Patna High Court
Commissioner Of Income-Tax vs Ashok Trading Company on 9 November, 1985
Equivalent citations: [1986]160ITR663(PATNA)
JUDGMENT
1. In this reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), the question referred to us for our opinion reads as follows:
"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that there was no mistake apparent from the record in the original order which could be rectified under Section 154 of the Income-tax Act, 1961 ? "
2. In this reference, we are concerned with the assessment year 1969-70.
3. The facts, in brief, are that the assessee had to file its return for the aforesaid year by September 30, 1969. It was, in fact, filed on August 7, 1970. In terms of Section 139 of the Act, interest has to be charged for late filing of the return. At the conclusion of the assessment, the Income-tax Officer passed no order in regard to levy of interest. Subsequently, the omission on the part of the Income-tax Officer came to his notice. Proceedings under Section 154 of the Act for rectification of the assessment was, therefore, initiated. Notices to that effect were issued. After hearing the parties, the Income-tax Officer imposed interest of Rs. 3,051. The assessee being aggrieved by the order of the Income-tax Officer filed an appeal. The Appellate Assistant Commissioner allowed the appeal and set aside the order by which interest had been charged by the Income-tax Officer. In the view of the Appellate Assistant Commissioner, no case for rectification had been made out. The Revenue being aggrieved by the order of the Appellate Assistant Commissioner appealed to the Appellate Tribunal. The Tribunal rejected the appeal observing that the Income-tax Officer must be deemed to have waived payment of interest. It is not in controversy that no mention had been made by the Income-tax Officer in regard to interest. Paragraph 5 in the order of the Tribunal sets out the reasons for rejecting the appeal of the Revenue. It reads as follows :
" We have considered the facts of the case and we are of the view that the principles decided in the case of S.A.L. Narayan Row v. Ishwarlal Bhagwandas [1965] 57 ITR 149 (SC) are applicable to the present case also. In that case also, it had been contended that there was nothing to show that the Income-tax Officer had exercised his discretion when he passed the order of assessment. The Supreme Court held that the case of the assessee fell within the terms of Rule 40(1) and the Income-tax Officer was in law bound to consider whether the assessee was entitled to reduction or waiver of interest under the fifth clause. The court further held that the law would be deemed to be effective from the retrospective date for the purpose. In this connection, it may be mentioned that in the judgment of the Supreme Court, the dissenting single judge has observed that it was difficult to agree that the omission to charge penal interest at the time of making the regular assessment must be ascribed to the exercise of discretion by the Income-tax Officer. However, in view of the judgment of the Supreme Court, it has to be presumed that the interest was waived and, therefore, no order under Section 154 could be passed to charge interest. "
4. From the above, it will be seen that the only point agitated before the Tribunal by the parties was whether there had been waiver in regard to levy of interest by the Income-tax Officer. The Revenue being aggrieved by the order of the Tribunal in appeal moved it for making a reference to this court. The questions suggested by the Commissioner of Income-tax were as follows:
" 1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the interest charged under Section 139 was waived by the Inspecting Assistant Commissioner and no order under Section 154 could be passed ?
2. Whether, on the facts and in the circumstances of the case and in view of the provisions of Rule 117A of the Income-tax Rules, 1962, the Income-tax Officer can waive interest without permission of the Inspecting Assistant Commissioner as the amount is more than three thousand and in the absence of the permission, is the Tribunal justified in presuming that the interest has been waived by the Income-tax Officer and whether the ratio of the decision of the Supreme Court in the case of S.A.L. Narayan Row v. Ishwarlal Bhagwandas [1965] 57 ITR 149 is applicable to the instant case ? "
5. On a consideration of the rival stand of the parties, the Tribunal has referred to us the questions quoted earlier for our opinion.
