1983 (8) TMI 118 - AT - Income Tax

Summary

Issues:
1. Whether the omission to charge interest under section 139 (8) in the original assessment order was a mistake apparent from the record?
2. Whether the interest under section 139 (8) can be waived if not charged in the original assessment?
3. Whether the provisions of rule 117A of the IT Rules were correctly applied in the case?
4. Whether the decision of the Appellate Authority was justified in canceling the order passed by the ITO under section 154?

Analysis:

1. The case involved a delay of 11 months in the submission of the return by the assessee for the assessment year 1977-78. The ITO did not charge interest under section 139 (8) in the original assessment, leading to a show cause notice issued under section 154 to rectify the omission. The ITO rectified the assessment order, charging interest for the delay. The Appellate Authority held that no mistake was apparent from the record, leading to an appeal by the Revenue.

2. The Revenue contended that the omission to charge interest under section 139 (8) was a rectifiable mistake under section 154 and that the interest cannot be considered waived simply because it was not charged in the original assessment. The argument was supported by the provision of rule 117A of the IT Rules, which required the assessee to submit an application and evidence for waiver of interest, which was not done in this case.

3. The authorized representative for the assessee argued that the omission to charge interest was not a mistake apparent from the record, and since no tax was payable, interest should not have been charged. The representative also cited a Karnataka High Court decision in support. However, the Tribunal found that the mistake of not charging interest was glaring and rectifiable under section 154.

4. The Tribunal examined the facts and submissions, emphasizing that a mistake of law could be rectified under section 154. It was noted that the order for reducing or waiving interest under rule 117A should be a speaking order, and in this case, the omission to charge interest did not amount to waiver. The Tribunal allowed the appeal, setting aside the Appellate Authority's order and restoring that of the ITO under section 154.

5. The Tribunal also distinguished the case from a previous decision and clarified the application of Explanation (2) to section 139 (8) in determining the tax payable for charging interest. The reliance on a decision of the Karnataka High Court was deemed misplaced as the facts of that case were different from the present situation.

6. Ultimately, the Tribunal concluded that the omission to charge interest under section 139 (8) was a rectifiable mistake, and since no penalty proceedings were initiated against the assessee, there was no cause shown to waive the interest. The appeal was allowed, and the order of the ITO under section 154 was restored.