Full Judgment
2. The assessee appealed against the aforesaid order under Section 154 to the Commissioner (Appeals) who vide his order dated 31-3-1983 quashed the demand for interest by observing, inter alia, as follows : 6. Again this action of the assessing officer cannot be upheld by me because, firstly, as is contended by the learned counsel, the assessing officer had not given a show-cause notice to the appellant before taking impugned action in this regard so far as the charge of interest under Sections 139(8) and 216 is concerned. Secondly, because both the provisions of Section 139(8) and Section 216 are of the nature of discretionary provisions, i.e., the assessing officer has a discretion either to charge such interest or to waive such interest. Therefore, because such an interest had not been charged at the time of original assessment proceedings, it is again to be held that the question of charging interest under these provisions was really a debatable question, inasmuch as that it is now known whether at the time of framing the original assessment proceedings, the assessing officer had waived the interest after utilising his discretion in this regard. The impugned action taken is, therefore, struck down in accordance with the ratio of the decision of Volkart Bros. referred to above.
3. The revenue appealed against the aforesaid order of the Commissioner (Appeals) to the Tribunal who confirmed the order of the Commissioner (Appeals) vide their combined orders in IT Appeal Nos. 2811 and 2813 (Delhi) of 1983, dated 18-9-1984. This is what the Tribunal observed on the aforesaid subject-matter of demand for interest vide paragraph 12 of their order : The interest appears to have been mentioned in the demand notice in the back of the assessee, without affording an opportunity to explain its case. The action of the learned IAC (Assessment) did indeed increase the assessee's burden. The assessee should have been heard before making any such attempt. The learned Commissioner (Appeals), therefore, was right in our view to entertain the appeal and vacate the charging of interest mentioned in the demand notice.
Such mention, in the demand notice, of interest was purely on account of change of opinion as the assessing authorities had an option which was not exercised earlier no doubt the facts were the same. The learned IAC (Assessment)'s action, therefore, was not tenable on account of the change of opinion also.
4. In the meanwhile the assessee had put in an application under Section 154. While passing the order under Section 154, on the request of the assessee, the IAC (Assessment) again demanded interest under Section 216 and under Section 139 ignoring the order of the Commissioner (Appeals) for the aforesaid assessment year which had been passed in the mean while on 31-3-1983. While doing so, the said IAC made, inter alia, the following observations : In this connection, it may be mentioned that the interest under Sections 139 and 216 was not charged under Section 154 as had been wrongly stated by the assessee before the Commissioner (Appeals). In fact both the interests were charged at the time of regular assessment made on 31-3-1982 at Rs. 32,384 under Section 139(8) and Rs. 36,954 under Section 216 as would be clear from the following demands:Income-tax & S.C. 10,61,210Interest under Section 139 32,384Interest under Section 216 36,954 ------------Less : Already paid 10,60,906 ------------ Accordingly, a demand of Rs. 69,642 was created vide demand notice issued to the assessee on 31-3-1983, i.e., the date of completion of regular assessment. Thus it is clear that interest under both the sections was charged at the time of original assessment itself and not under Section 154 as has been pleaded by the assessee before the learned Commissioner (Appeals). The interest under Section 139(8) was, however, increased from Rs. 32,384 to Rs. 32,639 under Section 154 on 9-12-1982 as the income of the assessee was increased to some extent. In view of this fact, the assessee's application for deleting the interest under Sections 139 and 216 is rejected accordingly. A reference is made to Commissioner (Appeals) separately, in this behalf.
It is not clear from the facts placed before us as to whether reference was made by the IAC (Assessment) to the Commissioner (Appeals) as indicated in the last line quoted above. But as noted earlier, in the meanwhile, the order of the Commissioner (Appeals) dated 31-3-1983 came up for consideration before the Tribunal on 18-9-1984 and they confirmed the same as noted above.
5. The assessee again appealed against the second order under Section 154 passed by the IAC (Assessment) on 27-10-1983 to the Commissioner (Appeals) who had the benefit of the order of the Tribunal passed in the meanwhile on 18-9-1984. The said Commissioner (Appeals) after a very elaborate analysis of the facts has given the finding that his predecessor had wrongly appreciated the facts in question and that the real facts were as brought out by the IAC (Assessment) in his second order under Section 154, namely, that the interest under Sections 139 and 216 had been charged at the time of the original assessment itself and that, therefore, his predecessor Commissioner had wrongly proceeded on the assumption that the interest was created for the first time vide the notice issued by the IAC (Assessment) along with the order under Section 154. The Tribunal had merely confirmed the above erroneous order of the Commissioner (Appeals) and, therefore, according to him the only effect of the aforesaid two orders was that the extra demand of Rs. 255 created through the demand notice issued along with the order under Section 154 was deleted by the Tribunal and the other demand was still standing and had not been deleted.
