JUDGMENT
1. This reference under Section 256(1) of the Income-tax Act is concluded by the ratio of our decision in Tax Case No. 231 of 1976, CIT v. Ashok Trading Company (663 supra), disposed of on November 9, 1985, as we shall presently show.
2. The assessee is a registered firm and was assessed as such for the assessment year 1969-70.
3. The Income-tax Officer assessed the taxable income at Rs. 56,682. The assessment order shows that the question of charging of interest thereon totally escaped consideration. It is not in controversy and was never in controversy that ordinarily the assessee would be liable to pay interest on the assessed tax. No order was, however, passed by the Income-tax Officer. He did not at all advert to this aspect in his order. Subsequently, his attention was drawn to this slip. He, therefore, initiated proceedings for rectification under Section 154 of the Act. Notice was issued to the assessee but no one appeared. In his absence, therefore, the Income-tax Officer by order dated November 2, 1973, rectified the assessment and assessed Rs. 3,675 as interest payable by the assessee. The assessee thereafter filed an appeal to the Appellate Assistant Commissioner against the assessment. In the matter of rectification and charing of interest, the Appellate Assistant Commissioner relied upon the decision of the Supreme Court in S. A. L. Narayan Row v. Ishwarlal Bhagwan Das [1965] 57 ITR 149 and held that the Income-tax Officer must be deemed to have exercised discretion in favour of the assessee not to charge interest under Section 139(2). In short, the Appellate Assistant Commissioner held that the Income-tax Officer had waived charging of interest. Being aggrieved by the order of the Appellate Assistant Commissioner, the Revenue appealed to the Income-tax Appellate Tribunal. The Tribunal affirmed the order of the Appellate Assistant Commissioner in the same terms. Hence, the present reference at the instance of the Revenue. The question referred to us for our opinion is as below:
“Whether, on the facts and in the circumstances of the case, the Tribunal was correct in presuming that the Income-tax Officer had exercised his discretion in favour of the assessee by not charging interest under Section 139(2) of the Income-tax Act, 1961, at the time of completing the original assessment and in holding that the provisions of Section 154 were not applicable for rectifying the original order for the purpose of charging the above interest ? ”
4. In the case of Ashok Trading Company [1986] 160 ITR 663 (Pat), we held as follows (p. 668) :
” The case of Premchand Sitanath Roy v. Addl. CIT [1977] 109 ITR 751 (Cal) is really a decision against the assessee. In that case, the position was that in terms of the proviso to Section 139(1) of the Act, there was an obligation to charge interest from the assessee for late filing of the return. Interest had not been charged in that case. Therefore, their Lordships of the Calcutta High Court laid down that the liability can only be exonerated in terms of Sub-section (8) of Section 139 of the Act and that exercise of discretion must also be in accordance with Rule 117A of the Rules, In that case, Sabyasachi Mukharji J. observed that there was no evidence that the Income-tax Officer had exercised discretion or applied his mind to the facts of the case. The same is the situation before us. It would, therefore, be difficult to hold that, there was waiver in regard to charging of interest. Assuming that there was an express order to that effect, even then the order would be without jurisdiction as no previous approval had been obtained. The wording of Sabyasachi Mukharji J. that the waiver has to be in accordance with 117A of the Rules is rather significant. In that view of the matter, the Calcutta decision also cannot be of any help to the assessee. ”
5. In Tax Case No. 231 of 1976 (CIT v. Ashok Trading Co. [1986] 160 ITR 663), the Tribunal had referred to us, for our opinion, the question whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that there was no mistake apparent from the record in the original order which could be rectified under Section 154 of the Income-tax Act, 1961, In that case as well, the interest after rectification was assessed at Rs. 3,051, a sum above Rs. 1000. In that case also, the Income-tax Officer totally omitted to advert to the question of chargeability of interest. Subsequently, the Income-tax Officer had taken action under Section 154 of the Act for rectification so far as the interest had escaped assessment. The question, therefore, which fell for considertion in that case was whether the order of rectification was correctly effected. The same question has been referred to us in the present case.
6. The question of rectification is inextricably linked with the question of waiver of interest. In the earlier case of Ashok Trading Company [1986] 160 ITR 663 (Pat), upon a consideration of Rule 117A, we held that there was no waiver of the levy of interest. The proviso to Rule 117A is rather important and it lays down that the previous approval of the Inspecting Assistant Commissioner must be obtained for the purpose of waiving interest where the amount of interest reduced or waived under Clause (iv) or (v) exceeds Rs. 1,000. In the instant case as well, the chargeable interest exceeds Rs. 1,000, the sum being Rs, 3,675. It is not in controversy that the approval of the Inspecting Assistant Commissioner had never been obtained for the waiver of interest. It is thus obvious that the Income-tax Officer had no jurisdiction to waive the charging of interest. If the Income-tax Officer had no jurisdiction to waive charging of interest, it cannot be held that the Income-tax Officer must be deemed to have decided not to charge interest. I have purposely avoided the word “waiver” as that word has not been used either by the Appellate Assistant Commissioner or by the Tribunal or in the question referred to us but the substance of the question is the same. A decision “not to charge interest” is the same as waiver. Our decision, therefore, is on the footing of the waiver which is the only power in the Income-tax Officer not to charge interest. The question referred to us, therefore, in this reference must be answered in the same terms as our earlier decision in Tax Case No. 231 of 1976, disposed of on November 9, 1985 [CIT v. Ashok Trading Company [1986] 160 ITR 663 (Pat)].
7. For the reasons stated above, we are of the view that the Tribunal was not correct in presuming that the Income-tax Offier had exercised his discretion in favour of the assessee by not charging interest under Section 139(2). For the very same reason, as decided earlier, we are of the view that the proceeding for rectification was rightly initiated and the Tribunal was not right in this regard as well. The reference is thus disposed of in favour of the Revenue and against the assessee. Since, no one has appeared on behalf of the assessee, there shall be no order as to costs.
8. Let a copy of this judgment be transmitted to the Income-tax Appellate Tribunal through its Assistant Registrar in terms of Section 260 of the Act.
