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TMI Blog1975 (8) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... to act under section 154 of the Income-tax Act, 1961, and corrected the order since the conditions precedent for condoning delay in making payment of the annuity deposit were not satisfied with the result that the allowance made on account of annuity deposit was withdrawn. Being aggrieved by this order of rectification of the Income-tax Officer, the assessee went in appeal before the Appellate Assistant Commissioner who confirmed the order of the Income-tax Officer. The assessee, therefore, carried the matter in further appeal to the Tribunal. Before the Tribunal, it was conceded on behalf of the assessee that no application in the prescribed form as required by clause 4 of the Annuity Deposit Scheme, 1966, was made within the prescribed period. It was also conceded that no previous approval of the Inspecting Assistant Commissioner as required under 2nd proviso to clause 4 was obtained by the Income-tax Officer. The Tribunal, however, was of the opinion that since the Income-tax Officer had a discretion under the proviso to section 280C(2) of the Income-tax Act, 1961, to extend the time and since the Income-tax Officer concerned had noted that the deposit was paid after the prescr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordance with, and subject to the provisions of, this Chapter in respect of the adjusted total income of the previous year or previous years, as the case may be. (2) In respect of the adjusted total income in relation to which an annuity deposit is to be made under sub-section (1), such deposit shall- (i) in respect of the adjusted total income of the previous year or previous years relevant to the assessment year commencing on the 1st day of April, 1966, or any earlier assessment year, be made in advance in accordance with the provisions of sections 280E to 280-I; (ii) in respect of the adjusted total income of the previous year or previous years relevant to the assessment year commencing on the 1st day of April, 1967, or any subsequent assessment year, not being an assessment year commencing on or after the 1st day of April, 1969, be made by such person at any time (in one sum or in instalments of his choice) during the financial year immediately preceding such assessment year at the rate or rates specified in this behalf in the annual Finance Act: Provided that the Income-tax Officer may, in such cases, under such circumstances and subject to such conditions as may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpowers the Central Government to frame one or more scheme or schemes to be called Annuity Deposit Scheme or Schemes in relation to deposits under Chapter XXII-A. Sub-section (2) enumerates the different topics which may be provided for by the Scheme. Clause (aa) of sub-section (2) is the topic relevant for purposes of these references. Sub-section (2)(aa) reads as under : " 280W. Annuity Deposit Scheme.-(1)...... (2) A scheme under sub-section (1) may provide for-... (aa) the cases in which, the circumstances under which and the conditions subject to which, the Income-tax Officer may, under the proviso to clause (ii) of sub-section (2) of section 280C, allow a depositor to make a deposit or a further deposit after the expiry of the financial year immediately preceding the assessment year." The Central Government has, in exercise of powers conferred by section 280W of the Income-tax Act, 1961, framed the Annuity Deposit Scheme, 1966. Clause 4 of the said Scheme, so far as relevant for purposes of these references, reads as under: "4. Deposit when to be made.-(i) Save as provided hereinbelow, annuity deposit in relation to any assessment year commencing on the 1st day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scheme were wanting and were not complied with before exercising the discretion, the order is liable to be rectified under section 154 of the said Act, as it would be an error apparent on the record. On behalf of the assessees these contentions were sought to be repelled by urging that the Tribunal was justified in drawing the inference that, since the Income-tax Officer allowed the deduction on account of annuity deposit after noting specifically in the respective assessment orders that the assessees concerned have made the deposits on 3rd April, 1967, coupled with the fact that the said annuity amount refunded every year as required under section 280D has been brought to tax, the Income-tax Officer has in fact condoned the delay. It was further urged that if this discretion has been exercised by the Income-tax Officer concerned, as has been found by the Tribunal, the court should not interfere with this discretionary order. In our opinion, the contentions of the revenue should prevail. It is an admitted position that there is no necessity of any detailed investigation in this matter so far as the question of exercise of discretion of the Income-tax Officer under the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There is also another condition which has limited this discretion of the Income-tax Officer under the proviso to section 280C(2). The second limitation is that the asseessee concerned has to make an application in writing in the prescribed form before a specified date and the specified date in the present references before us is the date of filing of return. Unless the assessee concerned made an application before the specified date, which in the present references is the date of filing of return, for condoning the delay, the Income-tax Officer concerned could not have exercised his discretion at all. The third limitation to which this discretion of the Income-tax Officer is subjected is that he is required to make the order in writing. It is an admitted position here that all these three conditions are wanting, namely, (1) no application in the prescribed form had been made before the specified date; (2) no previous approval was obtained from the Inspecting Assistant Commissioner before condoning the delay ; and (3) no order has been made in writing condoning the delay. If these three conditions are wanting, which in fact have been found to be wanting by the Tribunal in these matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisable as from April 11, 1952, even though the Act came into force from May 24, 1953. The relevant rules prescribing the cases in which and the circumstances under which discretion was to be exercised by the Income-tax Officer under the 5th proviso were prescribed by the Central Government by rule 58 in December, 1953. Negativing the contention of the Attorney-General urged on behalf of the revenue that in any case there was nothing to show that the Income-tax Officer had purported to exercise his discretion when he passed the order of assessment and did not impose any liability for payment of interest under section 18A(6), Shah J., speaking for the majority of the judges, observed as under: " The Attorney-General contended that in any event there was nothing to show that the Income-tax Officer had purported to exercise his discretion when he passed the order of assessment and did not impose any liability for payment of interest under section 18A(6). That may be so. But the case of the assessee did fall within the terms of rule 48(1) and the Income-tax Officer must in law be bound to consider whether he was entitled to reduction or waiver of interest under the fifth proviso. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercised by the Income-tax Officer. If those conditions were wanting, it cannot be successfully urged, much less accepted, that that discretion was in fact exercised by the Income-tax Officer concerned. Mr. Patel, learned advocate appearing on behalf of the assessees, invited our attention to the decision of a single judge of the Kerala High Court in Mohammed Kunhi v. Additional Income-tax Officer, Cannanore, where the learned single judge was concerned with the legality of the rectification proceedings under section 35 of the Indian Income-tax Act, 1922, in respect of an original assessment order where the Income-tax Officer omitted to charge interest as required under section 18A. In that context, the learned single judge held that in such proceedings it was necessary to conduct an investigation to find out whether any part of the said rule has been satisfied to determine whether the officer has exercised his discretion, and if it was possible to decide whether there was an error or not only after coming to the conclusion whether rule 48(1) has been satisfied, the error could not be said to be an error apparent on the face of the record and the officer cannot invoke section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the previous approval of the Inspecting Assistant Commissioner, if the amount of interest exceeds Rs. 1,000, condone the delay. Admittedly, in the said case before the Division Bench, the previous approval of the Inspecting Assistant Commissioner was not obtained. In that context Divan C. J., speaking for the Division Bench, observed as under : "Therefore, it is apparent that the obligatory levying of penal interest under section 139 was omitted by the Income-tax Officer and the procedure laid down in section 139(8) and rule 117A was not followed. Even if, therefore, the provisions of section 139 and rule 117A were held to be retrospective and were held to be applicable to the case of the assessee, the Income-tax Officer at the time of the original assessment order had not waived penal interest within the meaning of rule 117A. Hence, non-waiving of penal interest was consequently an error apparent on the face of the record and rectification provisions of section 154 could clearly be invoked by the Income-tax Officer." Attention of the Division Bench was invited to the decision of the Supreme Court in S. A. L. Narayan Row v. Ishwarlal Bhagwandas, but the Division Bench f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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