SENGUPTA,J. - (1.) IN this reference under s. 256(2) of the IT Act, 1961 ('the Act') for the asst. yr. 1984-85, the following question of law has been referred to this Court: "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that levying of interest under s. 139(8) and 217 of the IT Act, 1961 was not legal in the instant case and in directing the AO not to recover the interest charged under s. 139(8) of the IT Act, 1961?"
(2.) SHORTLY stated, the facts are that while completing the assessment of the assessee, a registered firm, for the asst yr. 1984-85, the ITO in his order dt. 21st May, 1986 directed to 'charge interest as per law'. Accordingly, in the notice of demand sums of Rs. 11,160 and Rs. 2,923 were included as interest payable under ss. 139(8) and 217 of the Act. The assessee challenged the above charging of interest before the CIT (A) but remained unsuccessful.
(3.) THE assessee then brought the issue in second appeal before the Tribunal. The Tribunal following the decision in the cases of Mulakh Raj Bimal Kumar vs. ITO 1976 CTR (J&K) 279 : (1977) 107 ITR 383 (J&K) and of Monohar Gidwany vs. CIT (1983) 139 ITR 498 (Cal) Accepted the claim of the assessee with the following remarks: "We have carefully considered the rival submissions and the case laws cited before us. We are unable to appreciate that the cases cited on behalf of the assessee were distinguishable on facts. As is evident from the assessment order, no directions to charge interest under specific provisions of the Act were made by the ITO. No interest was charged in the notice of demand. This clearly shows that the ITO failed to apply his mind regarding charging of interest and left this job to his subordinate staff. This is clearly not permissible under the law. For the above reasons, we hold that interest levy was not legal and the same could not be demanded as per the challan accompanying the assessment order. The ITO is, accordingly, directed that interest charged under the above sections should not be recovered from the assessee." ;