1. These are two inter-connected appeals of the assessee, who is taxed in the status of individual, for the same assessment year 1975-76 against two orders of the ITO, one being an order under Section 155 of the Income-tax Act, 1961 ('the Act'), dated 7-2-1979 and the other being an order dated 8-3-1979 under Section 154 of the Act.
2. We may first state the relevant facts in respect of the two orders passed. The ITO passed the assessment order dated 3-9-1977 for the assessment year 1975-76 and towards the end the following observations were made: Assessed under Section 143(3). Tax shall be worked out on the above income. Notice of demand together with the challan shall be issued after giving credit for taxes paid under Section 210. Interest under Section 139(8) shall be charged.
Notice under Section 274 read with Section 271 shall also be issued, also issue notice under Section 274 read with Section 273.
In consequence of this assessment order after calculation of tax, a notice of demand was issued to the assessee demanding payment of Rs. 16,804. On the back side of the demand notice the details of the working of the amount demanded were given. It is seen from the photostat copy of the demand notice included in the assessee's paper-book that the amount demanded included interest under Section 217 of the Act, amounting to Rs. 3,683 and interest under Section 139 of the Act, amounting to Rs. 381. The assessee addressed a letter dated 3-8-1978 pointing out that on verification it was found that interest under Section 217 of Rs. 3,683 had been charged and that from the order it was found that there was no order for charging interest under Section 217. In view of this, it was stated that the interest was wrongly charged and a request was made to rectify the demand. The ITO did not dispose of this application of the assessee but issued a notice proposing rectification in respect of tv o points, viz., (i) deduction of Section 80G should be restricted to 10 per cent of total income ; Thereafter, he passed an order under Section 154 dated 8-3-1979 in which he not only dealt with the mistakes pointed out in his notice to the assessee referred to earlier but also with the assessee's pending application dated 3-8-1978. The order passed is clearly a combined order and in para 2 in the opening part he deals with the assessee's letter dated 3-8-1978 objecting 'to the charging of interest under Section 217 as it was not mentioned in the body of the assessment order'. The ITO disposed of this issue in the next sentence as under: Since this is the mistake apparent from records, it is rectified under Section 154.
The ITO in the next sentence in the same para referred to the assessee's objection about the refusal of interest charged under Section 139(8), in view of revised total income consequent upon the withdrawal of excess rebate allowed under Section 80G of the Act. In other words, the ITO started dealing with the second item of his notice about recalculation of interest chargeable under Sections 139(8) and 217. In para 3, the ITO observed that interest under Sections 139(8) and 217(1) shall be revised in view of his observations above. In that order he also referred to the total income assessed as per order dated 7-2-1979. Shri K.C. Patel, the assessee's counsel, submitted that the assessee had no idea about the passing of order dated 7-2-1979 as he had not been issued any notice before the passing of the order. He stated that on making enquiries, the assessee found that the ITO had earlier passed an order dated 7-2-1979 under Section 155 in order to revise the assessee's share of income from the firm Jaylaxmi Credit Corporation. As a result of order under Section 155, the assessee's income got revised downwards and this explanation, the absence of any notice to the asses-see prior to the amendment made by the ITO (sic).
However, in that order as is seen from the photostat copy included in the assessee's paper-book, the ITO in hand had included the following line: 3. Shri K.C. Patel challenged both the orders of the ITO for the following reasons: (i) He contended that as in the assessment order charging of interest under Section 217 was not mentioned by the ITO even though he had specifically mentioned about the charging of interest under Section 139(8) of the Income-tax Act, interest could not be charged through the demand notice. Tt was stated that demand notice was like a decree in a civil case while assessment order was like a judgment.
(ii) The ITO had not properly disposed of the assessee's application for rectification dated 3rd August, 1978 in the order passed on 8-3-1979. Tt: was pointed out that when the ITO had accepted the mistake, he should have cancelled the demand of interest under Section 217 and not proceeded further.
(iii) In respect of order under Section 155 dated 7-2-1979, it was submitted that so far as the reduction part of the income of the assessee was concerned no notice was required but as the ITO had added one sentence in hand for charging of interest under Section 217, this could not be done, being a substantive order to levy interest, without giving a notice to the assessee.
It was also stated that the AAC was not right in observing that there was no appeal provided in the circumstances of the assessee's case and attention was invited to the fact that the appeals in this case were filed against rectification orders under Sections 154 and 155 and not simply against charging of interest under Section 217.
