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income-tax Officer Vs. Gwalior Webbing Co. Ltd. - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Kolkata
Decided On
Judge
Reported in(1986)15ITD282(Kol.)
Appellantincome-tax Officer
RespondentGwalior Webbing Co. Ltd.
Excerpt:
.....of cit v. anglo indian jute mills co. ltd. [1980] 124 itr 384. he further found that under the facts and circumstances of the case, the ito should have waived interest under rule 40 of the income-tax rules, 1962. accordingly, the interest charged was deleted by the commissioner (appeals). aggrieved by the said order of the commissioner (appeals), the department has come up in appeal.2. the contention of the learned departmental representative is that appeal on the point of charging interest under section 215 was not maintainable before the commissioner (appeals) and as such, the commissioner (appeals) fell in error in entertaining the appeal and further allowing it on that point. according to him, the appeal could lie before the commissioner (appeals) only if from the facts on record.....
Judgment:
1. The ITO while framing the assessment for the assessment year 1980-81 in the case of the assessee-company stated at the end of the assessment order 'Add: Interest under Section 215 of the Income-tax Act, 1961--Rs. 30,178'. The said order of the ITO was challenged in appeal along with other grounds before the Commissioner (Appeals), who held that an appeal against that order under Section 215 of the Income-tax Act, 1961 ('the Act') though not specifically provided for in Section 246 of the Act was maintainable in view of the judgment of the Calcutta High Court in the case of CIT v. Anglo Indian Jute Mills Co. Ltd. [1980] 124 ITR 384. He further found that under the facts and circumstances of the case, the ITO should have waived interest under Rule 40 of the Income-tax Rules, 1962. Accordingly, the interest charged was deleted by the Commissioner (Appeals). Aggrieved by the said order of the Commissioner (Appeals), the department has come up in appeal.

2. The contention of the learned departmental representative is that appeal on the point of charging interest under Section 215 was not maintainable before the Commissioner (Appeals) and as such, the Commissioner (Appeals) fell in error in entertaining the appeal and further allowing it on that point. According to him, the appeal could lie before the Commissioner (Appeals) only if from the facts on record it was obvious that no interest was chargeable at all under Section 215. In other words, where the assessee totally denies his liability to pay interest under Section 215, he could challenge the levy of interest in appeal but such challenge is not sustainable in appeal if it is based on claim of discretionary relief of waiver under Rule 40. He, in support, placed reliance upon judgment of the Hon'ble Calcutta High Court in the case of CIT v. Karam Chand Thapar & Bros. (P.) Ltd. [1979] 119 ITR 751. He also referred to the observations of the Hon'ble Allahabad High Court in the case of CIT v. Elgin Mills Co. Ltd. [1980] 123 ITR 712 that insofar as Sections 215 and 217 of the Act are concerned, charging of interest thereunder is automatic.

