INCOME-TAX OFFICER Vs. BENARSILAL GOENKA

JUDGEMENT

(1.) The dispute in this appeal relates to the assessees liability for payment of interest under section 217(1A) of the Income-tax Act, 1961 (the Act).

(2.) Initially the ITO did not charge any interest under this provision of law though he mentioned in the assessment order that interest may be charged according to law. In relation to that assessment the assessee filed rectification application under section 154 of the Act on 7-7-1977. By his order dated 27-4-1981 the ITO rectified the assessment and simultaneously directed the levy of interest under section 217(1A). The said direction has been quashed on appeal by the AAC relying upon a decision of the Kerala High Court in Mohammed Kunhi v. Addl. ITO, 1967 66 ITR 250 .

(3.) We have heard the representatives of the parties at length in this appeal. So far as the reliance upon the decision of the Kerala High Court in Mohammed Kunhis case (supra) by the AAC is concerned, we are of the considered opinion that the present case is distinguishable. What had happened in that case was that in the original assessment the ITO had not charged any interest under section 18A (6) of the Indian Income-tax Act, 1922 (the 1922 Act). subsequently, he purported to levy the same by an order under section 154 of the 1961 Act, corresponding to section 35 of the 1922 Act. The assessee filed a writ and the contention raised on this behalf was that the question as to whether an interest under section 18A (6) must be charged was dependent on the exercise of discretion vested in the ITO by the fifth proviso to that sub-section and also on the further fact as to whether any of the conditions mentioned in rule 48 of the Indian Income-tax Rules, 1922, had been fulfilled. The High Court held that it could very well be argued that the ITO had exercised his discretion to waive the interest conferred by him by the proviso to section 18A (6). Though there is a similar provision contained in section 215(4) of the Act, which would apply to this interest also, it cannot be said by any stretch of imagination that the ITO had waived the charging of interest in the present case. It may be pointed out that in the original the ITO had specifically mentioned that interest according to law should be charged. The circumstances under which interest according to law should be charged. The circumstances under which interest can be waived are specified in detail in rule 40 of the Income-tax Rules, 1962 and in the circumstances of the case it cannot be said that any of the clauses of that rule was applicable to the present case. If the Honble Kerala High Court had chosen to hold that the ITO should be deemed to have waived the interest in the first instance in that case, it does not lay down an absolute rule of law that interest should be deemed to have been waived in all similar cases. Each case would have to depend on its facts and circumstances. The crucial thing to note in this behalf is that even at the time of original assessment the ITO had passed an order that interest may be charged according to law and ordinarily interest under section 217(1A) has to be charged and not waived.