K. A. THANIKACHALAM, J.M.: These are tow appeals filed by two assessee involving similar points for asst. yr. 1979-80. assessee contest orders passed by CIT under s. 263 of IT Act, 1961, in their respective case setting aside assessments as made. ITO in making relevant assessment did not initiate any penalty proceedings under s. 271(1)(a) or under s. 273(2)(c). He also did not levy interest under s. 217(1A). CIT was of view that these were lapses which rendered relevant assessment orders erroneous and prejudicial to Revenue. He called upon each of assessee to show cause why action under s. 263 should not be taken. pleas of assessee were that they had paid advance taxes as demanded. They had no reason to believe that income for year would have been higher and would have necessitated filing of estimate showing upward revision of tax payable and further extension of time had been sought for filing returns and hence, penal provision of s. 271(1)(a) and s. 273(2)(c) were not attracted, nor were provisions relating to levy of interest attracted. CIT did not agree. conclusion of CIT in this regard, which is in identical terms in each of cases, was as under: "Penal interest under s. 217(1A) is attracted for failure to file estimate as provided by sub-s. (3A) of s. 212. said sub-section says that if current income of assessee being likely to be greater than income on which advance-tax payable by him under s. 210 has been computed exceeds amount of advance-tax so payable by more than 33 1/3 per cent, he has to file estimate in prescribed manner. It cannot be said that assessee could not anticipate his current income being more than what he has estimated since in case of M/s Purushotham Ramjee & Co. (Kutch) huge additions for similar reasons had been made even in respect of earlier years. I am therefore, not convinced about assessee s explanation. Since conclusion of proceedings under s. 143(3) in course of which ITO failed to initiate proceedings under s. 273(2)(c) and 271(1)(a) and failure on part of ITO to levy interest under s. 217(1A) are erroneous and prejudicial to interests of revenue I set aside assessment order of ITO in respect o f above assessment year with direction to redo assessment in accordance with law." In appeal before us, ld. counsel placed reliance on decision of Delhi High Court in case of Addl. CIT, Delhi vs. J. K. D. Costa (1981) 25 CTR (Del) 224: (1982) 133 ITR 7 (Del) as also on latter decision of same High Court in Addl. CIT vs. Achal Kumar Jain (1982) 30 CTR (Del) 146: (1983) 142 ITR 606 (Del). He submitted that non-initiation of penal proceedings during course of assessment proceedings would not render assessment made erroneous or prejudicial to Revenue. Since there was no infirmity in order of assessment, for non-initiation of penalty proceedings, even if they should have been initiated, he submitted, CIT could not exercise his revisionary powers under s. 263. Apart from it, he stated that even on facts, each of assessee has sought for extension of time till 30th Nov., 1979 for filing return and return was filed on 5th Dec., 1979. Another contention was that full advance- tax as demanded had been paid. In case of Shri Ramjee Arjun, tax demanded was Rs. 26,133 on estimated income of Rs. 70,650 being that assessed for asst. yr. 1977-78 and such tax had been paid. In case of Shri Ranjit Ramjee advance-tax paid as demanded was Rs. 26,059 on estimated income of Rs. 69,920 which was that assessed for asst. yr. 1975- 76. final return filed in case of Shri Ramjee Arjun in December, 1979 showed total income of Rs. 80,270 which included share income of Rs. 79,792 from firm of M/s Purushotham Ramjee & Co. assessment was completed determining total income at Rs. 1,79,240 which included share income of Rs. 1,70,157 form aforesaid firm. In case of Shri Ranjit Ramjee, return filed showed total income of Rs. 61,330 which included share income of Rs. 51,320 from M/s Purushotham Ramjee & Co., but assessment was completed in 1982 determining total income at Rs. 1,28,300 which included share income of Rs. 1,18,230 from aforesaid firm. It was stated that additions in firm s case were being disputed in appeal and matter was pending. contention was that assessee held no reason to believe that such additions would be made. If at all estimate had to be made under s. 212(3A), it had to be filed by 15th Dec., 1978. By this time no assessment had been made in case of M/s Purushotham Ramjee & Co., for any of asst. yrs. 1976-77, 1977-78 and 1978-79 such assessments having been completed only on 22nd Aug., 1979, 6th Sept., 1980 and 5th Sept., 1981. Therefore, there was no question even of assessee imagining with reference to additions made by Department for earlier year in firm s case that assessee s income would require upward revision. It was also submitted that though returns were filed in December, 1979, assessment were made only in March, 1982 and delay was not due to any fault of assessee and in any view of matter, interest under s. 217(1A) should not be charged and it is fit case for waiver of interest and it is apparently because of this reason that ITO did not levy interest and it should be deemed that he had waived levy of interest. last contention urged was that if interest was to be levied under s. 217(1A), there ought to be separate order and non-levy of interest would not render assessment order void. ld. Departmental Representative opposed plea and he submitted that there was decision of Madhya Pradesh High Court in case of Vineet Talkies vs. CIT (1984) 41 CTR (MP) 130: (1984) 148 ITR 66 (MP) which categorically laid down that levy of interest under s. 217(1A) was mandatory and there was no scope for waiver thereof. ld. Departmental Representative also relied on earlier decision of Madhya Pradesh High Court in case of CIT vs. Narpat Singh Malkhan Singh (1980) 19 CTR (MP) 302: (1981) 128 ITR 77 (MP) wherein Court held that action under s. 263 could be taken for non-levy of interest under s. 217(1A) though on facts CIT s action was not upheld because there was earlier appeal and merger of order of ITO with that of first appellate authority. He also submitted that view of Madhya Pradesh High Court in catena of cases was