: The assessee, a registered firm running a distillery, paid advance tax based on its own estimate for the years 1968-69 and 1969-70. However, upon completion of regular assessment, the tax determined to be payable was significantly more than the advance tax paid, leading to interest payable u/s 215 as the advance tax paid was less than 75% of the assessed tax.

Charging of interest under section 215: The Income-tax Officer is mandated to charge interest at 12% per annum if the advance tax paid falls short of the assessed tax by more than 75%. Failure to charge interest on such shortfall would deprive the revenue of its rightful dues, making it prejudicial to the interest of the revenue.

Jurisdiction of Additional Commissioner u/s 263: The Additional Commissioner can modify or cancel an assessment order if it is deemed erroneous and prejudicial to the revenue's interest. The test for determining prejudice involves assessing whether the error affected the rights of the party or led to a miscarriage of justice, as explained by the High Court of Calcutta.

Discretion of Income-tax Officer to waive interest u/r 46(1): The Income-tax Officer has the discretionary power to waive or reduce interest under section 215(4) u/r 46, but this power must be exercised based on relevant grounds specified in the rule. Failure to indicate the exercise of such discretion in the order renders it impossible to presume that interest has been waived.

The High Court held that the order of the Income-tax Officer not charging interest was erroneous and prejudicial to the revenue's interest, giving jurisdiction to the Additional Commissioner u/s 263 to direct the assessment of interest. The court emphasized that the discretion to waive interest must be explicitly stated in the order, as it is a quasi-judicial act requiring reasons to be provided. The court distinguished previous cases cited by the assessee's counsel, ruling in favor of the department and against the assessee on the issue of jurisdiction u/s 263.