1985 (11) TMI 107 - AT - Income Tax

Summary

Issues:
- Appeal against order of Commissioner under section 263 of the Income-tax Act, 1961 for assessment year 1976-77.
- Validity of the order passed under section 154 by the Commissioner.
- Interpretation of conflicting judgments of Kerala High Court.
- Applicability of CBDT Circular No. 334 dated 3-4-1982 on levy of interest under section 220(2).

Analysis:
1. The appeal was filed by the assessee against the order of the Commissioner under section 263 of the Income-tax Act, 1961 for the assessment year 1976-77. The initial assessment was completed on 12-9-1976, with a demand raised against the assessee, which was subsequently reduced through appeals and orders. The Tribunal allowed the department's appeal against the AAC's order, resulting in a demand of Rs. 77,787, including interest under section 220(2). The assessee filed a petition under section 154 to delete the interest, which was initially granted but later revised by the Commissioner on 22-7-1983.

2. The Commissioner's order under section 154 was challenged before the Tribunal. The Tribunal considered the conflicting judgments of the Kerala High Court in A.V. Thomas & Co. Ltd.'s case and K.P. Abdul Kareem Hajee's case. The Tribunal found that the facts in A.V. Thomas & Co. Ltd.'s case were similar to the present case, where demands were paid by the assessee, unlike in K.P. Abdul Kareem Hajee's case. Citing A.V. Thomas & Co.'s case, the Tribunal held that the Commissioner's order under section 263 was legally flawed and set it aside.

3. Additionally, the Tribunal addressed the applicability of CBDT Circular No. 334 dated 3-4-1982 on the levy of interest under section 220(2) when the original assessment is set aside. Referring to the Kerala High Court's decision in CIT v. Malayala Manorama & Co. Ltd., the Tribunal emphasized that the court must interpret the Act independently of departmental practices. Consequently, the Tribunal set aside the Commissioner's order and restored the ITO's order dated 30-7-1981 passed under section 154.

4. In conclusion, the Tribunal allowed the appeal filed by the assessee against the Commissioner's order under section 263, emphasizing the importance of distinguishing between conflicting judgments and the primacy of legal interpretation over administrative directives.