Law:

Section:

Section 217(1A) of the income-tax act, 1961, read with rule 40 of the income-tax rules, 1962-Advance tax-Interest payable by assesses-Assessee failed to file advance tax estimate under section 212 and thus became liable to penal interest-since ito omitted to levy same, commissioner directed ito under section 263 to levy interest under section 217(1a)-whether a mere omission of ito to charge penal interest could be regarded as a conscious waiver on his part-Held, on facts, no-Whether commissioner justified in directing ito to levy interest-Held, on facts, yes. Facts The assessee failed to file an estimate of advance tax under section 212, thus, becoming liable to penal interest under section 217(1A). The ITO, somehow, had omitted to levy the same at the time of regular assessment. The Commissioner initiated proceedings under section 263 and after hearing the assessee directed the ITO to consider the question of levy of interest under section 217(1A). In the appeal against Commissioner's order before the Tribunal, the assessee contended that the omission to levy penal interest in the assessment order must be construed as a waiver on the part of the ITO to levy the penal interest since the ITO had the power under rule 40 to waive interest. On reference: Held Waiver is not as a matter of course but it is subject to a finding by the ITO that special circumstances existed in the case which justified either waiver or reduction of interest chargeable. The act of waiver is a conscious overt act on the part of the ITO and a mere omission or inaction on his part to levy penal interest cannot be construed, under any circumstances, as an act of waiver. Therefore, it could not be accepted that by omitting to levy interest, the ITO had waived such interest. The Commissioner's order, in the circumstances of the case, directing the ITO to levy interest was justified. Case review CIT v. City Palayacot Co. [1980] 122 ITR 430 (Mad.) followed. Editor's note While answering the question against the assessee, the High Court observed that this did not detract from the observations in the order of the Commissioner to the effect that the "ITO is not barred from considering any relief…

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