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TMI Blog1990 (3) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... ,948. The assessee sent to the Income-tax Officer on 8-9-1978 an estimate of the current income of ₹ 4,25,000 and the advance tax payable by him thereon was calculated at ₹ 2,69,380. However, he actually paid the advance tax in the sum of ₹ 1,04,777. Thereafter revised estimate was filed by him on 17-3-1979 estimating the total income at ₹ 4,10,000 and calculating the tax payable thereon at ₹ 2,58,980. Thus, after deducting ₹ 1,04,077 paid earlier the balance payable according to the revised estimate was shown at ₹ 1,54,203. Apparently, the assessee landed himself for the liability to pay interest under section 215. However, the Income-tax Officer was silent on the point in the assessment order. The Commissioner of Income-tax took the said assessment order to be erroneous insofar as it was prejudicial to the interests of the revenue. He, therefore, issued a notice to the assessee under section 263 to show cause as to why the assessment order should not be revised. The assessee raised the following objections to the said notice: (1) The assessment order proposed to be revised was appealed against and as such, it merged in the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that it was worth-noting that non-charging of interest under section 215 was taken by the ITO as a mistake apparent from the record and he initiated proceeding under section 154 and it must be borne in mind that liability to pay interest under section 215 was automatic and unqualified. It was, therefore, necessary that waiver of such liability by a public officer should not be construed by mere inference from his silence. Waiver of interest under section 215 required application of judicial mind and stating reasons showing as to how the judicial discretion had been exercised. Pendency of proceedings under section 154 was no bar to invoke jurisdiction under section 263 of the Act. The Tribunal also observed: when an estimate has been validly filed and amount of tax has been paid less than calculated on the basis of that estimate it cannot be said that the advance tax is not paid on the basis of the estimate. Payment of tax on the basis of estimate does not mean payment of exactly the same amount calculated on the basis of the said estimate. It was the short payment which is made liable for payment of interest. If short payment of advance tax on the basis of assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al to revenue.- (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Income-tax Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. 7. It has been argued that the Commissioner has power to cancel any order passed by the ITO if he considers the order to be erroneous insofar as it is prejudicial to the interests of the revenue but the pre-condition for passing any order under section 263 is existence of an erroneous order passed by the ITO. In the instant case no order has been passed by the ITO charging interest under section 215 of the Act. Under such circumstances, the Commissioner was powerless to pass any order of revision under section 263 in respect of the ITO's failure to charge interest. 8. In our view, there is consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er sub-section (1) is greater or smaller than the amount of the refund, if any, due under this Act on a proper computation; or (f)the status in which the assessee has been assessed under sub-section (1) is different from the status in which the assessee is properly assessable under this Act; 9. The jurisdiction of the ITO under section 143(3) of the Act is only to compute the total income or loss of the assessee and determine the sum payable by him or refundable to him on the basis of such assessment. The Explanation to section 143(3) makes it clear that the assessment shall be incorrect or inadequate or incomplete in material respect in the circumstances specified in clause (a), contained therein. This clause does not mention non-levy of interest as a ground for considering an assessment to be incorrect or inadequate or incomplete in material respect. 10. In the instant case, the ITO has computed the total income and determined the amount of tax payable by the assessee. Thereafter he charged interest under section 139(8). Assuming that he had failed to pass an order and charge interest under section 215, the assessment order cannot be regarded as incorrect or ina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 1st day of April next following the said financial year up to the date of the regular assessment shall be payable by the assessee upon the amount by which the advance tax so paid falls short of the assessed tax: Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect as if for the words 'seventy five per cent' the words 'eighty-three and one-third per cent' had been substituted. (2) Where before the date of completion of a regular assessment, tax is paid by the assessee under section 140A or otherwise,- (i)interest shall be calculated in accordance with the foregoing provision up to the date on which the tax is so paid; and (ii)thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax as so paid insofar as it relates to income subject to advance tax falls short of the assessed tax. (3) Where as a result of an order under section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 264, the amount on which interest was payable under this section has been reduced, the interest shall be reduced accordingly and the excess i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or dates specified in section 211, he shall be deemed to be an assessee in default in respect of such instalment or instalments. (2) If any assessee does not pay on the specified date any instalment of advance tax that he is required to pay under section 210 and does not, on or before the date on which any such instalment as is not paid becomes due, send under sub-section (1) or sub-section (2) of section 212 an estimate or a revised estimate of the advance tax payable by him, he shall be deemed to be an assessee in default in respect of such instalment or instalments. 