STAR DIAMOND TOOLS Vs. FIRST INCOME TAX OFFICER
LAWS(IT)-1982-1-8
INCOME TAX APPELLATE TRIBUNAL
Decided on January 16,1982

Appellant
VERSUS
Respondents

JUDGEMENT

P.S. Dhillon, Judicial Member - (1.) THE assessee has made this appeal against the order of the Commissioner passed under Section 263 of the Income-tax Act, 1961 ("the Act"), directing the ITO to charge interest under Section 139(8) of the Act and also to initiate penalty proceedings under Section 271(1)(a) of the Act.
(2.) The relevant facts, in brief, are that the assessee is a registered firm. It filed the return and the ITO completed the assessment on 15-1-1979. The assessment order shows that he gave credit for advance tax paid of Rs. 38,720 and ordered to charge interest under Sections 217(1 A) and 139(8) of the Act, and ordered for the issuance of notice under Section 274 read with Section 273(c) of the Act. However, the Commissioner, on a perusal of the assessment records, found that the assessment order passed by the ITO in the assessee's case on 15-1-1979 for the assessment year under consideration was erroneous and prejudicial to the interests of the revenue for the following reasons : a. The return of income vyas due on 30-6-1976. It was filed on 11-4-1977. Tax on total income of Rs. 1,99,640 as unregistered firm works out to Rs. 1,30,282. After deducting advance tax paid in time, balance tax payable works out to Rs. 1,05,162 or Rs. 1,05,100 as per Rule 117A on which interest under Section 139(8) at the rate of 12 per cent per annum for the period from 1-7-1976 to 31-3-1977 was leviable. While completing the assessment, the Income-tax Officer did not charge interest as per the provisions of Section 139(8). b. The provisions of Section 271(1)(a) were attracted in this case and the ITO failed to initiate penalty proceedings under this section. Accordingly, he issued a notice under Section 263 on the assessee. In response to it, Shri. V.H. Patil, learned counsel for the assessee, attended and contended that since the advance tax paid was much more than the tax payable on the basis of the total income assessed for the year, there was a refund to which the assessee was entitled and the result of the assessment order was a refund to the assessee, and as such, there was no loss to the revenue by the late filing of the return, and, therefore, there was no justification for charging interest under Section 139(8) or for the initiation of penalty proceedings under Section 271(1)(a). The Commissioner did not accept these contentions ; hence, he rejected these on the ground that the assessee was a registered firm but the interest under Section 139(8) and penalty under Section 271(1)(7) had to be charged on the basis of computation of tax due by the assessee as an unregistered firm and the point raised for determining the issue was that since the assessee had filed its return late, interest under Section 139(8) had to be charged. Accordingly, he directed the ITO to charge interest under Section 139(8) as well as to initiate penalty proceedings under Section 271(1)(a).
(3.) THE assessee being aggrieved has preferred this appeal. Shri. V.H. Patil, learned counsel for the assessee, contends that the Commissioner can take action under Section 263 if the assessment order of the ITO is erroneous insofar as prejudicial to the interest of the revenue, and when in the assessment order there is no mention for initiation of the penalty proceedings under Section 271(1)(a) and for charging interest under Section 139(8), then his jurisdiction is ousted if he takes action on the plea that the ITO had not charged the interest under Section 139(8) and failed to initiate penalty proceedings under Section 271(1)(a). He further contends that when the refund is made by the ITO, then there is no basis for charging interest under Section 139(8) as interest under Section 139(8) is charged if the revenue's money is utilised by the assessee in his business by late filing of the return, and over here, there is no such position. He further contends that the penalty proceedings can be initiated in the assessment proceedings, and if these are not initiated in the assessment proceedings, then the ITO has no jurisdiction to initiate such proceedings, and as such, the Commissioner cannot vest the ITO with the jurisdiction which he is not having. Furthermore he contends that if there is no order regarding charging of interest under Section 139(8), then the assessment order is not erroneous at all. He relies on the decision of the Hon'ble Karnataka High Court in the case of CIT v. Executors of the Estate of Late H.H. Rajkuverba Dowager Maharani Saheb of Gondal [1978] 115 ITR 301, and that of the Tribunal in IT Appeal No. 204 (Bom.) of 1979 for the assessment year 1974-75 dated 2-6-1980. On the other hand, Shri Bhargava, learned departmental representative, relies on the decision of the Hon'ble Andhra Pradesh High Court in the case of CIT v. Karkhana Zinda Tilismath [1980] 123 ITR 814 stating therein that even if there is no mention in the order of the ITO charging interest under Section 139(8) or for initiation of penalty proceedings under Section 271(1)(a), then the Commissioner is within his powers to direct him to do so, under Section 263(2). He has also placed reliance in support of this proposition on the decisions in the cases of CIT v. City Palayacot Co. [1980] 122 ITR 430 (Mad.), Addl. CIT v. Kantilal Jain [1980] 125 ITR 373 (MP) and IT Appeal Nos. 1592 and 1593 (Bom.) of 1975-76 dated 8-11-1975.;


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