4. On behalf of the revenue, it was submitted that as held by the Allahabad High Court in the case of Ram Kishan Rajendra Kumar v. ITO, no separate order for charging of interest under Section 217 was required in the assessment order and the levy of interest being an automatic imposition under the relevant provision, the ITO's action in demanding the interest through the demand notice after making the tax calculations in the prescribed form was in order. It was also pointed out that the ITO was aware of the default in filing the estimate of advance tax when in the last sentence he referred to issuing of notice under Section 274 read with Section 273 of the Act, and, therefore, even though the levy of interest under Section 217 was not specifically mentioned, interest was rightly charged at the time of making calculations of the amount payable by the assessee. It was next stated that the ITO having charged the interest under Section 217 at the time of assessment itself while passing the first order under Section 155, dated 7-2-1979 was merely referring to the recalculation of interest payable under Section 217 though he did not use accurate words. It was pointed out that as a result of an order under Section 155, the assessee's income had come down and what the ITO meant by the sentence was to revise downward the demands of interest under Sections 139 and 217 also. Lastly, it was submitted in respect of the order under Section 154 of the Act, dated 8-3-1979 that the mistake which the ITO accepted in that order was merely of not mentioning the fact of charging of interest under Section 217 in the body of the assessment order and that mistake only is sought to be made good in his order and not that he ordered for the levy of interest under Section 217 itself for the first time since interest had in fact been levied at the assessment stage itself. It was also submitted that the ITO thereafter dealt with his own notice of rectification of the assessee and disposed of both the assessee's application and his notice together after hearing the assessee and also directed for recalculation of both the interests under Sections 139(8) and 217(1) on account of upward revision of the income due to mistake in the calculation of deduction under Section 80G. Alternatively, it was submitted that the ITO could also charge interest under Section 217 and recalculate the same under Section 154, if it is held that he had failed to properly charge the interest at the assessment stage. Reliance was placed on an unreported decision of the Gujarat High Court in the case of Dalwadi & Co. v. CIT [IT Reference No. 54 of 1972], order dated 17-12-1973 and two reported decisions of the Gujarat High Court in Addl. CIT v. Mohanlal P. Jain  102 ITR 584 (which was relied upon by the Tribunal in an order dated 6-91975 in the case of Girishchandra & Co. [IT Appeal No. 1234 (Ahd.) of 1974-75] wherein interest under Section 217 was charged by issuing notice under Section 154, also cited by the revenue) and CIT v.Ramjibhai Hirjibhai & Sons  110 ITR 411 (Guj.).
5. We have carefully considered the rival submissions and feel that even though superficially the ITO has made a number of mistakes in drawing his orders the substance of the matter, viewed in proper light, remains unaffected. We will first deal with the assessee's appeal [IT Appeal No. 1727 (Ahd.) of 1981] relating to order under Section 155 of the ITO dated 7-2-1979. This order was clearly passed by the ITO to revise the assessee's assessed income downwards by taking note of his assessed share of income from the firm, Jaylaxmi Credit Corporation.
For this purpose, it is undisputed that the ITO could make the rectification without notice. The only dispute raised by the assessee is in respect of last sentence added in band by the ITO about charging of interest under Sections 139 and 217. The asses-see's interpretation is that the ITO was seeking to impose interest under Section 217by addingthis sentence. In the facts of the case such an interpretation is cleary unwarranted. The ITO undisputedly had raised the demand of interest under Section 217 by issuing the demand notice to the assessee and this he did after making calculation in a form used for the purpose in the Income-tax Office. Again, if the ITO was purporting to levy interest under Section 217 by writing the sentence in the order under Section 155, one fails to understand as to why he wrote what he did in his later order dated 8-3-1979 while dealing with the assessee's application dated. 3-8-1978. This sentence of the ITO, therefore, has to be understood in the context and, in our view, it only means that calculations of interests under Sections 139 and 217 will have also to be amended. This would mean again a relief to the assessee and there was no question of issuing a notice to the assessee before making the rectification. Alternatively, the sentence can be treated to be redundant as it could not be held to be imposing the levy of interest under. Section 217 for the first time in the circumstances of this case. Consequently, we see no substance in the assessee's appeal IT Appeal No. 1727 (Ahd.) of 1981 and, accordingly dismiss the same.
6. Now we come to the order under Section 154 dated 8-3-1979. We may point out at the outset two important facts. Section 143(3) of the Act, under which the assessment is made by the ITO on the assessee requires the ITO not only to make an assessment of total income or loss of an assessee but also the determination of the sum payable by him or refundable to him on the basis of such assessment. Here, it is to be noted that the ITO is required not only to work out the tax payable by an assessee but the sum payable which in its very nature requires the ITO to take into account other levies like interests under Section 139(8), 217, etc. Secondly, even when the ITO computes the income by writing in the assessment order, his task under Section 143(3) is still incomplete and it is completed only when he also signs the tax calculation sheet in use in the Income-tax Office. In the tax calculation sheet, not only the taxes are calculated but also other sums payable like the interest, if any, are worked out. The ITO signs both the assessment order and the tax calculation sheet and thereafter a demand is created against the assessee by issuing a demand notice.
Taking note of these facts and the Allahabad High Court decision relied upon by the revenue, we feel that the ITO's action in demanding interest under Section 217 by giving details on the demand notice was in order. The Allahabad High Court in Ram Kishan (supra) at page 370 in para 6, has clearly observed that it was "not satisfied that the order imposing interest has to be a speaking order because the imposition is 'automatic' and that it is only a matter of calculation". In this view of the matter, the action of the ITO at the assessment stage was truite correct and the ITO would have been justified in rejecting the assessee's application dated 3-8-1968.
7. We may next judge his action as is seen from the order dated 8-3-1979. He merely refers to the facts pointed out by the assessee in letter dated 3-8-1978 that the fact of charging of interest under Section 217 was not mentioned in the body of the assessment order and treats it to be a mistake apparent from record which he rectified under Section 154. From reading of this order, we find force in the contention of the revenue that the ITO had merely tried to rectify the absence of a sentence to that effect in the assessment order and no more as the interest had already been charged at the assessment stage itself. The rectification, therefore, which the ITO was contemplating was verbal in nature without disturbing the calculation. It is for this reason, we find that he proceeded to recalculate the interest as per para 3 of his order. However, in one sense it is purely academic, to take note of this unnecessary order of the ITO as his action in charging the interest at the assessment stage is fully justifiable in view of our findings in the preceding para and the decision of the Allahabad High Court which is based on reading of the relevant Section 217. We find, therefore, no substance in the second appeal of the assessee, i.e., IT Appeal No. 1728 (Ahd.) of 1981, and this is also dismissed.