6. It will thus be seen that the only question agitated before the Tribunal was whether there was a waiver by the Income-tax Officer in regard to the imposition of interest. The only question, therefore, we have got to decide is whether the non-consideration of the matter regarding levy of interest amounted to waiver or not. In this connection, Rule 117A of the Income-tax Rules, 1962, is important. This rule empowers the Income-tax Officer to waive levy of interest in certain situations. Rule 117A reads as follows:--
"The Income-tax Officer may reduce or waive the interest payable under Section 139 in the cases and in the circumstances mentioned below, namely:
(i) where the return of income is furnished by a person who has been treated under Section 163 as an agent of a non-resident and is assessed in respect of the latter's income ;
(ii) where the return of income is furnished by an assessee whose only source of income during the relevant previous year is a share in the income of an unregistered firm which has been assessed on its total income in respect of that previous year under Clause (b) of Section 183 ;
(iii) where the return of income of a deceased individual is furnished by his legal representative and the legal representative satisfies the Income-tax Officer that he had sufficient cause for not furnishing such return within time;
(iv) where the return of income has been furnished in pursuance of a notice issued under Section 148 ;
(v) any case in which the assessee produces evidence to the satisfaction of the Income-tax Officer that he was prevented by sufficient cause from furnishing the return within time :
Provided that the previous approval of the Inspecting Assistant Commissioner has been obtained where the amount of interest reduced or waived, as the case may be, under Clause (iv) or Clause (v) exceeds one thousand rupees."
7. From the above, it will be seen that the Income-tax Officer may waive interest payable by an assessee. The proviso thereto, however, is rather significant. It lays down that where the sum likely to be imposed as penal interest may exceed Rs, 1,000, the Income-tax Officer can waive the payment of interest only with the previous approval of the Inspecting Assistant Commissioner, to follows therefrom that without the prior approval of the Inspecting Assistant Commissioner, an Income-tax Officer cannot waive levy of interest if it is likely to exceed Rs. 1,000. In this case, the interest charged was Rs. 3,000 odd and, therefore, this proviso came into operation. Without the previous approval of the Inspecting Assistant Commissioner, the Income-tax Officer did not have jurisdiction to waive the interest. Previous approval was thus a pre-condition for waiver. It is well established that waiver is a deliberate act. Omission or slip is not waiver. In this case, there was a bar to the exercise of the right of waiver. It is not in controversy that the Income-tax Officer neither secured prior approval of the Inspecting Assistant Commissioner to waive the penal interest nor was such a prayer maple by the assessee. If the Income-tax Officer had no jurisdiction to waive interest without the previous approval of the Inspecting Assistant Commissioner, it is obvious that the order of the Income-tax Officer keeping silent on the question of charging penal interest cannot amount to waiver. In that view of the matter, the Income-tax Officer was bound to levy interest. Being bound and having not exercised the jurisdiction, there was clearly an error apparent on the face of the record. That being the situation, Section 1 54 of the Act would clearly come into play. Section 154 of the Act lays down that an Income-tax Officer may amend an order of assessment with a view to rectify a mistake apparent from the record. Even if we were to assume that non-consideration of the question of levy of penal interest is taken or must be taken as waiving the interest, even that could be without jurisdiction because there was no prior approval by the Inspecting Assistant Commissioner. The position in law cannot be placed higher than that. The maximum that the assessee could assert was that the silence of the Income-tax officer must be deemed to be speech but in view of the proviso to the provisions of Rule 117A of the Income-tax Rules, the Income-tax Officer had no jurisdiction to waive it and the error being apparent it could be certainly rectified.
8. Learned counsel for the Revenue brought to our notice the case of CIT v. Ramjibhai Hirjibhai & Sons [1977] 110 ITR 411 (Guj). The view that we have taken finds ample support from the aforesaid decision of the Gujarat High Court.
9. Learned counsel for the assessee placed reliance upon the decision of the Supreme Court in the case of S. A. L. Narayan Row v. Ishwarlal Bhagwandas [1965] 57 ITR 149. That was a case under the Indian Income-tax Act of 1922. Their Lordships of the Supreme Court in that case were concerned with Rule 48 of the Indian Income-tax Rules, 1922. At that point of time, there was no provision like the proviso to Rule 117A of the Income-tax Rules. The absence of the proviso quoted above makes all the difference. The Supreme Court case of S. A. L. Narayan Row v. Ishwarlal Bhagwandas [1965] 57 ITR 149 would have applied to the present case fully if the interest liable to be levied was below one thousand rupees. If it was below that ceiling, the order of the Income-tax Officer failing to mention anything about charging of interest could have been read as waiver of interest and, in that situation, the failure to mention about the interest would have constituted no error apparent on the face of record. The Supreme Court case is clearly distinguishable, as was distinguished by the Gujarat High Court as well.
