In this appeal, Revenue has raised following grounds: "(i) On facts and circumstances of case, learned CIT(A)-II, Thane, erred in deleting interest under s. 234A/234B/234C by AO. (ii) learned CIT (A)-II, Thane, further erred in not appreciating fact that levy of interest under ss. 234A/234B and 234C is mandatory in view of amendment to ss. 234A, B and C which has retrospective effect from 1st April, 1989." In this case, return of income was filed for asst. yr. 1998-99 on 11th March, 2000 declaring income of Rs. 8,84,000, which was accepted by AO under s. 143(3) of IT Act, 1961. As return was apparently late and there is apparent default in paying advance tax, AO charged interest of Rs. 2,39,435 under ss. 234A, 234B and 234C of Act. This interest has been charged through ITNS-150 and demanded through demand notice and challan. There was no mention about these interests in assessment order. Aggrieved, assessee appealed before CIT(A), who observed that there was no specific mention in assessment order, that interest should be charged and also there is no working of interest charged under various sections in demand notice (DN). Thereafter, relying on decision of Hon ble Supreme Court in case of CIT vs. Ranchi Club Ltd. (2000) 164 CTR (SC) 200: (2001) 247 ITR 209 (SC) and also on decision of Hon ble Patna High Court in case of Smt. Tej Kumari vs. CIT (2000) 164 CTR (Pat)(FB) 201: (2001) 247 ITR 210 (Pat)(FB) he held that interest cannot be charged and recovered from assessee merely on strength of DN. learned CIT(A) also placed reliance on judgments of Tribunal (as mentioned by him in para 3 of his order) in holding that interest could not be recovered from assessee merely on strength of DN, if same is not specifically considered/mentioned in assessment order. Before us, learned Departmental Representative for Revenue argued that charging of interest under ss. 234A, 234B and 234C of Act is mandatory in view of decision of Hon ble Supreme Court in case of CIT vs. Anjum M.H. Ghaswala (2001) 171 CTR (SC) 1: (2001) 252 ITR 1 (SC). Therefore, it is immaterial whether AO makes any specific order in assessment order. He, further, relied on decision of Tribunal in case of Harsha Bhogle vs. AO (2004) 87 TTJ (Mumbai) 892: (2003) 86 ITD 714 (Mumbai), wherein it has been held that decision of Hon ble Supreme Court in case of Anjum M.H. Ghaswala (supra) was not considered by various Benches of Tribunal, while holding that interest under these sections could not be recovered merely on strength of DN in view of decision in Ranchi Club Ltd. s case (supra). Further, according to learned Departmental Representative, decision of Ranchi Club Ltd. s case (supra) is no longer good law as it could not consider decision in case of Anjum M.H. Ghaswala (supra), which was delivered by Constitution Bench of five Judges later than case of Ranchi Club Ltd. (supra). learned counsel for assessee, on other hand, relied on order of learned CIT(A) as well as decision of Tribunal in case of Ronald Enterprises (ITA No. 2593/Mum/1999, dt. 15th June, 2004), and also following other decisions on same point: (i) CIT vs. Kishan Lal (HUF) (2002) 258 ITR 359 (Del) (ii) CIT vs. Autolite (India) (P) Ltd. (2003) 179 CTR (Raj) 341: (2002) 256 ITR 303 (Raj) (iii) CIT vs. Inchacape India (P) Ltd. (2003) 179 CTR (Del) 212: (2002) 124 TAXMAN 744 (Del) (iv) Hotel Apsara International (ITA No. 2011/Mum/2000) Whereas learned Departmental Representative also relied on following judgments to support his arguments: (i) Vinod Khurana vs. CIT (2001) 170 CTR (P&H) 383: (2002) 253 ITR 578 (P&H) (ii) TransIndia Freight Services (P) Ltd. vs. Asstt. CIT (ITA No. 637/Mum/2001, dt. 28th Oct., 2004) According to learned Departmental Representative, decisions in cases of Ronald Enterprises (supra) and Hotel Apsara International (supra) are also distinguishable on facts. We have considered rival submissions and case laws cited by parties. We are of view that interest under ss. 234A, 234B and 234C of Act is mandatory in nature. Our view is supported by decision of Hon ble Supreme Court in CIT vs. Anjum M.H. Ghaswala (supra) on which learned Departmental Representative has heavily relied. This decision was given by Constitution Bench of five Judges on question as to whether Settlement Commission has power to waive or reduce interest under s. 245D. question proposed before Hon ble Supreme Court in said case was: "Whether Settlement Commission (for short Commission ) constituted under s. 245B of IT Act, 1961 (hereinafter referred to as Act ) has jurisdiction to reduce or waive interest chargeable under ss. 234A, 234B and 234C of Act, while passing orders of settlement under s. 245D(4) of Act?" For answering this question, Hon ble Supreme Court examined provisions under ss. 234A, 234B and 234C of Act and observed that wherever statute contemplated power of waiver or reduction of interest to any particular authority, it is so provided. However, interest contemplated under ss. 234A, 234B and 234C of Act is mandatory in nature and power of waiver or reduction has not been expressly conferred on commission. To quote: "For answering above question, we will have to examine character of interest payable under provisions of ss. 234A, 234B and 234C. perusal o f these sections shows that interest for default in furnishing return of income, default in payment of advance tax and interest for deferment of advance tax are mandatory in nature. Sec. 234A which refers to payment of interest for default in furnishing return of income-tax mandates: 234A. (1) Where return of income for any assessment year under sub- s. (1) or sub-s. (4) of s. 139, or in response to notice under sub-s. (1) of s. 142, is furnished after due date, or is not furnished, assessee shall be liable to pay simple interest at rate of one and one-half (substituted for two by Finance Act, 1999, w.e.f. 1st June, 1999) per cent for every month or part of month comprised in period commencing on date immediately following due