Suhas Chandra Sen, J.
1. The assessment year involved in this case is 1973-74 for which the previous year ended on March 31, 1973. In the year under consideration M/s. Rallis International Ltd., a non-resident company, held 25,000 shares of its subsidiary company known as Oriental Carpet ., Amritsar. It appears that some time prior to December 29, 1970, M/s. Rallis International Ltd. decided to sell the said shares. For the said sale M/s. Grindlays Bank Ltd. acted as an agent on behalf of M/s. Rallis International Ltd. The ITO passed an order dated March 29, 1974, under Section 163(1)(c) of the Act declaring the assessee as an agent of the said non-resident company, M/s. Rallis International Ltd.
2. The assessee challenged the said assessment of the ITO before the AAC and one of the grounds raised therein was that interest under Section 139(8) of the Act should not have been charged. The AAC set aside the order of the ITO in the matter of charging of interest under Section 139(8) of the Act and remanded the case to the ITO for consideration by him of all the facts and circumstances of the case and to decide afresh whether interest should be charged or whether it should be waived or it should be reduced as provided under the I.T. Rules. The Revenue appealed to the Tribunal. Before the Tribunal it was contended on behalf of the Revenue that the appeal by the assessee against the charging of interest Under Section 139(8) of the Act was not competent. Secondly, it was urged that the AAC erred in setting aside the order of the ITO charging interest under Section 139(8).
3. On the first point the Tribunal held that the AAC was justified in entertaining the appeal.
4. On the second point, the Tribunal upheld the order of the AAC by observing :
' It is not under dispute that in the earlier years the assessee was being assessed through a different statutory agent and it was for this assessment year for the first time that Grindlays Bank Ltd. was assessed as the statutory agent of the assessee-company. Another special feature of this case is that from the income of interest, dividends as well as capital gains tax was deducted at source before the receipt of the income by the assessee-company. On the other hand, there is force in the argument of the learned departmental representative, Shri Narayanan, that the obligation to file a voluntary return within the specified time limit is both on the resident assessee and non-resident assessee and, therefore, the assessee was under the obligation to file the voluntary return of income within the time-limit laid down under Sub-section (1) of Section 139 either directly or through its statutory agent. We are of the view that all these things require consideration by the Income-tax Officer for the purpose of deciding whether the interest under Section 139 should be waived or reduced under the Rules and the Appellate Assistant Commissioner, therefore, in our view, rightly sent the matter back to the Income-tax Officer on this point for consideration of all the facts and circumstances and for taking a decision whether the interest should be charged or whether it should be waived or it should be reduced as provided under the Rules.'
5. Pursuant to the said directions by the Tribunal, the ITO went into the question of charging of interest Under Section 139(8) and held :
'It is not disputed that the assessee's income for the assessment year exceeded the taxable limit. Accordingly, the assessee was under an obligation to file a voluntary return of income within the time limit (i.e., 30-6-73) either directly or through its agent. Hence, the assessee cannot escape the consequences of not filing theireturn of income. Accordingly, the contention of the assessee's authorised representative cannot be accepted. The assessee is, therefore, liable to pay interest under Section 139(8) @12% from 1-7-1973 to 28-5-1974 (i.e., for 10 months). This comes to Rs. 79,653. However, with the approval of the IACR-XII, this is reduced to Rs. 45,850, which is arrived at as under : Interest on tax of Rs. 4,58,500 determined to be payable under Section 195 @ 12% from 1-7-1973 to 28-5-1974 (i.e., completed months)--Rs. 45,850.'
6. Aggrieved by the order of the ITO, the assessee preferred an appeal and the Commissioner of Income-tax (Appeals) held that the appellant could not be penalised for any default which was prior to his being given a notice under Section 163. It was, therefore, held that no interest was chargable in this case.