that for non-initiation of penalty proceedings under s. 217(1A) also, action could be taken under s. 263. We have carefully considered rival submissions. decision of Delhi High Court in Addl. CIT vs. Achal Kumar Jain (1982) 30 CTR (Del) 146: (1983) 142 ITR 606 (Del) follows ratio of earlier decision in case of Addl. CIT vs. J.K.D. Costa (1981) 25 CTR (Del) 224: (1982) 133 ITR 7 (Del). latter decision of Delhi High Court has set out various latter decision of Delhi High Court has set out various pronouncements of Madhya Pradesh High Court which took view that action under s. 263 could be taken by CIT in case ITO had omitted to initiate penal proceedings. Court eventually reiterated view taken in D. Costa s case. Dealing with powers of CIT, Court finally observed in (1982) 30 CTR (Del) 146 at 151: (1983) 142 ITR 606 at 613 (Del) in Achal Kumar Jain s case as under: "The meaning attributed to expression "assessment" is different in various contexts of Act. But in context of s. 263, it is particular "proceeding" that is to be considered. If he is dealing with assessment proceedings and assessment order, he cannot extend his powers to deal with penalty proceedings when they are not before him. As observed by us in J.K.D. Costa s case: "There is no identity between assessment proceedings and penalty proceedings; latter are separate proceedings, that may, in some cases, follow as consequence of assessment proceedings. As Tribunal has pointed out, though it is usual for ITO to record in assessment order that penalty proceedings are being initiated, this is more matter of convenience than of legal requirement. All that law requires so far as penalty proceedings are concerned, is that they should be initiated in course of proceedings for assessment. It is sufficient if there is some record somewhere even apart from assessment order itself, that ITO has recorded his satisfaction that assessee is guilty of concealment or other default for which penalty action is called for. Indeed, in certain cases it is possible for ITO to issue penalty notice or initiate penalty proceedings even long before assessment is completed though actual penalty order cannot be passed until assessment is finalised." This Court s observation in Gee Vee Enterprises vs. Addl. CIT 1975 CTR (Del) 61: (1975) 99 ITR 375, that intention of Legislature was to entrust CIT, under s. 263, with larger power than that of ITO, is to be read in context of case. Deshpande, J., speaking for Court, observed [1975 CTR (Del) 61 at 69: (1975) 99 ITR 375 at 384 (Del).]: "The intention of legislature was to give wide power to CIT. He may consider order of ITO as erroneous not only because it contains some apparent error of reasoning or of law or of fact of it, but also because it is stereotyped order which simply accepts what assessee has stated in his return and fails to make inquiries which are called for in circumstances of case." This cannot be read to mean that CIT is entitled to bring within his scope and deal with penalty proceedings and orders (which are admittedly connected but distinct) while calling for and examining record of assessment proceedings and orders." ld. counsel had submitted that Supreme Court had declined to grant special leave to appeal against decision of Delhi High Court in D. Costa s case and report regarding this appears in CED vs. Prakashchand (1983) 35 CTR (MP) 419: (1984) 147 ITR 1 (MP). In view of refusal by Supreme Court to grant special leave to appeal against judgment of Delhi High Court in D. Costa s case, we would follow view taken by Delhi High Court i.e., that non-initiation of penalty proceedings either under s. 271(1)(a) or under s. 273(2)(c) would not render assessment order erroneous or prejudicial to Revenue. Therefore, for non-initiation of penalty proceedings, we hold that CIT was not justified in setting aside present assessments in either of case. reason given by CIT, namely, that assessee should have filed higher estimate under s. 212(3A) having regard to additions made in past in case of firm of M/s Purushotham Ramjee & Co. cannot also stand in view of factual data which we have set out earlier which would show that assessments in firm s case where certain additions were for each of asst. yrs. 1976-77 to 1978-79 were subsequent to last date by which assessee could have filed estimate under s. 212(3A), i.e., 15th Dec., 1978. High Court of Delhi in D. Costa s case had also held that even if there was minor lapse in not levying interest, wholesale cancellation of assessment was not warranted and all that CIT can do was to direct ITO to consider question on merits and in accordance with law after giving assessee opportunity of being heard. Following ratio of aforesaid decision, we have to hold that for non-levy of interest under s. 217(1A), even if it was otherwise liveable, assessment could not be set aside. plea of ld. counsel was that levy of interest under s. 217(1A) had to be by independent order though customarily it formed part of assessment order and hence non-levy of interest under s. 217(1A) could not vitiate assessment order. We need not pronounce on this aspect in present appeals for we have held following judgment of Delhi High Court that setting aside of assessment in each of case, all that subsists is direction to ITO that he should examine whether interest is liveable under s. 217(1A). Even if CIT has not given such direction, it is certainly open to ITO, if interest is leviable under s. 217(1A), in independent order to examine this issue. Therefore, specific direction by CIT in this regard would not place assessee in worse position because interest is liveable only if it is liveable in accordance with law. In this regard, we may state that ld. counsel for assessee had placed before us order in ITA No. 1014/Mds/83 dt. 5th Oct., 1983, in case of ITO vs. R. Narayanan, Madras (1984) 19 TTJ (Mad) 591 where Tribunal had held that waiver of interest was permissible even in cases where interest was liveable under s. 217 (1A). Whether interest is liveable or not is matter for ITO to decide and hence we would not offer any comments on this aspect also. result is both appeals are allowed. *** SHREE RAMJEE ARJUN v. INCOME TAX OFFICER