JUDGMENT
G. T. NANAVATI, ACTG. C.J. – In this petition, under article 226 of the Constitution, the petitioner-assessee is challenging the order dated February 14, 1979, passed by the Income-tax Officer under section 215 of the Income-tax Act, 1961, and the order dated March 15, 1980, èpassed by the Commissioner of Income-tax in exercise of his revisional powers.
For the assessment year 1975-76, the petitioner submitted a return on July 31, 1975, declaring a total income of Rs. 6,28,695 and a revised return on November 5, 1976, declaring a total income of Rs. 6,36,989. On assessment, it was found that the total income of the petitioner for the relevant year was Rs. 7,30,140. The said order of assessment dated November 16, 1976, was again rectified under section 154 by an order dated April 13, 1977, and the total income was revised from Rs. 7,30,140 to Rs. 7,21,130. Thereafter, the Income-tax officer issued a notice under section 154 for rectification of the assessment order on the ground that there was an error apparent on the face of the record inasmuch as no interest was levied under section 215. The petitioner objected to the same on the ground that as the Income-tax Officer had not charged any interest under section 215, the omission cannot be said to be apparent on the face of the record as an inference can also be drawn from such omission that the Income-tax Officer had waived the interest. Thereupon, the Income-tax Officer passed an order on February 14, 1979, dropping the proceedings under section 154, but on the very day, initiated proceedings under section 215 and levied interest of Rs. 14,888. The petitioner preferred a revision application to the Commissioner of Income-tax. By his order dated March 15, 1980, the Commissioner held that the benefit of rule 40(1) can be made available from the end of one year after submission of the return till the date of filing of the revised return and, therefore, the assessee was entitled to have the benefit from August 1, 1976, to November 5, 1976, and for the remaining period, the petitioner was liable to pay interest. He, therefore, partly allowed he revision application. As stated above, both these orders, that is the order passed by the Income-tax Officer levying interest and the order passed by the Commissioner in revision, are challenged in this petition.
What is contended by the learned advocate for the petitioner is that both the Income-tax Officer and Commissioner have misconstrued the correct position of law and, labouring under some misconception, they have passed the impugned orders. If we turn to the order passed by the Income-tax Officer at annexure “F”, it becomes apparent that he proceeded on the basis that levy of interest when the advance tax paid by the assessee is less than 75 per cent, is mandatory under section 215 of the Act. Another reason given by the Income-tax Officer is that at the time of assessment, such interest was not levied through oversight. What is required to be noted is that the Income-tax Officer who had issued the notice under section 215 was quite different from the Income-tax Officer who had passed the assessment order. As the previous Income-tax Officer had not passed any order to levy interest at the time of passing the assessment order, the successor-income-tax Officer though that it was an oversight on the part of the Income-tax Officer and èjumping to such a conclusion, he issued a notice under section 215 and levied interest. The Income-tax Officer did not consider the provision whereby a discretion has been given to the Income-tax Officer either to waive or reduce interest in such circumstances.
So far as the order passed by the Commissioner is concerned, it appears that it is mainly based on there grounds, viz., (i) the Income-tax Officer can be said to have considered the question of reduction or waiver of interest only when a request in that behalf was specifically made to him; (ii) as the interest which became payable was Rs. 14,888, the Income-tax Officer could not have reduced or waived that interest without making a reference to higher authorities under sub-rule (5) of rule 40 of the Income-tax Rules : and (iii) the assessee can get the benefit of rule 40 (5) of the Rules from the end of one year after submission of the return till the date of the revised return and not for the remaining period.
Now, it is an admitted position that this being a case of delayed payment of advance tax, rule 40(1) is applicable. The learned Advocate relied upon the decision of this court in CIT v. Gordhanbhai Jethabhai [1994] 205 ITR 279 and submitted that in view of the said decision, the reasoning of the Commissioner that the Income-tax Officer can be said to have considered the question of reduction or waiver of interest only when a request in that behalf was specifically made, must be regarded as bad. In that case, this court has specifically held that the power under rule 40 can be exercised by the Income-tax Officer even without being moved by an application by the assessee.
