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Commissioner of Income-tax Vs. Shri Mahinder Singh - Court Judgment

LegalCrystal Citation
Subject Direct Taxation
CourtDelhi High Court
Decided On
Case NumberIncome-tax Case No. 55 of 1980
Judge
Reported in[1985]156ITR882(Delhi)
ActsIncome Tax Act, 1961 - Sections 154, 155, 212(3), 217, 256(1) and 256(2); Income Tax Rules - Rule 40
AppellantCommissioner of Income-tax
RespondentShri Mahinder Singh
Excerpt:
.....petition under section 256(2) of the act has been moved claiming a reference of the following two questions :(i) whether, on the facts and in the circumstances of the case, the tribunal is legally correct in holding that section 154 was not applicable to the facts of the case ? (ii) whether the tribunal is legally correct in holding that the interest charged under section 217 could be deemed to have been waived under rule 40, particularly when there was no application for the waiver and there was no absolute power with the income-tax officer for waiving interest for the entire period ?' 5. it seems to us that the tribunal was right in coming to the conclusion that interest could not be charged under section 217 unless the conditions were satisfied. the tribunal held that before interest..........be dependent on the share from the two firms which were separately to be assessed, eventually the income assessed was rs. 1,78,693. an estimate regarding this amount could not have been filed because the assessment of the assessed had to await the ascertainment of the income of the two firms. 6. in any case, the question whether interest should be or should not be charged depended on a number of facts which made the case unfit for the application of section 154. even now, we do not know the facts relevant to rule 40 and the application of section 217 as it existed at the relevant time. so, we think it is a question of fact rather than a question of law. and as the facts are not ascertained, we do not see how a question of law arises. 7. in the circumstances, we are compelled to reject.....
Judgment:

D.K. Kapur, J.

1. The Income-tax Officer passed an assessment order for the assessment year 1970-71 in respect of the present assessed on January 30, 1973. The return had been filed on January 19, 1971, showing an income of Rs. 9,962. In that order, no interest was charged under section 217 of the Income-tax Act, 1961. The income of the assessed was from Shankar Housing Corporation and M/s. Mahavir Singh & Co. and the assessment was for Rs. 1,78,693 against the returned income of Rs. 9,962.

2. By order dated December 11, 1974, an order was passed under sections 154 and 155 of the Act imposing a demand of Rs. 22,080 under section 217 of the Act. It may be noted that under section 217, interest is imposable when no estimate has been made. The power to waive the interest is set out in rule 40 of the Income-tax Rules, 1962. The Income-tax Officer may reduce or waive the interest. A noteworthy feature of this case was that the income was entirely from two firms and the declared income was only Rs. 9,962. One of the grounds for waiving the interest is delay in making the assessment. The assessment was made more than two years after the return was filed. The delay in making the assessment is not dealt with in the order of review.

3. On appeal to the Appellate Assistant Commissioner, the Income-tax Officer's order was upheld, but the Tribunal set aside the same holding That it was not a case covered by section 154. One of the points urged was that there was no mistake in failure to charge interest in the circumstances of the case. This ground was accepted and the Tribunal never actually decided whether there was a mistake or not.

4. A reference was sought under section 256(1) of the Act which has been refused. Now, a petition under section 256(2) of the Act has been moved claiming a reference of the following two questions :

'(i) Whether, on the facts and in the circumstances of the case, the Tribunal is legally correct in holding that section 154 was not applicable to the facts of the case

(ii) Whether the Tribunal is legally correct in holding that the interest charged under section 217 could be deemed to have been waived under rule 40, particularly when there was no application for the waiver and there was no absolute power with the Income-tax Officer for waiving interest for the entire period ?'

5. It seems to us that the Tribunal was right in coming to the conclusion that interest could not be charged under section 217 unless the conditions were satisfied. The assessment year in question was 1970-71 and at that time section 217 was confined to the persons referred to in section 212(3) and no other persons could be charged interest. The Tribunal held that before interest could be charged, it had to be held that section 212(3) was satisfied, i.e., the assessed had to be a person who had not been previously assessed in any regular assessment; and, secondly, the conditions of rule 40 had to be kept in view. There was a clear delay in making the assessment order, so one of the conditions of rule 40 was satisfied, i.e., the assessment was made after one year. There may be other grounds on which rule 40 may apply. One of the considerations which might be relevant was that the return was only for Rs. 9,962, but as the income had to be dependent on the share from the two firms which were separately to be assessed, eventually the income assessed was Rs. 1,78,693. An estimate regarding this amount could not have been filed because the assessment of the assessed had to await the ascertainment of the income of the two firms.

6. In any case, the question whether interest should be or should not be charged depended on a number of facts which made the case unfit for the application of section 154. Even now, we do not know the facts relevant to rule 40 and the application of section 217 as it existed at the relevant time. So, we think it is a question of fact rather than a question of law. And as the facts are not ascertained, we do not see how a question of law arises.

7. In the circumstances, we are compelled to reject the application, but leave the parties to bear their own costs.


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