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Chandra Metal Company Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 148 of 1975
Judge
Reported in[1979]119ITR279(All)
ActsIncome Tax Act, 1961 - Sections 139(1) and 154
AppellantChandra Metal Company
RespondentCommissioner of Income-tax
Appellant AdvocateR.K. Gulati, Adv.
Respondent AdvocateR.S. Dhawan and ;A. Gupta, Advs.
Excerpt:
- - the assessee went up in appeal but failed. gulati, learned counsel for the assessee, has submitted that it is well settled that for purposes of section 154 of the act it is only an obvious and patent mistake apparent on the face of the record which could be rectified......facts because there the interest was not charged at all. it was sought to be charged for the first time by way of rectification. accordingly, it was held that the question whether interest was chargeable being a debatable point no rectification proceedings were maintainable. in the present case, interest was admittedly charged. the only question was whether the calculation of interest was correct. it is not disputed that in accordance with the provisions of the act the calculation was wrong and, therefore, there was a shortfall of rs. 10,074. though there is a difference of opinion between the various high courts, this court's view as expressed in income-tax reference no. 618 of 1974 (cit v. tikam chand agarwal, decided on august 25, 1978--since reported in : [1979]119itr248(all) ) is.....
Judgment:

Satish Chandra, C.J.

1. The question of law which requires our consideration is :

'Whether the revenue could validly rectify the assessment order under Section 154 of the I.T. Act, 1961 ?'

2. The question relates to the assessment year 1967-68. For this year, the return of income was due to be filed by September 30, 1967. It was actually filed on March 21, 1968. In due course, the ITO completed the assessment by an order dated August 5, 1968. In the assessment form and the demand notice a sum of Rs. 2,658 was shown as payable as interest under Section 139(1) of the Act for delay in submission of returns.

3. Subsequently, the ITO served upon the assessee a notice for rectification of the assessment order under Section 154. He wanted to add a sum of Rs. 10,074 on account of interest on the footing that the interest charged originally was by mistake wrongly calculated. The assessee filed objections, which were repelled and the assessment order was suitably rectified. The assessee went up in appeal but failed. He then approached the Tribunal, which also repelled his submissions and dismissed the appeal.

4. Mr. Gulati, learned counsel for the assessee, has submitted that it is well settled that for purposes of Section 154 of the Act it is only an obvious and patent mistake apparent on the face of the record which could be rectified. In support of this contention, he placed reliance on Raja Hari Chand Raj Singh v. CIT : [1978]114ITR727(All) . In that case, it was specificallyheld that the question whether under Section 139(1) of the Act interest was chargeable for the delayed submission of returns by the assessee when he had not applied for extension of time, is one on which there is serious difference of opinion between the various High Courts. Therefore, the ITO cannot charge interest by way of rectification. In the present case the assessee did not apply for extension of time. To this extent the decision of this court in Raja Hari Chand Raj Singh's case : [1978]114ITR727(All) is material but that case is distinguishable on facts because there the interest was not charged at all. It was sought to be charged for the first time by way of rectification. Accordingly, it was held that the question whether interest was chargeable being a debatable point no rectification proceedings were maintainable. In the present case, interest was admittedly charged. The only question was whether the calculation of interest was correct. It is not disputed that in accordance with the provisions of the Act the calculation was wrong and, therefore, there was a shortfall of Rs. 10,074. Though there is a difference of opinion between the various High Courts, this court's view as expressed in Income-tax Reference No. 618 of 1974 (CIT v. Tikam Chand Agarwal, decided on August 25, 1978--since reported in : [1979]119ITR248(All) ) is that interest is chargeable under these circumstances.

5. Mr. Gulati then submitted that in point of law no interest was chargeable and hence the ITO had no jurisdiction to initiate proceedings for charging interest by way of rectification. As already said, this court's view is that in the circumstances the interest is chargeable. Therefore, the ITO had jurisdiction to charge interest. This question, however, is not very material because the ITO is not trying to charge interest for the first time by way of rectification ; he had already charged it. He is now merely trying to rectify a computational error.

6. It was then urged that it is not quite correct to say that initially the ITO charged interest because, as held by the Jammu and Kashmir High Court in Mulakh Raj Bimal Kumar v. ITO , the charge of interest should be in the assessment order itself. Mentioning of an amount payable as interest in the demand notice is not enough. In the aforesaid case, the Jammu and Kashmir High Court had ruled that interest is not chargeable under Section 139 unless the assessee seeks extension of time by way of an application. This court has taken a contrary view in Addl. CIT v. Saraya Distillery [1978] 115 ITR 34. It has held that Section 142 of the Act read with Section 215 indicates that at the time of regular assessment interest has to be charged from the persons who have paid advance tax on their own estimate in an amount which falls short of the assessed tax by more than 75 per cent, thereof, and the officer is not required to pass aformal order to that effect. The officer has only to calculate the interest and make a demand for it. In view of this decision of our own court, we are not inclined to agree with the observations of the Jammu and Kashmir High Court. The amount of interest is calculated in the assessment form, which amount then is carried into the demand notice.

7. In the end, it was submitted that the ITO had jurisdiction to waive or reduce the amount of interest and he was deemed to have exercised that power. The Tribunal has held that there was no occasion for the ITO to exercise the discretion of waiver or reduction of interest. The error was of a clerical nature. It cannot, hence, be said that in the circumstances the officer had waived or reduced the interest payable by the assessee. In our opinion, this finding of fact is not vitiated by any error of law.

8. In A. H. Wheeler & Co. P. Ltd. v. ITO : [1964]51ITR92(All) , it was held that even assuming that the omission to reduce the super-tax rebate was deliberate, if that view was manifestly wrong in law, the ITO had jurisdiction to rectify the assessment. This shows that even if such a mistake was deliberate, since the interest was chargeable according to the statutory provisions, it could be rectified.

9. In the result, we answer the question referred to us in the affirmative, in favour of the department and against the assessee. The Commissioner of Income-tax will be entitled to costs, which we assess at Rs. 200.


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