1985 (3) TMI 112 - AT - Income Tax

Summary

Issues:
1. Jurisdiction of the Commissioner to invoke section 263 for non-levy of interest under section 215.
2. Whether the IAC's assessment order can be revised under section 263.
3. Application of rule 40 for waiver or reduction of interest under section 215.

Detailed Analysis:

1. The judgment revolves around the jurisdiction of the Commissioner to invoke section 263 for the non-levy of interest under section 215 in the assessment order. The deceased assessee did not pay any advance tax despite filing an estimate of tax payable. The Commissioner invoked section 263 as he deemed the non-levy of interest prejudicial to revenue. The Tribunal held that the Commissioner has the power to invoke section 263 even for assessments made by the IAC, citing the East Coast Marine Products case.

2. The judgment addresses the issue of whether the IAC's assessment order can be revised under section 263. The assessee contended that section 263 can only correct errors in orders passed by the ITO, not the IAC. However, the Tribunal disagreed, stating that the Commissioner can revise assessments made by the IAC, as clarified in section 125 of the Income-tax Act.

3. The application of rule 40 for the waiver or reduction of interest under section 215 was also a key point of contention. The Tribunal analyzed the provisions of section 215, highlighting the discretionary power of the ITO to waive or reduce interest payable. It was noted that the ITO must pass an order exercising this discretion, and in the absence of such an order, the non-levy of interest was deemed erroneous and prejudicial to revenue. The Tribunal cited various High Court decisions supporting the Commissioner's jurisdiction to invoke section 263 for non-levy of interest under section 215.

4. The judgment extensively discussed precedents from High Courts, emphasizing the need for a judicial exercise of discretion in cases of interest waiver or reduction. It was highlighted that the ITO's omission to levy interest cannot be equated with a waiver, and the Commissioner has the authority to intervene under sections 263 and 264 if necessary. The Tribunal upheld the Commissioner's order, emphasizing the importance of proper assessment and levy of interest under section 215.

5. In conclusion, the Tribunal dismissed the appeal, affirming the Commissioner's jurisdiction to invoke section 263 for the non-levy of interest under section 215. The judgment underscored the significance of following established precedents and ensuring proper assessment procedures to safeguard revenue interests.