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TMI Blog1973 (9) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner by counsel for the assessee to establish that no interest was chargeable in view of rule 40(1) of the Income-tax Rules, 1962, for short, " the Rules ", framed in accordance with section 215(4) of the Act, were not considered by the Commissioner as he was of the view that those matters were in the first instance to be considered by the Income-tax Officer. The order of the Commissioner is annexure " B ". From this order, appeals were taken for the three years to the Income-tax Appellate Tribunal, Cochin Bench, and the Tribunal allowed those appeals and set aside the order of the Commissioner in relation to all the three years. The view taken by the Tribunal was that it has to be inferred in view of section 215(4) read with rule 40(1) that the Income-tax Officer exercised his discretion to waive or reduce the interest in favour of the assessee and that, therefore, the assessment orders of the Income-tax Officer cannot be said to be erroneous and prejudicial to the interests of the revenue. Such a view has been taken by the Tribunal mainly on the basis of the decision of the Supreme Court in S. A. L. Narayan Row v. Ishwarlal Bhagwandas and the observations of the Bomba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, af ter 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. " The question that arises for determination relates to the power of the Commissioner under section 263(1) of the Act. This in its turn depends on the interpretation of the section and particularly of the words of the section " erroneous in so far as it is prejudicial to the interests of the revenue ". The Tribunal has referred to a number of decisions but as we understand the gist of the order of the Tribunal, the view of the Tribunal is based on the observations of the Bombay High Court in Shantilal Rawji v. M. C. Nair, IV Income-tax Officer, E-Ward, Bombay, at page 443. These are the observations : "Now, let us first of all consider what the position would have been if this proviso was in force on the 10th March, 1953. In fact it came into force on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subsequent decision the appeal from which was disposed of by the Supreme Court in the decision reported in [1965] 57 I.T.R. 149. The question therein was whether the Income-tax Officer acting under section 35 of the Indian Income-tax Act, 1922, had the power to rectify an alleged mistake in the order of assessment passed by the Income-tax Officer in that he omitted to charge interest under section 18A(6) of that Act. At the time when the Income-tax Officer passed the order, section 18A stood unqualified casting an obligation on the part of the Income-tax Officer to charge interest. Later the section was amended and a proviso was added vesting a discretion in the Income-tax Officer similar to the discretion now vested under rule 40 of the rules framed under section 215(4) of the Act. This proviso was given retrospective operation. It was held that in view of the retrospective operation given to the proviso it must be assumed that the proviso was in the statute book when the order was passed. In those circumstances, it was held by the High Court that the rectification order was not justified. The revision taken before the Commissioner against the order had been dismissed on the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act will be left helpless ; he will not be able to decide whether the discretion vested in the Income-tax Officer has been properly or improperly exercised. In such circumstances two courses, we conceive, are open to the Commissioner under section 263. He can himself decide in revision whether interest should be charged or not and revise the order of the Income-tax Officer or more properly he may set aside the order in that regard and remit it for fresh consideration by the Income-tax Officer. This is what has been done by the order of the Commissioner which is annexure "B " in the paper book. The order has specifically reserved a right to the assessee to urge such grounds that he may have to support the position that no interest should be charged by virtue of rule 40. The Commissioner is certainly entitled to know on what grounds interest had been waived. The discretion vested in the Income-tax Officer ranges between a right to waive interest completely or to reduce it. Naturally, interest cannot be automatically waived altogether. We conceive, a judicial exercise of discretion is necessary to find out what interest should be charged or whether any interest at all should be ch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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