On the other hand, the learned advocate for the Revenue drew our attention to the decision of this court in Income-tax Reference No. 54 of 1972 decided on December 17, 1973, wherein it is held that if no satisfaction as required by rule 117A of the Rules is to be found on the face of the record nor does it appear from the record, that previous approval of the Inspecting Assistant Commissioner was obtained before the Income-tax Officer passed the original assessment order, then it could not have been inferred that he had waived interest and it must be regarded as a case where he had committed an error in not passing the order for levying interest. That was a case arising under section 139(8) and rule 117A. Rule 117A is quite different from rule 40 as we do not find in rule 40 any requirement as to obtaining prior approval of the higher authorities if interest is to be reduced or waived in a case where the interest payable is more than Rs. 1,000. Noticing this difference between rule 40 and rule 117A, the learned advocate for the Revenue submitted that as both these rules deal with reduction or waiver of interest, the requirement of obtaining prior approval must be read in rule 40 also. It is not possible to accept this contention because that will be adding something in the rule which the rule-making authority has though it not fit to incorporate. When the rule-making authority has specifically provided in rule 117A that the Income-tax èOfficer should obtain prior approval for waiving or reducing interest if the amount of interest payable is more than Rs. 1,000, and it has thought it fit not to provide like that in rule 40, the legitimate inference to be drawn would be that in the case of waiver or reduction of interest on account of late payment of advance tax, they did not think it fit to impose a condition on the discretion or power of the Income-tax officer. We cannot consider it as an act of omission on the part of the rule-making authority and add in rule 40 the requirement which the rule-making authority did not think it fit to introduce for this reason, it must be held that the first ground given by the Commissioner in support of his view is not sustainable.
As pointed out above, the second reason given by the Commissioner is that the Income-tax Officer could not have reduced or waived interest without reference to the higher authorities in view of the provision of sub-rule (5) of rule 40. If we turn to sub-rule (5), we do not find any such provision in that sub-rule. It reads as under :
“(5) Any case in which the Deputy Commissioner considers that the circumstances are such that a reduction or waiver of the interest payable under section 215 or section 217 is justified.
“Thus, under this rule, the Deputy Commissioner (earlier, the Inspecting Assistant Commissioner) is given power to reduce or waive the interest payable under section 215 and section 217 in a case where such action would be justified. It appears that under some misconception or upon misreading of the said rule, the Commissioner held that it was not open to the Income-tax Officer to reduce or waive the interest without referring the matter to the higher authorities.
The third ground given by the Commissioner is also not tenable because rule 40(1) nowhere provides that the benefit of that rule will be available from the end of one year after submission of the return till the date of filing of the revised return and not for the remaining period. In order to show that the said view of the Commissioner is wrong, the learned advocate for the petitioner drew our attention to the decision of the Madras High Court in the case of CIT v. City Palayacot Co. [1980] 122 ITR 430, wherein the madras High Court has held as under (at page 444) :
“This aspect leads to the consideration of the question as to what form the order of the Commissioner should have taken. Even on the basis that the omission to charge interest was prejudicial to the interest of Revenue, the Commissioner was not justified in automatically charging the interest for the period April 1, 1965, to April 6, 1967. The present cases would fall either within the scope of rule 40(1) or rule 40(5). Rule 40(1) applies to a case where the assessment was completed more than one year after the submission of the return. From the language of this rule, the learned standing counsel for the Commissioner contended that up to the date of completion of one year from the date of the return the assessee was liable to pay interest and that only the subsequent delay in assessment has to be examined to see whether it (the delay) was attributable to the assessee. If the delay was ènot attributable to the assessee, then for the period of one year from the date of the return, the assessee would, in his submission, have to pay interest. In other words, according to learned counsel, the question of exercise of discretion arose only after the period of one year from the date of the submission of the return. If that is so, then there was no need under sub-rule (5) of rule 40 to vest the discretion in the Inspecting Assistant Commissioner without reference to any period or condition, to examine whether the circumstances were such that a reduction of the interest was justified. From the fact that the Inspecting Assistant Commissioner was vested with a discretion, which is in addition to what is available to the Income-tax Officer, it is clear that he is not bound by any mandatory period of one year, from the date of the return, up to which interest is bound to be charged. The particular statutory provision envisages reduction or waiver of the interest payable by the assessee and the prescription of the cases by the rules. Though the rules can provide for the cases or the circumstances, in the absence of any specific provision in the statute to show that interest was bound to be charged up to the period of one year from the date of the return, we are unable to hold that there is any such period for which there is a statutory mandate to charge interest. We do not think it possible also to construe the statutory provision in the light of the rules. The rules can only prescribe, and cannot control the construction of the statutory provision. It is not possible, therefore, to accept the submission that in the present case, it was mandatory on the part of the Income-tax Officer to levy interest from April 1, 1965, till April 6, 1967.”
Thus, none of the grounds given by the Income-tax Officer and the Commissioner for levy of interest is tenable and for that reason, the orders passed by them must be regarded as bad. They, therefore, deserve to be quashed.
In the result, this petition is allowed. The impugned orders at annexures “F” and “I” to the petition are quashed and set aside. Rule is made absolute. No order as to costs.