1. These appeals, by the revenue, and cross-objections by the assessee, pertains to the consolidated order of the Commissioner (Appeals) dated 7-5-1983, relating to the assessment years 1972-73 and 1973-74. In the appeals of the revenue, common grievance projected before us is that the learned Commissioner (Appeals) erred in allowing relief on account of interest charged under Section 220(2) of the Income-tax Act, 1961 ('the Act') when there is no provision under the Act for waiver of interest charged under Section 220(2).
2. The parties have been heard. The appeals, which were determined by the learned Commissioner (Appeals) by the impugned order, were filed before him against the orders, claimed to be made to give effect to the appellate orders. There were diverse grounds before the Commissioner (Appeals), pertaining to charging of interest under various sections.
But the issue that has travelled before us, as projected (supra), relates only to the interest charged under under Section 220(2) by the ITO and deleted by the Commissioner (Appeals). We are purposely not giving the figures of interest because these require verification, as, in the grounds of appeal by the revenue, for the assessment year 1972-73, the figure of relief appears to be wrongly given at Rs. 3,040, as against Rs. 2,050, actually allowed by the Commissioner (Appeals).
Similarly, the figure for the assessment year 1973-74 would need verification. Therefore, we are not acting on the figures but on the principles involved in the appeals. The figures will be automatically covered by the decision taken by us.
3. Section 220 falls under Chapter XVII, dealing with the collection and recovery of tax. Section 220 provides 'when tax payable and when assessee deemed in default'. Sub-section (2) of this section which has to be read with Rules 118, 119 and 119A of the Income-tax Rules, 1962 provides that if the amount specified in any notice of demand under Section 156 of the Act is not paid within the period limited under Sub-section (1) of this section, the assessee shall be liable to pay simple interest at specified rate per annum from the date commencing after the end of the period mentioned in Sub-section (1).
4. Rule 118 deals with the levy of interest under Section 220(2), where a recovery certificate is not issued. Rule 119 provides for levy of interest under Section 220(2) in a case where recovery certificate is issued and Rule 119A prescribes the procedure to be followed in calculating interest.
5. Under Rule 118, the ITO has a mandate from the Legislature to calculate interest payable under Sub-section (2) of Section 220 at the end of each financial year if the amount of tax, penalty or other sum in respect of which such interest is payable, has not been paid in full before the end of any such financial year and issue a notice of demand under Section 156, accordingly. Sub-rule (2) of Rule 118 directs the ITO to compute interest up to the date on which the payment of tax or penalty or any other sum has been paid before the end of the financial year.
6. Under Rule 119, there is a direction, which is mandatory to the ITO, that at the time of issuing a certificate under Section 222 of the Act, to calculate the interest payable under Sub-section (2) of Section 220 on the amount of arrears of tax, penalty or other sum up to the date of the issue of the certificate. He has to indicate further in the certificate issued for tax recovery, the amount of interest, calculated under Sub-rule (1) of Rule 119, as reduced by the amount of payment made by the assessee. When we examine the facts before us along with the submissions of the parties and on perusal of the orders of the authorities below, we find that the ITO failed to calculate and issue a notice under Section 156 for each of the financial year about the amount of interest payable by the assessee. In the order that came up in appeal before the learned Commissioner (Appeals), he calculated interest for the entire period under Rule 119 because calculation of interest in each financial year, as provided under Rule 118 had not been done by him. Therefore, he was contravening the provisions by calculating interest even for the period provided under Rule 118, for which, despite the mandate, provided in the statute, he had failed to calculate interest. Therefore, the calculation of interest made by him in the order, which came up in appeal before the learned Commissioner (Appeals), was wrongly made and was not in accordance with law. The learned Commissioner (Appeals) rightly directed him to calculate the interest with regard to the period that comes within the ambit of the relevant rule when he made the order and worked out interest while giving effect to the appellate order. We, therefore, see no reason, why, at the instance of revenue, we should interefere in his order.
7. Before we close, we would like to mention that we have carefully considered not only the relevant provisions of the statute and the rules, but also the Kerala High Court judgment in the case of Official Liquidator 118 ITR 398 (sic) on behalf of the revenue. This judgment has no relevance, whatsoever, to the issue before us.
8. The assessee, in the cross-objections, seeks no relief, but supports merely the order of the Commissioner (Appeals). The cross-objections are, therefore, infructuous.