1. The deceased assessee, namely, Shri M. A. Rahim did not pay any advance tax although he had filed an estimate of tax payable under Section 209A(1) of the Income-tax Act, 1961 ('the Act'), for the assessment year 1980-81. The advance tax payable according to his own estimate was Rs. 32,938 and the tax determined on regular assessment on 30-12-1981 was Rs. 39,812. In the assessment order, the IAC who made the assessment did not charge any interest under Section 215 of the Act. The Commissioner invoked the provisions of Section 263 of the Act as he was of the view that non-levy of interest in the assessment order was erroneous and prejudicial to the interests of the revenue. In response to the notice issued under Section 263, the assessee appeared and objected to the proceedings under Section 263. After considering the assessee's objections, the Commissioner (Investigation and Survey) passed the order dated 27-12-1983 under Section 263 directing the IAC to invoke the provisions of Section 215 and levy such interest as is leviable under the provisions of the said section read with Rule 40 of the Income-tax Rules, 1962 ('the Rules') after giving a due opportunity of being heard to the legal representative of the deceased assessee.
Against the said order, the present appeal is filed.
2. The learned counsel for the assessee submitted that the provisions of Section 263 can be invoked to correct the errors in the assessment order passed by the ITO but not an IAC. We are unable to accept this contention. In East Coast Marine Products (P.) Ltd. v. ITO  4 ITD 73, the Tribunal, Hyderabad Special Bench, held that an order of the assessment made by the IAC may be subject to revision by the Commissioner. It was observed as under : It may also be worthwhile mentioning that the Legislature has made it clear as to when the orders of the IAC in the matter of assessment can be treated as orders of assessment passed by the ITO if we look to the provisions of Section 125. Section 125 contemplates conferring of powers of the ITO on an IAC. In such a case reference to the ITO under the Act would mean reference to the IAC. In other words, if an assessment is made by an IAC because of conferring such powers on him under Section 125, reference to the ITO under Section 263 would mean reference to the IAC and such an order of assessment may be subject to revision by the Commissioner.
But for the specific mention, the Commissioner may not be able to revise .... (p. 85) We agree with the view of the Special Bench. We hold that the Commissioner has power to invoke the provisions of Section 263 even in respect of the assessment made by the IAC.3. The learned counsel then submitted that when there is no mention of the levy of interest under Section 215 in the assessment order it should be deemed that the levy of interest has been waived under Rule 40. The provisions of Section 263 cannot be invoked for non-levy of interest under Section 215. Thus, the Commissioner had no jurisdiction to pass the impugned order. He placed reliance on a few decisions. The learned departmental representative justified the order of the Commissioner (Investigation and Survey). He submitted that there is nothing on record to indicate that the levy of interest under Section 215 has been waived. If the interest leviable under Section 215 is not levied, the Commissioner has ample jurisdiction to invoke the provisions of Section 263. He placed reliance on a few decisions.
Alternatively, he submitted that no appeal lies against levy of interest under Section 215 and that even indirectly an appeal will not lie against the order of the Commissioner directing the assessing authority to levy interest under Section 215. In our view, this alternative contention is not well founded. An appeal is provided against an order of the Commissioner made under Section 263.
4. We have considered the rival submissions. The issue is whether the provisions of Section 263 could be invoked for non-levy of interest under Section 215 in the assessment order. Under Sub-section (1) of Section 215, if the advance tax paid by the assessee is less than 75 per cent of the assessed tax, simple interest at the rate of 12 per cent per annum shall be payable by the assessee upon the amount by which the advance tax so paid falls short of the assessed tax. Under Sub-section (4) of Section 215, the ITO may reduce or waive interest payable by the assessee. Rule 40 provides the circumstances under which the ITO may reduce or waive interest payable under Section 215 or 217 of the Act. It is clear from the above provisions that the ITO has been vested with discretionary powers to waive or reduce interest payable under certain circumstances. This will clearly show that the ITO will have to exercise his discretion by passing an order. The order can be a regular order or may be an order in the order sheet itself. We have verified the records and found that no such order has been passed by the assessing authority. This will clearly indicate that the assessing authority has not exercised the discretionary power to waive or reduce the interest payable under Section 215. Thus, the action of the assessing authority in not levying the interest under Section 215 is erroneous and prejudicial to the interests of the revenue, as in the instant case, the assessee has not paid any advance tax at all and so the provisions of Section 215 are clearly attracted. Thus, the Commissioner has jurisdiction to invoke the provisions of Section 263 as the assessment order is erroneous and prejudicial to the interests of the revenue on account of the omission to charge interest under Section 215.
