Law:

Section:

Section 263, read with section 215 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment years 1964-65 to 1966-67 - ITO did not charge interest under section 215(1) and his order was silent in that regard - Commissioner acting under section 263 set aside assessment order and remitted it for fresh consideration by ITO specifically reserving a right to assessee to urge grounds to support his position that no interest was chargeable by virtue of rule 40 of Income-tax Rules, 1962 - Whether Commissioner was justified in modifying assessment order - Held, yes Section 215 of the Income-tax Act, 1961 - Advance-tax - Interest payabale by assessee - Assessment years 1964-65 to 1966-67 - Whether reduction or waiver of interest is a quasi judicial act, and, therefore, an order under section 215(4) should state reason for it - Held, yes FACTS For the relevant assessment years the ITO did not charge interest under section 215(1) and his orders were silent in this regard. The Commissioner acting under section 263 set aside those orders to that extent. On appeal, the Tribunal set aside the Commissioner order on the view that it had to be inferred in view of section 215(4) read with rule 40(1) that the ITO exercised his discretion to waive or reduce the interest in favour of the assessee, and, therefore, his orders of assessment could not be said to be erroneous and prejudicial to the interests of revenue. On reference : HELD If an order is prejudicial to the interests of the revenue and if it is erroneous, the Commissioner can set aside that order. An order which does not charge interest is on the face of it and prima facie prejudicial to the interests of the revenue, and whether it is erroneous or not will depend upon the grounds, if any, on the basis of which the omission to charge interest is sought to be supported. If these are seen in an assessment order, the Commissioner, before setting aside the order must consider whether those grounds can support the waiver or reduction of interest. He cannot in those circumstances set aside the order refusing to charge interest without at the same time finding that the grounds stated are…

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