2001 (1) TMI 237 - AT - Income Tax

Issues Involved:
1. Legality of the Dy. CIT's suo motu deletion of interest under sections 234A, 234B, and 234C.
2. Adequacy of opportunity of being heard before rectification under section 154.
3. Legality of rectification orders under section 154 by the Asstt. CIT.
4. Disciplinary actions against the Dy. CIT for alleged misconduct.

Detailed Analysis:

1. Legality of the Dy. CIT's Suo Motu Deletion of Interest:
The Dy. CIT, Special Range, Nagpur, on 26th May 1994, suo motu deleted interests under sections 234A, 234B, and 234C which were originally charged in the orders dated 29th January 1992. This action was taken without any application or move from the appellants. The tribunal found this act to be illegal and reckless, causing substantial revenue loss to the Government. The tribunal emphasized that the power to waive interest under these sections rests solely with the Chief CIT, not the Dy. CIT.

2. Adequacy of Opportunity of Being Heard Before Rectification:
The appellants argued that the orders passed by the Asstt. CIT under section 154 were illegal as they were issued without providing a reasonable opportunity of being heard. The tribunal supported this view, referencing its previous order in the case of M/s Mehta Steel Industries, which held that orders passed without such opportunity are null and void. The tribunal quashed the rectification orders on this basis.

3. Legality of Rectification Orders Under Section 154 by the Asstt. CIT:
The tribunal found that the issue of charging interest under sections 234A, 234B, and 234C was highly debatable, with multiple opinions from different officers and the audit party. It cited the Supreme Court's decision in T.S. Balaram, ITO vs. Volkart Bros., which states that rectification under section 154 can only address clear and patent mistakes, not debatable issues. Consequently, the tribunal deemed the rectification orders passed in March 1998 by the Asstt. CIT as illegal and quashed them.

4. Disciplinary Actions Against the Dy. CIT for Alleged Misconduct:
The tribunal highlighted the serious misconduct by the Dy. CIT in suo motu deleting the interests, causing significant revenue loss. It recommended a thorough inquiry and investigation by police authorities to determine whether the Dy. CIT's actions were deliberate or inadvertent. The tribunal also directed the CIT, Vidarbha Region, Nagpur, to initiate disciplinary proceedings against the Dy. CIT as per the Central Civil Services (Conduct) Rules and to recover the lost revenue from his salary or pension.

Orders and Directions:
1. Quashing of CIT(A) Orders: The tribunal vacated and canceled the orders passed by the CIT(A), Nagpur.
2. Refund of Interests Paid: Ordered the refund of interests under sections 234A, 234B, and 234C, if any paid by the appellants, by 28th February 2001.
3. Cost Payment: Directed the CIT, Vidarbha Region, Nagpur, to pay Rs. 7,500 to each appellant by 28th February 2001.
4. Interest on Delayed Payments: Imposed an 18% per annum interest on delayed payments from 1st March 2001.
5. Recovery from Dy. CIT: Ordered recovery of amounts from the salary or pension of the Dy. CIT responsible for the illegal act.
6. Disciplinary Proceedings: Directed initiation of disciplinary proceedings against the Dy. CIT for misconduct.
7. Communication of Orders: Directed the Asstt. Registrar to forward copies of the order to relevant authorities, including the Central Vigilance Commissioner, Revenue Secretary, and CBDT Chairman.

Conclusion:
The appeals were allowed, and the tribunal issued detailed directions to rectify the illegal actions and ensure accountability for the revenue loss caused by the Dy. CIT's misconduct.

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