Law:

Section:

Section 217, read with sections 215, 216 and 263 of the Income-tax Act, 1961 – Advance tax – Interest payable by assessee when no estimate made – Whether order made under section 215 or section 216 or section 217 does not form part of order of assessment; it has to be passed only after regular assessment is made – Held, yes – Whether mere omission on part of ITO to refer to penal interest payable under any of those sections in order of assessment cannot lead to inference that ITO has waived interest payable without giving any reason for doing so – Held, yes – In assessment order ITO did not state anything about either levying, reducing or waiving of interest under section 217 – Commissioner exercising powers under section 263 directed ITO to levy interest under section 217 - Whether action taken by Commissioner was premature one and he had no jurisdiction under section 263 to pass order in question – Held, yes Words and phrases : Expression ‘regular assessment' as occurring in section 217 of the Income-tax Act, 1961 FACTS The ITO passed an order of assessment under section 143(3) but that order did not state anything about the liability of the assessee to pay interest under section 217(1). When this fact came to the notice of the Commissioner, he initiated under section 263 and issued notices to the assessees concerned calling upon them to show cause as to why an order should not be made charging interest under section 217. The assessees raised objection that the Commissioner had no jurisdiction to take any action under section 263 as there was no order passed by the ITO concerned either levying or not levying interest under section 217 in respect of which he could exercise his revisional power. The Commissioner overruled the said objection and directed the ITO to levy interest under section 217. On appeal, The Tribunal held that the Commissioner had no power under section 263 to pass the order in question and accordingly cancelled the proceedings initiated by him. On reference : HELD The power under section 263 can be exercised by the Commissioner when the following factors co-exist: (i)There should be a proceeding under the Act; (ii)In such proceeding the ITO…

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