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TMI Blog1983 (2) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... r penalty under section 273(b) of the Income-tax Act, 1961 ('the Act') and the penal interest under section 217 of the Act, was not subjected to the said penalty and penal interest by the ITO. Accordingly, the Commissioner issued a show-cause notice to the assessee dated 15-1-1975 recording his aforesaid opinion and stated in the said notice that 'in exercise of powers conferred upon me by section 263 of the Income-tax Act, I propose to make suitable remedial orders'. In reply, dated28-1-1975, to the said show-cause notice, the stand of the assessee was that neither the penalty under section 273(b) nor penal interest under section 217 was leviable. As such, the proposed remedial action was not justified. The proceedings be dropped. The Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment order, disallowed interest paid of Rs. 21,272 paid to Jiwanlal Amarlal of Sheopurkalan under section 36(1)(iii) of the Act and that the interest so paid was interest paid to the partners, Prahlad Das and Amarlal. The assessee-firm was liable to pay interest to partners and not to Jiwanlal Amarlal because the assessee-firm did not borrow any money from Jiwanlal Amarlal, constituted by three partners including the two partners of the assessee-firm. The amount standing to the credit balance of these two partners of the assessee-firm at the relevant time was withdrawn and introduced as the borrowed funds of the partners concerned. In this way, the total income as finally assessed was determined at Rs. 76,680. 4. Aggrieved by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) and 217(1)' towards the end of the said order of the Commissioner which, according to Mr. Vaish, qualifies the directions issued by him (the Commissioner) earlier to the ITO 'to make a fresh assessment according to law'. In support of his argument, Mr. Vaish in the first instance referred to the recent decision of the Delhi High Court in Addl. CIT v. J.K. D'costa [1982] 133 ITR 7. According to Mr. Vaish, the powers of the Commissioner under section 263 though quite wide empower him to pass an order which the circumstances of the case will justify, the mere fact that there is some minor omission or mistake in the assessment order cannot and did not in the circumstances of the case, more so in the light of the notice under section 263, ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d against, the same has become final. Further, according to the said order of the Commissioner under section 263 it was apparent that the Commissioner has set aside the whole assessment order which he in law was competent to do. This also found support from the order of the AAC, dated15-5-1975, who had held that the appeal of the assessee against the original assessment order in view of the setting aside of the assessment order by the Commissioner had become infructuous. 6. We have given consideration to the above arguments. It is correct that the order of the Commissioner under section 263 having been not appealed against has become final. It is also correct as is clear from the order of the AAC, dated 15-5-1975 at page 7 of the paper bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterests of the revenue. The Commissioner, as is clear from the copy of the notice under section 263 at page 2 of the paper book, decided to initiate proceedings under section 263 by issuing the said notice. The action contemplated by the Commissioner under section 263 as is apparent from para 2 of the show-cause notice is, to use the words of the Commissioner, 'In exercise of powers conferred upon me by section 263 of the Income-tax Act, 1961, I propose to make suitable remedial orders'. The Commissioner, as is clear from the said notice, did not form an opinion that there was something totally or basically wrong with the assessment order which was not capable of being remedied by amendments to the assessment order itself so as to justify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(3) for the assessment year 1970-71 and direct him to make a fresh assessment according to law, considering the applicability of provisions of sections 273(b) and 217(1) of the Income-tax Act. " [Emphasis supplied] The words italicised by us qualify the powers of the ITO in the matter of making fresh assessment order according to law which, as is clear from the above, was confined only in the matter of the leviability, if any, of the penalty under section 273(b) and interest under section 217. It is, therefore, clear beyond any shadow of doubt that the Commissioner had not set aside the original assessment order in entirety. The original assessment order was set aside only to the extent that it enabled the ITO to consider the question of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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