1986 (8) TMI 125 - AT - Income Tax

Summary

Issues:
1. Charging of interest under sections 139 and 216 without prior show-cause notice.
2. Discretionary nature of provisions under sections 139(8) and 216.
3. Tribunal's confirmation of Commissioner (Appeals) order quashing demand for interest.
4. Assessment of interest under sections 139 and 216 during original assessment.
5. Commissioner (Appeals) overturning predecessor's order based on Tribunal's decision.
6. Legality of Commissioner (Appeals) correcting predecessor's order after Tribunal's confirmation.
7. Validity of IAC (Assessment) and Commissioner (Appeals) actions in modifying Tribunal's order.

Analysis:
1. The appeal concerned the initiation of action under section 154 of the Income-tax Act, 1961 regarding the charging of depreciation on certain assets, leading to the demand for interest under sections 139 and 216 without a prior show-cause notice to the assessee.
2. The Commissioner (Appeals) quashed the demand for interest citing the discretionary nature of provisions under sections 139(8) and 216, emphasizing the assessing officer's failure to exercise discretion during the original assessment.
3. The Tribunal upheld the Commissioner (Appeals) decision, noting that the interest was mentioned in the demand notice without affording the assessee an opportunity to explain, and the action was deemed untenable due to a change of opinion by the assessing authorities.
4. The IAC (Assessment) asserted that interest under sections 139 and 216 was charged during the original assessment and not under section 154, rejecting the assessee's plea to delete the interest.
5. The Commissioner (Appeals) in a subsequent order overturned the predecessor's decision, relying on the Tribunal's confirmation, stating that interest had indeed been charged during the original assessment, and the extra demand created through the notice under section 154 was deleted.
6. The assessee challenged the second order under section 154, arguing that the Commissioner (Appeals) could not override the Tribunal's decision, which had merged with the order of his predecessor, and cited legal precedents to support the contention.
7. The Tribunal found the Commissioner (Appeals) erred in disturbing its order, emphasizing the finality of the Tribunal's decision and the inadmissibility of attempts to bypass it, ultimately allowing the assessee's appeal and declaring the Commissioner (Appeals) order erroneous.