1980 (6) TMI 46 - AT - Income Tax

Summary

Issues: Jurisdiction of CIT under section 263 to direct levy of interest under section 217 of the Income Tax Act, 1961.

Analysis:

The appeal before the Appellate Tribunal ITAT Bombay-A involved the question of jurisdiction of the Commissioner of Income Tax (CIT) to direct the Income Tax Officer (ITO) to levy interest under section 217 of the Income Tax Act, 1961. The CIT had passed an order under section 263 directing the ITO to consider charging interest under section 217 as the assessee had failed to file an estimate of advance-tax payable. The assessee contended that the CIT had no jurisdiction to pass such an order as the original assessment order was already under appeal before the Appellate Assistant Commissioner (AAC). The assessee relied on various decisions to support its argument, including cases from the Allahabad, Calcutta, and Gujarat High Courts. Additionally, the assessee referred to section 154(1A) and a Tribunal order to strengthen its position.

Alternatively, the assessee argued, based on a Karnataka High Court decision, that interest cannot form part of the assessment order and without a separate order levying interest under section 217, the CIT cannot revise the assessment order under section 263. The Department's representative contended that no separate order is required under section 217 as interest is added to the tax, citing relevant authorities.

After considering the submissions and contentions of both parties, the Tribunal found merit in the assessee's objections. The Tribunal analyzed the decisions cited by the Department and held that the charge of interest under section 217 must be a separate order made by the ITO after a regular assessment. The Tribunal emphasized the quasi-judicial nature of proceedings under sections 215 and 217 and the requirement for a specific order under section 217. The Tribunal also highlighted the conditions precedent for invoking jurisdiction under section 263, emphasizing the necessity of an order under section 217. The Tribunal concluded that the CIT's order under section 263 revising the assessment order was unwarranted and lacked jurisdiction, aligning with the Karnataka High Court decision referenced.

Furthermore, the Tribunal agreed with the assessee that even if the failure to charge interest could be considered part of the assessment order, the CIT's jurisdiction to revise the order was barred due to the assessment being the subject of appeal before the AAC. The Tribunal referenced a special Bench order of the Tribunal to support this conclusion. Ultimately, the Tribunal set aside the CIT's order under section 263, allowing the appeal in favor of the assessee.