13. Section 221 provides that when an assessee is in default in making payment of tax, he shall, in addition to the amount of the arrears and the amount of interest payable under sub-section (2) of section 220, be liable, by way of penalty, to pay such amount as the ITO may direct. 14. The question that has arisen in the instant case is whether an order levying interest is an order independent of and distinct from an assessment order. Section 143(2) does not provide for levying of interest. Rule 40 provides as under: 40. Waiver of interest.- The Income-tax Officer may reduce or waive the interest p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO may appeal to the AAC against such order. The orders against which appeals will lie have been enumerated in clauses (a) to (o) of section 246. Clauses (c), ( d), ( e) and (m) are relevant for this purpose and are as under: 246. Appealable orders.- (a) and (b ) ****** (c) an order against the assessee, where the assessee denies his liability to be assessed under this Act or any order of assessment under sub-section (3) of section 143 or section 144, where the assessee objects to the amount of income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed; (d) an order under section 146 refusing to reopen an assessment made under section 144; (e) an order of assessment, reassessment or recomputation under section 147 or section 150; It will be seen from sub-clause (c) of section 246 that an assessee has a right of appeal (1) where he denies his liability to be assessed under the Act; or (2) any order of assessment under sub-section (3) of section 143 or section 144 where (i) the assessee objects to the amount of income assessed; (ii) to the amount of tax determined; or (iii) to the amount of lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee can deny his liability to pay any interest at all under section 215 in an appeal. In order to arrive at this conclusion the Supreme Court has drawn a fine distinction between 'Assessment' and an assessment order under sub-section (3) of section 143 or section 144. The assessee has a right of appeal against an order where he denies 'his liability to be assessed under this Act' under section 246(c). Therefore, he can prefer an appeal denying his liability to pay any interest at all under section 215. This right of appeal is not to be equated with the right of appeal that the assessee has to prefer an appeal against any order of assessment under sub-section (3) of section 143 or section 144 in which case he can take all the points including the point reduction of the liability to pay tax or the quantum of the income assessed. 18. In order to appreciate the fine distinction made by the Supreme Court one has to bear in mind the meaning of the word 'Assessment' as explained in the case of C.A. Abraham v. ITO [1961] 41 ITR 425 (SC) and also in the case of Kalawati Devi Harlalka v. CIT [1967] 66 ITR 680 (SC), it was observed in the case of C.A. Abraham (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 143(3). That is the reason why against the order charging interest under section 215 the assessee can prefer an appeal denying his liability to be assessed and on no other ground whereas all the points included in an assessment order under section 143(3) may be agitated in appeal before the appellate authority. 20. That a separate order will have to be passed for charging interest under section 215 has clearly been stated by the Supreme Court in the case of Central Provinces Manganese Ore Co. Ltd. ( supra): Although section 143 and section 144 do not specifically provide for the levy of interest and the levy is, in fact, attributable to sub-section (8) of section 139 or section 215, it is nevertheless a part of the process of assessing the tax liability of the assessee. Where the Income-tax Officer considers that there is a case for levying interest under sub-section (8) of section 139 or under section 215, what he does in practice, is to make an order levying such interest after completing the assessment of the assessee's total income and the tax payable by him. (p. 966) [Emphasis supplied] The position is also made clear by the period of limitation provided by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 751 . In that case the ITO failed to charge any interest while passing the assessment order for the assessment year 1968-69. According to the assessee, the ITO was satisfied with the explanation giving by the assessee that the delay in filing the return was due to the death of the partners of the assessee-firm. The ITO had, therefore, waived the interest. The assessment order was, however, totally silent on the question of interest. On appeal, the AAC confirmed the order of assessment. Therefore, the Additional Commissioner issued a notice under section 263 to show cause why the order of assessment should not be revised as it did not disclose any reason for waiver of interest. The assessee filed a writ petition challenging the said notice. It was contended for the petitioner that (a ) the order of the ITO having merged in the appellate order of the AAC, the Additional Commissioner had no jurisdiction to issue the notice under section 263, and (b) an order under section 139(8) was a discretionary order of the ITO and the exercise of such discretion in one way or another could not be the subject-matter of interference by the revisional power of the Commissioner under section 263. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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