5. In CIT v. Cochin-Malabar Estates Ltd.  97 ITR 466 (Ker.), the ITO did not charge interest under Section 215. The Commissioner invoked the provisions of Section 263. On those facts, the Kerala High Court held that the Commissioner has jurisdiction to invoke the provisions of Section 263 for non-levy of interest under Section 215 in the assessment order. It was further held that the Commissioner is entitled to know on what grounds interest had been waived and the discretion vested in the ITO ranges between a right to waive interest completely or reduce it. A judicial exercise of discretion is necessary to find out what interest should be charged or whether any interest at all should be charged and naturally being a quasi-judicial act, the order must state the reasons for the waiver or reduction of interest. Hence, the order under Section 215 must state the reasons for it. The above decision was followed by the Calcutta High Court in the case of Singho Mica Mining Co. Ltd. v. CIT  111 ITR 231. The above two decisions were followed by the Allahabad High Court in Addl. CIT v. Saraya Distillery  115 ITR 34. It was held therein that since there is nothing in the order of the ITO to indicate that he has waived interest, it would not be possible to hold that interest has been waived by the ITO. The Commissioner has jurisdiction to invoke the provisions of Section 263. In CIT v. City Palayacot Co.  122 ITR 430, the Madras High Court held that in cases for levy of interest under Sections 215 and 217, it is not possible to infer any waiver from the omission to charge interest especially when the power is restricted to particular cases in the circumstances prescribed in Rule 40. It would be accessary for the ITO, if he exercises his discretion to indicate in his order as to why he waives or reduces the interest liable to be charged and the particular clause in Rule 40 may have also to be referred to as that alone would give a clue to his exercise of the power. The charging of interest and the omission to do so would be subject to the revisional powers of the Commissioner under Sections 263 and 264 of the Act. In cases where the ITO has omitted to exercise his jurisdiction, it would be necessary for the Commissioner to act under Section 263. In that case, it was observed that the proper order that should have been passed by the Commissioner would be to direct the ITO to consider the question of levy of interest in the context of Rule 40.
This decision was followed by the same High Court in R.R. Pictures v.CIT  143 ITR 429. It was held therein that the act of waiver is a conscious overt act on the part of the ITO and a mere omission or inaction on his part to levy penal interest cannot be construed under any circumstances as an act of waiver. As the ITO in his order omitted to levy penal interest under Section 217(1 A), the Commissioner was justified in directing the ITO to consider the levy of penal interest.
The above decisions of four High Courts support the revenue.
6. In CIT v. Executors of the Estate of Late H.H. Rajkuverba Dowager Maharani Saheb of Gondal  115 ITR 301, the Karnataka High Court held that an order under Section 215 or Section 216 or 217 of the Act can be passed only after a regular assessment is made and the omission to make a reference to interest payable under those provisions in the order of regular assessment cannot amount to an order waiving it and it may be possible for the ITO to pass an order under Section 217. But Section 263 cannot be invoked. As there is no order under Section 217, it is not prejudicial to the revenue. This decision is clearly distinguishable. In fact, in this decision, it was observed that the mere omission on the part of the ITO to refer to the penal interest payable under Section 215 or 217 in the assessment order cannot lead to the inference that the ITO has waived the interest payable without giving any reasons for doing so. This observation supports the case of the revenue. In this decision, it was held that as no order under Section 217 has been passed separately, which could be said to be prejudicial to the revenue, provisions of Section 263 cannot be invoked. The decision of the Delhi High Court in the case of CIT v.Caxton Press (P.) Ltd.  129 ITR 462 relied on by the assessee's counsel is clearly distinguishable. On the facts of that case, it was observed that it was nobody's case that the delay in making the assessment was on account of any default by the assessee and it was a case which might justifiably fall under the first example given in Rule 48 of the Rules. The foundation of the Commissioner's jurisdiction, therefore, did not exist and he could not have set aside the order of the ITO. This decision is clearly distinguishable on the facts of that case. The decision of the Madhya Pradesh High Court in CIT v. Narpat Singh Malkhan Singh  128 ITR 77 is also distinguishable. That was a case where the assessment order had merged with the order of the AAC.On the facts of that case, it was observed that it is not necessary to decide whether an order charging interest under Section 217 is a part and parcel of the order of the assessment or whether the ITO can pass such an order even after passing the assessment order. Assuming that an order under Section 217 is part of the assessment, the assessment order could not be set aside by the Additional Commissioner in revision, because it would also result in setting aside the order of the AAC passed in appeal. Now assuming that the ITO is competent to pass an order under Section 217 even after making the order of the assessment, the Commissioner cannot invoke the revisional jurisdiction in the absence of any order under Section 217. Thus, the facts of that case are clearly distinguishable and has no application to the instant case.
Even if these cases support the assessee we prefer to follow the majority view.
7. In our view, the decisions of the majority of the High Courts to which we have already referred are in favour of the revenue. We respectfully follow those decisions. In the instant case, there is nothing in the record to show that the assessing officer has either waived or reduced the interest leviable under Section 215. Hence the Commissioner had jurisdiction to invoke the provisions of Section 263 for non-levy of interest under Section 215. We may observe that before levying interest under Section 215, the IAC will consider the provisions of Section 215 and Rule 40 with regard to the waiver or reduction of interest if the assessee's case falls within the circumstances referred to in Rule 40. Thus, we uphold the order of the Commissioner.