1. These three appeals filed by the assessee relate to assessment years 1985-86, 1986-87 and 1987-88 and arise out of the common order of the Commissioner of Income-tax, Coimbatore passed under Section 263 of the I.T. Act, 1961, dated 23-3-1992. The Commissioner set aside the order of waiver of interest charged under Sections 215, 217 and 139(8) of the I.T. Act, 1961 for the assessment years under consideration and directed the Assessing Officer to consider the issue afresh after giving adequate opportunity of hearing to the assessee and pass suitable orders.
2. The brief facts of the case are that the Assessing Officer charged interest as under while completing the assessments for the assessment years under consideration : 1985-86 38,394 - - 1986-87 24,800 - 21,080 1987-88 - 12,469 5,344 The assessee had applied for waiver of interest to the Dy. Commissioner of Income-tax, Range-I, Coimbatore, who called for a report from the Asstt. Commissioner and directed the Asstt. Commissioner to waive interest under Section 139(8)/215/217in full under Rule 117A(5) and 40(5) of the I.T. Rules, 1962 for the assessment years under consideration, as mentioned above. As a result of such directions issued by the Dy. Commissioner, the Assessing Officer waived interest for the assessment years as mentioned above, vide order dated 28-7-1989. On a perusal of the records, the Commissioner of Income-tax, Coimbatore found that waiver of interest by Assessing Officer under Section 139(8)/215/217 granted in the case of the assessee was not in order as the prescribed conditions laid down in Rule 40(5)/117A(5) have not been fulfilled. The Commissioner came to the conclusion that the waiver of interest granted by the Assessing Officer after obtaining the approval of the Dy. Commissioner was erroneous and prejudicial to the interests of Revenue. The Commissioner, therefore, issued a show cause notice under Section 263 to the assessee calling upon him to show cause why an order as the circumstances of the case may justify, including an order for enhancing or modifying the order cancelling the assessment and directing a fresh assessment should not be passed. After hearing the assessee's counsel and after considering the written objections of the assessee dated 11-3-1992 the Commissioner came to the conclusion that the assessee has not given valid reasons for not filing the returns of income in time for the assessment years 1985-86 to 1987-88.
The Commissioner also noticed that the assessee was constructing additional floors to his building and there was no scarcity of funds to make payment of advance-tax/tax. The Commissioner also found that the assessee had made payment of insurance premium of Rs. 34,000 and purchased National Savings Certificates for Rs. 10,000 and shares for Rs. 10,000 and contributed to recurring deposits. It was also found that the assessee had a balance amount of Rs. 3.9 lakhs to his credit in the books of account of the firm, which showed that the assessee did not have scarcity of resources to make payment of advance-tax/tax. The Commissioner also found that the assessee's claim that he is entitled to the benefits under the Amnesty Scheme was not acceptable. It was observed by the Commissioner that the Dy. Commissioner has not given any finding regarding correctness or otherwise of the plea of the assessee and therefore, the order of the Dy. Commissioner was not a speaking order justifying the waiver granted by him. According to the Commissioner, the Dy. Commissioner and the Assessing Officer have not exercised their powers properly while waiving interest. Accordingly, for the reasons mentioned in the order under Section 263 the Commissioner set aside the order waiving interest under Section 139(8)/215/217 for fresh consideration. The Assessing Officer was also asked to give adequate opportunity of hearing to the assessee before passing suitable orders according to law. These directions of the Commissioner are contested in appeal by the assessee before the Tribunal.
3. It is argued by the ld. Counsel for the assessee that the Commissioner had no jurisdiction to review the order passed by the Dy.
Commissioner Range-I, Coimbatore waiving the interest under Sections 139(8)/215/217. It is stated by the ld. counsel that power has been conferred on the Dy. Commissioner by the Rules and the Rules have binding force. If the Dy. Commissioner issues a memorandum, then it does not mean that it has lost the binding force. Otherwise Rule 40(5) has no meaning. According to the learned counsel the Dy. Commissioner has powers to waive interest under Rule 40(5) of the I.T. Rules and unless mala fide is proved the Commissioner cannot say that the order of the Dy. Commissioner was erroneous and prejudicial to the interests of the Revenue. The ld. counsel submitted that the Assessing Officer/Dy. Commissioner have exercised their discretionary powers to waive the interest and the Commissioner cannot interfere with such discretionary powers unless mala fide is proved. It is also stated by the ld. counsel that the Assessing Officer did not send any proposal to the Dy. Commissioner for waiver of interest but the assessee applied for waiver of interest to the Dy. Commissioner and the Dy. Commissioner issued memorandum to the Assessing Officer directing to waive the interest. According to the ld. counsel the levy of interest under Section 139(8)/215/217 is discretionary and where discretion has been exercised under the law it cannot be erroneous and the Commissioner has no jurisdiction to set aside such an order passed by the Assessing Officer.
4. The ld. Departmental Representative referred to the provisions of Section 139(8) which empower the Assessing Officer to waive/reduce the interest. He also referred to Rule 117A and argued that under this rule the Assessing Officer has the power to waive interest with the approval of the Dy. Commissioner. The ld. D.R. contended that the Dy.