7. The ITO appealed to the Tribunal. The Tribunal in its order noted the fact that the assessment order that was passed originally had been challenged before the AAC and one of the grounds in the appeal filed before the AAC was relating to charge of interest Under Section 139(8): The Tribunal also took note of the fact that the AAC had set aside the order of the ITO in the matter of charging of interest and remanded the case to the ITO for consideration by him of all the facts and circumstances for taking a decision whether interest be charged or whether it should be waived or it should be reduced as provided under the I.T. Rules. The Tribunal, thereafter, noted in its order that, on further appeal, another Bench of the Tribunal had sustained the order of the AAC and the matter had been remanded to the ITO. The Tribunal, however, upheld the order passed by the ITO on remand only on the ground that M/s. Grindlays Bank Ltd. was an agent of the non-resident company. The Tribunal observed :
'Section 160(1)(i) as reproduced in paragraph 9 above lays down that every 'representative assessee'. as regards the income in respect of which he is a ' representative assessee' shall be subject to the same duties, responsibilities and liabilities as if the income were in fact received by or accruing to or in favour of him and shall be liable to assessment in his own name in respect of that income ; but any such assessment shall be made upon him in his representative capacity. As already held above M/s. Grindlays Bank Ltd. in the year under consideration was the 'representative assessee ' of the non-resident company, M/s. Rallis International Ltd. in respect of the taxable capital gains in question in regard to which the said bank is a ' representative assessee ' and the said bank in that capacity in terms of Section 161(1)(i) was under the statutory obligation/duties and responsibilities of filing the return under Section 139(1) of the Act by 30th June, 1973. The fact that the said bank was declared an agent under Section 163(1) of the Act, vide order dated 29-3-74 will not absolve it of its said responsibilities and legal obligation to file the return in respect of the income in question of the non-resident company, M/s. Rallis International Ltd., for the year under consideration under Section 139(1) of the Act. Admittedly, the said bank did not file the said return by 30th June, 1973. The said return as already stated was filed on 28th May, 1974. That being the position the said bank cannot escape the consequence of not filing the return of income by 30th June, 1973. As rightly held by the Income-tax Officer, interest is payable by the said bank under Section 139(8) @ 12% from 1-7-73 to 28-5-74. The decision of the Commissioner of Income-tax (Appeals) to the contrary is incorrect.'
8. At the instance of the assessee the following question of law has been referred Under Section 256(1) of the I.T. Act to this court:
' Whether, on the facts and in the circumstances of the case, and on proper interpretation of the provisions of Sections 9 ,160, 161 and 163 of the Income-tax Act, 1961, interest under Section 139(8) of the Act could be validly charged against the assessee for the accounting period relevant to the assessment year 1973-74. '
9. There were some printing mistakes in the question which were corrected at the time of hearing of this reference.
10. The assessee's case all along has been that interest was not leviable at all in the facts of this case. The assessee's liability to file a return arose only when the ITO served a notice upon the assessee treating it as a statutory agent on 29th March, 1974. This contention of the assessee was specifically negatived by the ITO as well as by the Tribunal. But the other contention of the assessee was that in the facts of this case, interest should have been waived or reduced. It was pointed out that the non-resident was being assessed for the past several years through some other statutory agent and this was the first year in which the nonresident company had business dealing with the assessee. It was further argued that tax had already been deducted at source from the income which was sought to be assessed and in that view of the matter, the Revenue had not suffered in any way at all. This second contention of the assessee was raised before the AAC who had directed the ITO to go into this question. That direction of the AAC was sustained, on appeal by the ITO, by the Tribunal. The case was remanded to the ITO ' for taking a decision whether the interest should be charged or whether it should be waived or it should be reduced as provided under the Rules '. In spite of this specific direction by the Tribunal, the ITO did not go into the question whether interest should be waived in this case or not. The order passed on remand by the ITO is totally silent on this point. When the matter went back to the Tribunal on further appeal, the Tribunal took note of its earlier direction but failed to consider whether in the facts of this case interest should have been waived or not.
11. In the facts and circumstances of the case, it appears that the ITO did not exercise his discretion in the matter of charging of interest bearing in mind all the relevant and necessary factors which the Tribunal in its order of remand had directed him to consider. In that view of the matter, in our opinion, the discretion to levy interest under Section 139(8) was not exercised properly and the order of the Tribunal was not carried out in the manner it was directed to be carried out. When the matter went back to the Tribunal once again, the Tribunal in its appellate order dated 12th March, 1980, failed to consider the question of waiver of interest at all. It reversed the finding of the Commissioner of Income-tax (Appeals) that no interest was leviable in law in this case. But it did not go into the question whether in the facts of this case interest should be waived or not. Both the ITO and the Tribunal have side-tracked the question of waiver of interest in this case and the direction in the remand order which was passed by the AAC and affirmed by the Tribunal on the earlier occasion was not carried out.
12. In that view of the matter, in our opinion, on the facts and in the circumstances of the case, we are of the opinion that interest Under Section 139(8) of the Act has not been validly charged against the assessee for the accounting period relevant to the assessment year 1973-74. The question that has been referred is, therefore, answered in the negative and in favour of the assessee.
13. Each party will pay and bear its own costs.
Sabyasachi Mukharji, J.
14. I agree.