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TMI Blog1983 (7) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s Harsaran Dass Sita Ram. It has been assessed to income-tax for a number of years. For the assessment year under appeal the return of income was filed on 29th Oct., 1979., declaring an income of Rs. 3,86,834. The assessment was completed by the ITO on a total income of Rs. 3,96,510 vide order dt. 27th Nov., 1979., The assessment so made was challenged in appeal before the CIT(A) who vide his order dt. 1st April, 1980., allowed a relief of Rs. 800 to the assessee. Thus the income was reduced from Rs. 3,96,510 to Rs. 3,95,710. 3. The assessee was required, in terms of s. 209A, inserted by Finance Act, 1978 w.e.f. 1st June, 1978, to send to the ITO a statement of advance-tax payable by him computed in the manner laid down in cl. (a) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, yet deposited the sum of Rs. 2,642 which was demanded on assessment. This payment of Rs. 2,642 was after adjustment of Rs. 87,500 paid by the assessee as advance-tax (Rs. 80,500) and self assessment tax (Rs. 7,000). 4. Thereafter the CIT called for the record and after examination thereof came to infer that "the order of assessment made by the ITO was erroneous so as to be prejudicial to the interest of revenue because, "in the absence of statement of advance-tax the ITO was required to charge interest amounting to Rs. 6,307 u/s 217(1). The ITO however, failed to compute such interest payable and omitted to charge the same. Further, the ITO also failed to initiate penalty proceedings u/s 273(1)(b) following provisions of s. 209A(1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order had not been made by the ITO u/ss 217 or 273 and, therefore, the CIT could not find the assessment order which did not include these orders as erroneous and prejudicial to the interest of revenue, that in the absence of such an order in existence made by the ITO, the ITO is deemed to have waived the interest and used his judicial discretion not to levy the interest and not to impose the penalty which even on the facts of the case was not exigible, that for levying interest u/s 217, the ITO has to take into consideration the provisions of r. 40 of the IT Rules which also mentions the IAC and by directing the ITO to levy the interest u/s 217, the CIT interfered with the jurisdiction of the IAC as well and that on the facts and circumsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs was erroneous so as to be prejudicial to the interest of revenue, that when there is no speaking order made by the ITO, there is no presumption of waiver of interest u/s 217 and that on the facts of the case, the CIT had lawfully assumed jurisdiction and had cancelled the order of the ITO with a direction to make it de novo and his order is valid. For the submissions reliance was placed on the following judgments: (i) Dawjee Dadabhoy & Co. vs. S.P. Jain & Anr. (1957) 31 ITR 872 (Cal); (ii) CIT vs. Cochin-Malabar Estates Ltd. (1974) 97 ITR 466 (Ker); (iii) Prem Chand Sita Nath Roy vs. Addl. CIT (1977) 109 ITR 751 (Cal); (iv) Singho Mica Mining Co. Ltd. vs. CIT (1978) 111 ITR 231 (Cal); (v) CIT vs. City Palayacot Co. (1980) 15 CT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment which had not been the subject matter of appeal. In the case before us the CIT had cancelled the entire assessment. On this position of law alone, the CIT's order is bad in law. 9. The judgment of the Kerala High Court in the case of Cochin-Malabar Estate Ltd. is on the question of ITO's failure to charge interest u/s 215(1) and is not as such directly applicable to the case of the assessee. In the case of Narpat Singh Malkhan Singh referred to supra, the Madhya Pradesh High Court has held that if the entire order of the ITO was set aside after part of it had merged with the order of the AAC, and the ITO was directed to make a fresh assessment, the order of the CIT would be bad in law. The court has further held that the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll that the law requires, so far as the penalty proceedings are concerned, is that they should be initiated in the course of the proceedings for assessment. Failure of the ITO to record in the assessment order his satisfaction or the lack of it in regard to the liability of penalty cannot be said to be a factor vitiating the order in any respect. An assessment cannot be said to be erroneous or prejudicial to the interest of revenue because of the failure of the ITO to record his opinion about the liability of penalty in the case. In view of the above judgments, the assumption of jurisdiction by the CIT on a mere technical default by the assessee was neither justified on facts nor in law. Therefore, the order of the CIT is bad in law. 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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