Commissioner has no power to waive interest under sectionl39(8) because that section empowers the Assessing Officer to waive or reduce interest. The ld. D.R. also referred to the provisions of Section 215(4) of the Act and pointed out that only the Assessing Officer has power to reduce or waive interest under that section. The ld. D.R.referred to the provisions of Sections 144A and 144B which empower the Dy. Commissioner to issue instructions to the Assessing Officer.
According to the ld. D.R. when the order of assessment is passed with the approval of the Dy. Commissioner under Sections 144A or 144B the Commissioner has power to revise such an order. Similarly when the Assessing Officer waives interest under Section 139(8)/215/217 under the directions or with approval of the Dy. Commissioner, such an order can be revised by the Commissioner in exercise of the power conferred under Section 263 of the I.T. Act, 1961. The ld. Departmental Representative also referred to the decisions in the cases of CIT v.Vithal Textiles [1989] 175 ITR 629/40 Taxman 401 (M.P.), Premier Cable Co. Ltd. v. CIT [1992] 193 ITR 719 (Ker.), CIT v. East Coast Marine Products (P.) Ltd. [1990] 181 ITR 314/51 Taxman 32 (A.P.), CIT v.Christian Mica Industries Ltd. [1979] 120 ITR 627 (Cal.) and Madras High Court's decision in the case of CIT v. V.V.A. Shanmugam [1999] 236 ITR 878. According to the ld. D.R., when two interpretations are possible the interpretation which confers jurisdiction should be given.
According to him, the Commissioner has jurisdiction to revise the order of the Assessing Officer which has been passed under the directions of the Dy. Commissioner. The D.R. pointed out that the Dy. Commissioner has issued the memorandum for internal guidance and it was not binding on the Assessing Officer. He pointed out that Rule 40 does not confer power but only lays down the circumstances under which the interest could be waived. Rule 40(5) lays down that the Dy. Commissioner can consider the circumstances under which interest can be waived and hence this Rule does not give power to waive interest. The ld. D.R. invited our attention to the aforementioned decisions relied on by him to show that the Commissioner can revise an order of assessment in cases where directions under Section 144A or 144B are issued by the Dy.
Commissioner.
5. We have carefully considered the rival submissions, facts of the case, case law cited and material on record. In order to appreciate the rival submissions it is considered necessary to reproduce the proviso to Section 139(8)/215/(4)/217(2) as well as Rule 40(5) of the I.T.Rules, 1962 and Rule 117A: Section 139(8) proviso : "provided that the Assessing Officer may, in such cases and under such circumstances as may be prescribed, reduce or waive the interest payable by any assessee under this sub-section.
Section 215(4) : "In such cases and under such circumstances as may be prescribed, the Assessing Officer may reduce or waive the interest payable by the assessee under this section." Section 217(2): "The provisions of Sub-sections (2), (3) and (4) of Section 215 shall apply to interest payable under this section as they apply to interest payable under that section".
Rule 40(5) : "The ITO may reduce or waive the interest payable under Section 215 or Section 217 in the cases and under the circumstances mentioned below, namely :- ... (5) Any case in which the I.A.C. considers that the circumstances are such that a reduction or waiver of the interest payable under Section 215 or Section 217 is justified.
Rule 117A, Proviso : "The ITO may waive or reduce the interest payable under Section 139 in the cases and in the circumstances mentioned below, namely :- Provided that the previous approval of the IAC 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.
It is clear from the proviso to Section 139(8), Section 215(4), 217(2) that only the Assessing Officer has power to waive or reduce the interest charged or chargeable under Section 139(8)/215/217. Proviso to Section 139(8), Sub-section (4) of Section 215 and Section 217 only empower the Assessing Officer to exercise the power for waiver or reduction of interest charged under these sections. Similarly Rule 40(5) and 117A empower only the Assessing Officer to reduce/waive interest chargeable under Section 139(8)/215/ 217. Under Rule 117A proviso of the I.T. Rules, reproduced above, the Assessing Officer is, however, required to obtain the previous approval of the Dy.