3. The learned counsel for the assessee, on the other hand, contended that the said order has been passed by the ITO without giving any opportunity to the assessee and as such, has been rendered illegal being in violation of rule of natural justice. On this premises, the learned counsel further argtted that the order being illegal could be assailed in appeal at least with the other ground taken against the said assessment order. According to him, the assessment order as a whole could be challenged in appeal and the order under Section 215 could not be made an exception to the right of appeal of the assessee provided in Clause (c) of Section 246(1). He placed reliance upon the observations of the Hon'ble Calcutta High Court in the case of CIT v.Lalit Prasad Rohini Kumar [1979] 117 ITR 603 reproduced by the High Court in their another judgment in the case of CIT v. New Swadeshi Mills of Ahmedabad Ltd. [1984] 147 ITR 163 which are as under: ...The ITO has the power and indeed the duty to charge interest under the circumstances mentioned in Sections 215 and 217 of the Act, but the ITO has the discretion to waive or reduce such interest in the circumstances mentioned in Rule 40 of the Income-tax Rules, 1962. Such discretion, in our opinion, in the facts and circumstances of the section read with the Rules, imposes a duty on the ITO to consider whether circumstances in the record warrant any waiver or reduction. Such consideration must be made from the facts on the record without being moved by the assessee but if other facts which are not on the record have to be examined for proper consideration then such consideration should be moved by the assessee. We are further of the opinion that it must appear that such consideration has been made by the ITO, it may be manifest from the order itself or it may be found out aliunde from the records or it may follow as in certain circumstances as the inevitable consequences from the facts on the records placed. How it should so appear must depend upon the facts and circumstances of the case....(p. 618) 4. On minute consideration of the respective contentions of the parties, we find much force in the contentions for and on behalf of the assessee. The order of the ITO simply mentions 'Add: Interest under Section 215--Rs. 30,178'. It does not show if the ITO in reality applied his mind to the levy of interest. The observation of the Hon'ble Allahabad High Court in the case of Elgin Mills Co. Ltd. (supra) that charging of interest under Section 215 is automatic is in a different context. It is in contradistinction with Section 216 of the Act. And, furthermore, from 'automatic' it should not be spelled out that charging of interest is mechanical. Every judicial and quasi-judicial act must show application of mind to the facts of the case and proper exercise of jurisdiction vested in the authority by law. Sub-section (4) of Section 215 lays down that in such cases and under such circumstances as may be prescribed, the ITO may reduce or waive the interest payable by the assesses under this section. Occasion for exercise of this discretion would arise only when the assessee is called upon by the ITO to explain as to why interest under Section 215 should not be charged. What is automatic is only that by mere calculation of the advance tax paid and the tax assessed the ITO can come to a finding that Section 215 is applicable but thereby he cannot mechanically levy interest unless he calls upon the assessee to explain as to why interest should not be levied. Such requirement is essential in view of requirement of proper exercise of discretion under Rule 40 read with Sub-section (4) of Section 215. It is needless to emphasise that it must appear from the order of the ITO that he has adopted such a course. It is plainly a case of non-exercise of jurisdiction (within limited sense) vested in the ITO by law and as such the order has become illegal. When the ITO has failed to exercise proper jurisdiction, the assessee cannot be left without remedy. It is pertinent to mention at this juncture that the Hon'ble Delhi High Court has in the case of CIT v. Mahabir Parshad & Sons [1980] 125 ITR 165 held that the language of a provision conferring right of appeal should be liberally construed. The Hon'ble High Court interpreted Section 246(c) and held that an appeal against the order of the ITO charging interest under Section 215 is maintainable when the objection has been taken along with other objections as to the amount of income assessed or the amount of tax determined. Even according to the judgment of the Hon'ble Calcutta High Court in the case of Karam Chand Thapar & Bros.

(P.) Ltd. (supra), the appeal of the assessee was maintainable before the Commissioner (Appeals). The assessee denied the liability to pay interest on the ground that the order charging interest was passed without hearing the assessee. As stated by the Hon'ble Calcutta High Court where the assessee denies his liability to be assessed at all, he can always as a corollary challenge the imposition of interest in appeal. Despite the fact that no appeal has been specifically provided for in Section 246 against an order passed under Section 215, all the High Courts have held that an appeal does lie against an order under Section 215 under certain circumstances. One of such circumstances can well be where the order has been passed in violation of natural justice, namely, that no opportunity was given to the assessee to show cause as to why interest should not be charged and thereby the ITO had no occasion to exercise his discretion under Rule 40 read with Section 215(4).

5. Once the appeal is held maintainable, the appellate authority is ceased of the matter and is entitled to consider it on merit if there are sufficient facts on record for doing so. While disposing of the appeal, the appellate authority has same power as those of the original authority. The Commissioner (Appeals), therefore, could do what the ITO could do for the purpose of assessment. In this connection, reference may be made to the observations of the Hon'ble Calcutta High Court in the case of Lalit Prasacl Rohini Kumar (supra) at p. 615.

6. Coming to the facts of the case, we find that the Commissioner (Appeals) has properly exercised discretion under Rule 40 in waiving the interest. Order of the Commissioner (Appeals) is, therefore, maintained.


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