Sudarsan Trading Co. Ltd. vs Commissioner of Income Tax

At the instance of the assessee, the Tribunal referred the following question for our opinion u/s 256(1) of the Income Tax Act, 1961 :

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the order u/s 263 was a proper and valid order and that the jurisdiction u/s 263 has been validly invoked ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Income Tax Officer could not have been deemed to have considered the levy of interest u/s 215 and dropped the same at the time of the original assessment ?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Income Tax Officer had not considered the question of charging interest u/s 215 of the Income Tax Act and, therefore, the order of the Income Tax Officer was erroneous and prejudicial to the interests of the Revenue under the provisions of section 263 of the Act ?"

The assessee is a public limited company carrying on business among others mainly as chit promoters. For the assessment year 1972-73, the Income Tax Officer, in the original assessment, did not charge interest u/s 215 of the Income Tax Act. The Commissioner invoking the provisions of section 263 of the Act came to the conclusion that the order passed by the Income Tax Officer is erroneous and prejudicial to the interests of the Revenue. Accordingly, the Commissioner directed the Income Tax Officer to consider the applicability of the provisions of section 215 after hearing the assessee and after taking note of the provisions of rule 40 of the Income Tax Rules. On further appeal before the Tribunal, the assessee contended that the interest leviable u/s 215 should be deemed to have been waived under rule 40 and, therefore, the order of the Commissioner was erroneous. The Tribunal, however, rejected the contention put forward by the assessee and confirmed the order of the Commissioner by following the decision of this court rendered in the case of Commissioner of Income Tax Vs. City Palayacot Co., . Questions Nos. 1 and 2, referred by the Tribunal, are directly covered by a decision of this court in Commissioner of Income Tax Vs. City Palayacot Co., . Accordingly, we answer the question referred to us as questions Nos. 1 and 2 in the affirmative and against the assessee.

So far as the third question is concerned, the tribunal came to the conclusion that the Income Tax Officer has considered the question of charging interest u/s 215 of the Income Tax Act and, therefore, the order passed by the Income Tax Officer was erroneous and prejudicial to the interests of the Revenue. Accordingly, the Tribunal held that the Commissioner has jurisdiction to interfere with the order passed by the Income Tax Officer u/s 263 of the Act. Since the interest was not waived expressly by the Income Tax Officer, it cannot be said that the Income Tax Officer would have impliedly waived levy of interest u/s 215 of the Income Tax Act, Taking this factual aspect in view, we consider that the order passed by the Tribunal on this aspect is in order. Accordingly, we answer the question referred to us as question No. 3 in the affirmative and against the assessee. There will be no order as to costs. Counsel fee Rs. 500.