JUDGMENT
P.K. Balasubramanyan, J.
1. At the instance of the Revenue the following question has been referred to us by the Income Tax Appellate Tribunal under Section 18 of the Companies (Profits) Surtax Act, 1964, read with Section 256(1) of the Income Tax Act:-
“Whether on the facts and in the circumstances of the case, the Tribunal is right in law and in fact in holding that it is not beyond doubt as to whether interest under Section 7C could be charged by an order under Section 13 of the Surtax Act and so the levy of the interest was not in order?”
2. For the assessment year 1982-83 the assessee was assessed under Section 6(2) of the Companies (Profits) Surtax Act, 1964 (hereinafter called the Surtax Act) on 25.2.1987. While making the assessment, the assessing officer did not levy interest payable by the assessee in terms of Section 7C of the Surtax Act. There was an appeal at the instance of the assessee against the assessment and the appeal was ultimately disposed of. Thereafter the assessing officer issued a notice to the assessee under Section 13 of the Surtax Act proposing to rectify the original order with reference to a reduction of profit under Section 41(2) of the Income Tax Act and also to correct the omission to charge interest under 7C of the Surtax Act. The assessee objected by contending that the assessment in the case was covered by the appellate order dated 17.6.1987 and that the original order of the assessing officer had got merged in the appellate order and hence, the provisions of Section 13 of the Surtax Act was not attracted. The assessing officer, the Deputy Commissioner of Surtax (Assessment), overruled this objection. He ordered rectification of the order by levying interest under Section 7C of the Surtax Act from 1.4.1982 to 25.2.1987, the date of the order of the regular assessment under Section 6(2) of the Surtax Act. We may notice here that the assessing officer, in terms of Section 14 of the Surtax Act, had also given effect to the order of the appellate authority in the appeal filed by the assessee by a separate order. The assessee challenged the order made under Section 13 of the Surtax Act by the assessing officer, before the Commissioner of Income Tax (Appeals). That appeal was dismissed by the appellate authority. The assessee thereupon filed a further appeal before the Income Tax Appellate Tribunal, Cochin Bench. The Only contention raised by the assessee in that appeal was that the assessing officer under the Surtax Act could not levied interest under Section 7C of the Surtax Act on the assessee in exercise of jurisdiction under Section 13 of the Surtax Act in view of the fact that the omission to charge interest in the original order of assessment dated 25.2.1987, was not a mistake which could be rectified under that provision, but that it was really a case of waiver of interest by the assessing officer when he completed the regular assessment. The Income Tax Appellate Tribunal is seen to have rendered a finding that the failure to levy interest under Section 7C of the Surtax Act was a mistake that could be set right by an order under Section 13 of the Surtax Act within a period of four years from the end of the financial year in which the order was passed.. Thereafter, the Appellate Tribunal is also seen to have stated that in view of the decision of the High Court of Gujarat, in Commissioner of Income Tax v. Gordhanbhai Jethabhai, 205 ITR 279, whether interest under Section 7C of the Act could be charged by an order under Section 13 of the Surtax Act, was a question on which two views were possible and hence it agreed with the contention of the assessee that the matter being debatable would not come within the purview of Section 13 of the Surtax Act. Thus rendering inconsistent findings, the Appellate Tribunal allowed the appeal filed by the assessee and deleted the interest charged under Section 7C of the Surtax Act by way of rectification under Section 13 of the Surtax Act. As noticed, at the instance of the Revenue the question referred to above was referred to us under Section 19 of the Surtax Act.
3. While sending up the relevant papers, the Tribunal had not sent up the revised order of assessment or the rectified order of assessment passed by the assessing officer on 2.7.1991, which is the source of the question that is referred to us for opinion. In that situation, we adopt the paper book filed before us on behalf of the assessee which contains the order dated 2.7.1991 and order that the said paper book also will be incorporated as part of the records of this reference.