10. Learned counsel for the assessee placed reliance upon the case of Kundan Lal Behari Lal v. CWT [1975] 98 ITR 359 (All), The provisions of the proviso to Rule 117A of the Income-tax Rules did not fall for consideration in the Allahabad case. In that view of the matter, this decision is not an authority in favour of the assessee. In that case, the Commissioner had waived the penalty for 1964-65 as no notice under Rule 117 of the Rules had been issued and, therefore, the return filed for that year was within time. The question falling for consideration before the Allahabad High Court was entirely different from the one before us.
11. The next decision brought to our notice is a decision of this court in Veena Theatres v. Union of India [1977] 109 ITR 748. In this case, the validity of a rectification proceeding was under challenge. In that case, interest had been levied on the petitioner. The petitioner filed an application under Section 154 of the Act for rectification of a mistake for charging interest which according to the assessee was an error apparent on the record. The assessee having failed in getting his relief moved this court by a writ petition. Their Lordships laid down that the point regarding levy of interest was a debatable one as different courts have taken different views of the matter on the question whether interest can be charged where no prayer has been made for extension of time. That is not the question before us. The question falling for consideration before us as before the Tribunal was whether the Income-tax Officer will be deemed to have waived charging of interest. That is the only question before us. The question falling for consideration before this court in the case of Veena Theatres [1977] 109 ITR 748 was thus different from the one before us. It has no relevance for our purposes.
12. The case of Premchand Sitanath Roy v. Addl. CIT [1977] 109 ITR 751 (Cal) is really a decision against the assessee. In that case, the position was that in terms of the proviso to Section 139(1) of the Act, there was an obligation to charge interest on the assessee for late filing of the return. Interest had not been charged in that case. Therefore, their Lordships of the Calcutta High Court laid down that the liability can only be exonerated in terms of Sub-section (8) of Section 139 of the Act and that exercise of discretion must also be in accordance with Rule 117A of the Rules. In that case, Sabyasachi Mukharji J. observed that there was no evidence that the Income-tax Officer had exercised discretion or applied his mind to the facts of the case. The same is the situation before us. It would, therefore, be difficult to hold that there was waiver in regard to charging of interest. Assuming that there was an express order to that effect, even then the order would be without jurisdiction as no previous approval had been obtained. The wording of Sabyasachi Mukharji J. that the waiver has to be in accordance with Rule 117A of the Rules is rather significant. In that view of the matter, the Calcutta decision also cannot be of any help to the assessee.
13. The last case relied upon by the learned counsel for the assessee was of Monohar Gidwany v. CIT [1983] 139 ITR 498 (Cal). That was a judgment delivered on a petition under article 226 of the Constitution of India. The single judge was seized of an entirely different matter. In that case, in the assessment order, interest had not been levied and yet such an interest was mentioned in the demand notice. His Lordship, therefore, held that the demand notice, in so far as demanding of interest was concerned, was without jurisdiction. There can be no exception to the decision of B. C. Basak J. in the case of Monohar Gidwany [1983] 139 ITR 498. The present case before us is different. This is not a case of demand of interest without any legal procedure. In that view of the matter, this case also cannot be of any assistance to the assessee.
14. Having given our best consideration to the submissions urged before us, we are of the view that the Tribunal was not correct in holding that there was no mistake apparent on the record in the original order which could be rectified under Section 1 54 of the Act. Reference is, therefore, answered in favour of the Revenue and against the assessee. There will, however, be no order as to costs. Let a copy of this order be transmitted to the Assistant Registrar, Income-tax Appellate Tribunal, Patna Bench, Patna, in terms of Section 260 of the Act.