Commissioner where the amount of interest reduced or waived, as the case may be, under Clause (iv) or (v) or Rule 117A exceeds one thousand rupees. Therefore, under Rule 117A the Dy. Commissioner has no power to waive or reduce the interest because this Rule starts with the words "in respect of Assessment Relating to assessment year commencing on or before the 1st day of April 1988 the Assessing Officer many reduce or waive the interest payable under Section 139 in the cases and in the circumstances mentioned..." It is clear from a reading of Rule 117A that the Dy. Commissioner has no power to waive or reduce the interest payable under sectionl39(8) but only the Assessing Officer has power to do so. But if the waiver/reduction exceeds Rs. 1,000, the Assessing Officer should seek the approval of the Dy. Commissioner. Similarly Rule 40(5) starts with the words "The Assessing Officer may reduce or waive the interest payable under Section 215 or 217 in the cases and under the circumstances mentioned below." Under this rule also the Assessing Officer has the power to reduce/waive the interest payable under Section 215 or 217. However, Sub-rule (5) of Rule 40 mentions that "any case in which the IAC considers that the circumstances are such that a reduction or waiver of the interest payable under Section 215 or Section 217 is justified". Under this rule the Dy. Commissioner has only to consider the circumstances regarding reduction or waiver of interest chargeable under Section 215 or 217 of the Act. If the circumstances exist for waiver/ reduction of interest under these sections, then the Dy. Commissioner can send a memorandum, instruction or direction to the Assessing Officer and after receipt of such memorandum, instruction or direction the Assessing Officer can reduce or waive the interest payable under Section 215/217 of the Act. But these sections do not empower the Dy. Commissioner to pass orders waiving or reducing the interest because the provisions of Section 215/217 only empower the Assessing Officer to reduce or waive interest payable under those sections. The role of the Dy. Commissioner in the waiver of interest under Section 215/217 is limited to the consideration of the circumstances which may justify reduction or waiver of interest. But he has no power to pass an order for waiver/reduction of interest under Sections 215/217 of the Act, because such a power under Rule 40 as well as under Sections 215(4) and 217 has been given to the Assessing Officer by the statute and not to the Dy.
Commissioner. The role of the Dy. Commissioner is thus limited to the consideration of the circumstances under which the waiver or reduction of interest under Section 215/217 is justified or not. The Dy.
Commissioner is not an authority under the provisions of Sections 215 and 217 or Rule 40 of the I.T. Act having powers to waive or reduce interest under Sections 215 and 217, because provisions of these sections as well as Rule 40 have given that power only to the Assessing Officer.
6. In the present case, the assessee made a petition to the Dy.
Commissioner to waive the interest under Section 139(8)/215/217 of the Act. The Dy. Commissioner asked for a report from the Assessing Officer. The Asstt. Commissioner vide letter dated 21-7-1989 sent a report to the Dy. Commissioner, who after receipt of the said report issued Memorandum dated 28-7-89 directing the Assessing Officer to waive the interest under Section 139(8)/215/217 for the assessment years 1985-86 to 1987-88. Neither the Dy. Commissioner nor the Assessing Officer gave any finding whether the circumstances would justify waiver/reduction of interest under Section 139(8)/215/217 of the Act. Therefore, the Commissioner was justified in coming to the conclusion that when the Dy. Commissioner considered the matter under Rule 40(5) he performed a quasi-judicial function and the proceedings of the I.A.C. in exercising the powers under Rule 40(5) should be a speaking order. It should also contain reasons whether the powers conferred on the I.T.O. and I.A.C. to reduce or waive interest is one coupled with a duty and in any event it should be exercised fairly and reasonably. It was found by the Commissioner that these norms were not found to have been followed by the Dy. Commissioner in his orders directing waiver of interest. Under these circumstances we are satisfied with the reasons given by the Commissioner for setting aside the waiver orders passed by the Assessing Officer for fresh consideration, because the issue regarding waiver of interest was not properly considered either by the Assessing Officer or the Dy.
Commissioner. When the Assessing Officer has not taken a correct decision and failed to follow the norms properly, the Commissioner can revise the assessment order passed by the Assessing Officer invoking the provisions of Section 263 of the Act. In the present case neither the Assessing Officer nor the Dy. Commissioner has explained with reasons as to how the assessee is entitled for waiver of interest under Section 139(8)/215/217of the Act and how the assessee satisfied the conditions for waiver of interest under these sections. Therefore, when the Commissioner realised that the Assessing Officer and the Dy.
Commissioner had not applied their mind and the norms are not found to have been followed by them, the Commissioner is fully entitled to set aside such an order acting under Section 263 of the Act and directing the Assessing Officer to consider the claim of the assessee afresh in accordance with law.
7. In the case laws cited by the ld. Departmental Representative (supra) particularly in the case of V.V.A. Shanmugam (supra) their Lordships, after considering various decisions mentioned in that order came to the conclusion that an order passed by the I.T.O. under directions given by the I.A.C. under Section 144A can be revised.
Following the ratio laid down by the jurisdictional High Court in the aforesaid case, we hold that the orders passed by the Assessing Officer in the present assessee's case regarding waiver/reduction of interest under Section 139(8)/215/217 under the directions of the Dy.
Commissioner can be revised by the Commissioner under Section 263 of the Act. There is no merit in the arguments of the ld. Counsel for the assessee that mala fides should be proved before revising the order of the Assessing Officer or Dy. Commissioner waiving interest under the above sections. Even if there is no mala fide, the Commissioner is competent to revise the order under Section 263 if the order waiving interest under Section 139(8)/215/217 is found to be erroneous in so far as it is prejudicial to the interests of Revenue. The Commissioner found that the Assessing Officer and the Dy. Commissioner has not followed the proper norms and have not given any reasons to waive or reduce interest under Section 139(8)/215 /217 of the Act and therefore, the Commissioner was fully justified in setting aside the orders which were not speaking and reasoned orders. We, therefore, confirm the order passed by the Commissioner under Section 263 of the Act and dismiss the assessee's appeals.