4. There is no dispute about the assessment under Section 6(2) of the Surtax Act for the relevant assessment year. The dispute centres round only the question whether the liability for interest imposed on the assessee by Section 7C of the Surtax Act, stood waived by the assessing officer not levying interest in the regular order of assessment dated 25.2.1987 and whether in the circumstances of the case, the assessing officer could rectify the order dated 25.2.1987 by levying interest chargeable under Section 7C of the Surtax Act while exercising jurisdiction under Section 13 of the Surtax Act. In this case, therefore, the question is whether the assessing officer had the jurisdiction to invoke Section 13 of the Surtax Act. Though the Tribunal originally seems to have taken the view that the power was not exercised within time, subsequently that finding was rectified by the Tribunal which found that the power had been exercised by the assessing officer within time. Therefore, the only question failing for decision is whether the failure to levy interest while making the order of regular assessment could be rectified in exercise of power under Section 13 of the Surtax Act by way of levying interest also, as provided by Section 7C of the Surtax Act. According to learned counsel for the assessee, Section 7C of the Surtax Act, by Sub-section (5) thereof, read with Rule 13C of the Companies (Profits) Surtax Rules, enables the assessing officer to waive interest in the circumstances stated and when the assessing officer did not levy interest while completing the original assessment, he must be taken to have waived the interest payable by the assessee under Section 7C of the Surtax Act and since it was an act of waiver by the assessing officer there was no question of rectification in exercise of power under Section 13 of the Act.
5. Learned counsel for the Revenue, on the other hand, submitted that the omission to levy interest, the obligation for which was statutorily imposed by Section 7C of the Surtax Act, was a patent error committed by the assessing officer and such and error clearly fell within the purview Section 13 of the Surtax Act. Counsel further submitted that waiver of interest by the assessing officer was a conscious act which called for application of mind and a finding regarding the satisfaction of one of the other of the conditions imposed by Rule 13C of the Rules and an omission to levy interest while completing the assessment, could not be considered as an act of waiver of interest by the assessing officer while completing the assessment.
6. Section 7C of the Surtax Act clearly provide that interest at the rate prescribed in that section, is payable by the assessee company for default in payment of advance surtax as provided by Section 7A of the Act. Thus the liability to pay interest is a liability imposed by the Statute itself. It does not spring form the order of the assessing officer.
7. It has been held by this Court in Commissioner of Income Tax v. R. Ramalingair, 241 ITR 753 that the liability to pay interest under Section 234-A and 234-B of the Income Tax Act is attracted automatically by operation of law and therefore, no prior notice to show cause is required to be given to the assessee before levy of such interest. The Division Bench has referred to and relied upon a decision of the Full Bench of this Court in Abdulla (PC) v. S.T.O., 86 STC 259 and various other decisions in support. We find that the said decision has application to cases arising under Section 7C of the Surtax Act since the provisions are in pari materia and the liability to pay interest under Section 7C of the Act is attracted automatically by operation of Section 7C itself.