6. The assessee is in appeal against the aforesaid order of the Commissioner (Appeals) to us and what is inter alia urged by the learned counsel for the assessee is that the learned Commissioner (Appeals) could not sit in judgment over an order of his own predecessor which had in the meanwhile merged with the order of the Tribunal and howsoever erroneous the finding of his predecessor might be, the Commissioner (Appeals) himself could not correct the said mistake when the order of his predecessor had merged with the order of the Tribunal. The IAC (Assessment) and the Commissioner (Appeals) were merely trying to bypass the validly passed orders of the proper appellate authorities and such action was not permissible under the law as held by their Lordships of the Hon'ble Supreme Court in the case of CIT v. Rao Thakur Narayan Singh [1965] 56 ITR 234. He also placed reliance on the observations of their Lordships of the Hon'ble Supreme Court in the case of Bhopal Sugar Industries Ltd. v. ITO [1960] 40 ITR 618 wherein their Lordships of the Hon'ble Supreme Court had stated, inter alia, as below: If the ITO fails to carry out the directions given by the Tribunal in its appellate order, which has become final, such a failure is destructive of a basic principle of justice and a writ of mandamus should issue debito justitiae to compel him to carry out the directions given by the Tribunal. Even the Court issuing the mandamus is not empowered to hold that such an order of the Tribunal is wrong.
7. On behalf of the revenue, it is pointed out that the facts as brought out by the IAC (Assessment) in his order under Section 154 and by the Commissioner (Appeals) in his order were unassailable and that the fact was that interest under Sections 139(8) and 216 had been charged in the demand notice issued along with the original assessment order itself and the Commissioner (Appeals) while passing his first order had committed an error in presuming that the said demand was being created through the demand notice issued along with the notice under Section 154 and that, therefore, the Tribunal should not interfere with the orders of the authorities below which on facts were correct and perpetuate thereby the error which had been committed.
8. We have given our careful and anxious consideration to the facts of the case. It has been held by their Lordships of the Hon'ble Supreme Court in the case of Rao Thakur Narayan Singh (supra) that even if the order of the Tribunal was patently erroneous and it had committed an inadvertent mistake, the Income-tax Department would not be justified in bypassing the said order and initiating reassessment proceedings in derogation of the findings given by the Tribunal. In the present case, the Tribunal has passed an order which dealt directly with the dispute as to whether the IAC (Assessment) was justified in demanding interest under Sections 139(8) and 216 from the assessee in respect of the assessment year 1979-80 amounting to Rs. 32,613 and Rs. 32,954 respectively. Paragraph 5 of the order of the Commissioner (Appeals) dated 31-3-1983 which has been confirmed by the Tribunal would make this position apparently clear. It was with regard to the above demands that the Commissioner (Appeals) held, though erroneously, that the demand in question had been created through the demand notice issued along with the order under Section 154. This order of the Commissioner (Appeals) was appealed against by the revenue before the Tribunal but unfortunately for the department the mistake in question was never brought to the attention of the Tribunal by the departmental representative even though the second order under Section 154 had been passed by the IAC (Assessment) in the meanwhile on 27-10-1983 and he had detected the mistake in question. Thus the Tribunal was led to believe on account of the facts stated in the Commissioner (Appeals)'s order not being contested by the revenue that the findings of the Commissioner (Appeals) on facts were correct. Accordingly, the Tribunal sustained the order of the Commissioner (Appeals), inter alia, on the ground that demand could not be created through the notice under Section 154. Once the said order had been passed, it was not open to the Commissioner (Appeals) to try to bypass the said order and to interpret it to mean that the said order dealt with only an increased demand of Rs. 255. It was not so. The dispute before the Tribunal was with regard to the interest under Section 139 amounting to Rs. 32,384 and interest under Section 216 amounting to Rs. 36,954 as per grounds of appeal before the Commissioner (Appeals). The present order of the Commissioner (Appeals) appears to us to be nothing short of an attempt at refusing to accept the finality of the order of the Tribunal and attempting to bypass it.
9. After scrutinising the facts as brought before us, it appears to us that the facts as stated by the IAC (Assessment) in his order dated 27-10-1983 are no doubt correct, but the IAC has no locus standi to modify the order of the Tribunal nor does the Commissioner (Appeals) have such locus standi. Whether or not the Tribunal would be able to rectify the mistake in question would have to be considered when an appropriate application is made before it. Presently we will express no opinion on the subject. Suffice it to say that the present order of the Commissioner (Appeals) is entirely erroneous insofar as it disturbs the order of the Tribunal which he cannot. The present appeal of the assessee should, therefore, succeed and we, accordingly, allow it.