8. Thus the question is whether the interest omitted to be levied by the original order of assessment could be brought in by way of rectification in exercise of power under Section 13 of the Surtax Act. In Income Tax Officer v. M.R. Vidyasagar, 44 ITR 732 dealing with Section 18A of the Indian Income Tax Act, 1922 read with Rule 48 of the then Income Tax Rules, which corresponds to Section 215 of the Income Tax Act, 1961 and Rule 40 of the Income Tax Rules, the Supreme Court held that the Income Tax Officer had no discretion in the matter of levying interest and was bound to impose liability for payment of interest. Thus, while completing the assessment, the assessing officer had the obligation to levy interest in terms of Section 7C of the Surtax Act. Then the question is whether his omission to do so would amount to a mistake apparent from the records, justifying his exercise of jurisdiction under Section 13 of the Surtax Act. In Commissioner of Income Tax v. Ramjibhai Hirjibhai, 110 ITR 411 the Gujarat High Court held that it was open to the Income Tax Officer under Section 154 of the Income Tax Act to initiate rectification proceedings and levy interest as the omission on his part at the time of the original assessment in that regard was apparent from the record. In a case of a similar omission to levy interest under the Income Tax Act, the Patna High Court in Commissioner of Income Tax v. Tiwary Bechar & Co. 165 ITR 78 held that the order could be rectified in exercise of power under Section 154 of the Income Tax Act and interest could be levied. The same view was taken by the High Court of Rajasthan in Mulchand Patti Mfg. Co. v. Commissioner of Income Tax, 215 ITR 746. Learned counsel for the assessee relied on Commissioner of Income Tax v. Gordanbhai Jethabhai, 205 ITR 279, another decision of the Gujarat High Court which is seen to have taken a view contrary to the decision of that court itself in Commissioner of Income Tax v. Ramjibhai Hirjibhai, 110 ITR 411 referred to earlier and in which it was held that when an assessing officer fails to levy interest while completing the original assessment, he must be taken to have exercised his power to waive the interest payable by the assessee in terms of the relevant statutory provision. With respect, we find it is not possible to accept the ratio of that decision. First of all, a waiver is a conscious act and unless it is discernible from the order that the assessing officer has applied his mind and taken a decision to waive the interest which has statutorily become due, it could not be postulated that there is a waiver of interest by the assessing officer. Secondly, a waiver of interest is not automatic as held by the Supreme Court in Income Tax Officer v. M.R. Vidyasagar, 44 ITR 732 and by this Court in Commissioner of Income Tax v. Cochin-Malabar Estates Ltd., 97 ITR 466. Unless the conditions in that behalf laid down under the relevant rule are satisfied, an assessee is not entitled to waiver of interest and it is not open to an assessing officer to waive the interest. In this case, the assessee has to satisfy atleast one of the conditions of Rule 13C of the Surtax Rules before the assessee could seek a waiver of the interest that has become due in terms of Section 7C of the Surtax Act. Therefore, without the assessing officer finding the existence of one of the grounds justifying waiver under Rules 13C of the Rules read with Section 7C(5) of the Surtax Act, it cannot be postulate that the assessing officer has waived the interest while completing the regular assessment under Section 6(2) of the Surtax Act. It may also be noted that going by the relevant clause in Rule 13C of the Rules, it may not also be possible for the assessing officer to waive interest due under Section 7C of the Act for one year commencing from the first day of April of the next following financial year concerned. We find that this is how the relevant provision was understood by the High Court of Allahabad also JK Jute Mills C. Ltd. v. Income Tax Officer,.
9. It appears to us therefore, that the theory of implied waiver cannot be invoked in a case where the statute itself makes the interest payable on the conditions therein being satisfied and it confers only a discretion in the authority concerned, to waive the interest on satisfying one or the other of the conditions specified in that behalf. The regular order of assessment in this case is totally silent on the question of interest leviable under Section 7C of the Surtex Act. From that situation, it cannot be inferred in the circumstances, that there was a waiver of interest by the assessing officer. It is clear that the failure to levy interest was only an omission and the same could be rectified in exercise of power under Section 13 of the Surtax Act.
10. As we have noticed, the Tribunal itself at one place has entered a finding that such an omission could be rectified in exercise of power under Section 13 of the Surtax Act, though in another place it has stated that the question whether a rectification under Section of the Act is possible, is a debatable question. There is nothing debatable about it. A statutory provision has been ignored and the assessment completed. This is capable of correction under Section 13 of the Surtax Act. We, therefore, hold that an omission to levy interest while completing the original assessment under Section 6(2) of the Surtax Act is capable of being rectified by exercise of power by the assessing officer under Section 13 of the Act.
11. In view of this conclusion, the question referred to us by the Tribunal has to be answered in favour of the Revenue and against the assessee. We thus answer the question referred to us for decision in favour of the Revenue.