date, and, . . . Similarly, ss. 234B and 234C also use similar mandatory words in regard to payment of interest. At this stage, it is of importance to notice sub-s. (4) of s. 234A which reads thus: (4) Where as result of order under s. 154 or s. 155 or s. 250 or s. 254 or s. 260 or s. 262 or s. 263 or s. 264 or order of Settlement Commission under sub-s. (4) of s. 245D, amount of tax on which interest was payable under sub-s. (1) or sub-s. (3) of this section has been increased or reduced, as case may be, interest shall be increased or reduced accordingly, and (i) in case where interest is increased, AO shall serve on assessee notice of demand in prescribed form specifying sum payable, and such notice of demand shall be deemed to be notice under s. 156 and provisions of this Act shall apply accordingly; (ii) in case where interest is reduced, excess interest paid, if any, shall be refunded. perusal of this sub-section which refers to sub-s. (4) of s. 245D mandates that if by virtue of order passed under s. 245D, amount of tax on which interest was payable under sub-s. (1) or sub-s. (3) of this section has been increased or reduced, as case may be, interest shall be increased or reduced accordingly. This section is indicator of fact that so far as interest falling due by virtue of default in furnishing return of income, default in payment of advance-tax or interest for deferment of advance tax are concerned, Part F of Chapter XVII has been obligated with duty of levy of interest, as also to make necessary changes in payment of interest dependent on change that may occur consequent to order of settlement under s. 245D(4). It is also to be noted that wherever Act contemplated power of waiver o r reduction of interest to be entrusted with any particular authority in any particular situation, it has done so like in s. 220(2A) of Act. It is also worthwhile to note that Act wherever it contemplated that there should be no levy of interest, it has clearly made provision for same as could be seen from s. 158BF which mandates that no interest under provisions of s. 234A, 234B or 234C shall be levied or imposed upon assessee in respect of undisclosed income determined in block assessment. If scheme of levy o f interest is thus to be analysed on anvil of provisions referred to hereinabove, it shows that interest contemplated under ss. 234A, 234B and 234C is mandatory in nature and power of waiver or reduction having not been expressly conferred on Commission, same indicates that so far as payment of statutory interest is concerned, same is outside purview of settlement contemplated in Chapter XIX-A of Act." (Emphasis, italicised in print, supplied) In same contest, Hon ble Supreme Court emphasized that legislature had expressly used expression "shall" as against "may" making it clear that interest under these sections is mandatory. Prior to amendment brought out by Finance Act, 1987, corresponding sections pertaining to imposition of interest used expression "may" thereby giving discretion to authorities to reduce or waive interest. They observed in this context as under: "Next, Commission has elaborately discussed object of introduction o f Chapter XIX-A in Act, history behind introduction and schematic rationalization of provisions of Chapter XIX-A brought about through Finance Act, 1987, to hold that in exercising its power under Chapter XIX-A it has almost unbridled power to arrive at settlement. This exercise of purposive interpretation by looking into object and scheme of Act and legislative intendment would arise, in our opinion, if language of statute is either ambiguous or conflicting or gives meaning leading to absurdity. We do not find any such problem in provisions of Act to which we have already referred. Secs. 234A, 234B and 234C in clear terms impose mandate to collect interest at rates stipulated therein. expression "shall" used in said section cannot by any stretch of imagination be construed as "may". There are sufficient indications in scheme of Act to show that expression "shall" used in ss. 234A, 234B and 234C is used by legislature deliberately and it has not left any scope for interpreting said expression as "may". This is clear from fact that prior to amendment brought about by Finance Act, 1987, legislature in corresponding section pertaining to imposition of interest used expression "may" thereby giving discretion to authorities concerned to either reduce or waive interest. change brought about by Amending Act (Finance Act, 1987) is clear indication of fact that intention of legislature was to make collection of statutory interest mandatory. In this connection, we may usefully refer to judgment of this Court in Jaywant S. Kulkarni vs. Minochar Dosabhai Shroff AIR 1988 SC 1817, wherein this Court held that when legislature changes expression "may" to "shall" by amendment of statute, it is clear that it intended to make provision mandatory from existing directory provision". (Emphasis, italicised in print, supplied) Further, emphasizing on their observation that Settlement Commission does not have power to waive or reduce interest, they observed as under: "While Settlement Commission arrives at taxable income of assessee on basis of records available before it, it has to levy mandatorily chargeable tax on such income arrived at by it and wherever interest is due under mandatory provisions like ss. 234A, 234B and 234C, it has to include said interest also in settlement." While interpreting powers of Settlement Commission under Chapter XIX-A, Hon ble Supreme Court observed that Settlement Commission could arrive at taxable income on basis of record available before it. But it has to levy mandatorily chargeable tax on such income arrived at by it and wherever interest is due under mandatory provision, it has to include such interest. It observed as under: "1. In this view of matter, we are of opinion that assuming that there is any room for interpretation of provisions of Part F of Chapter XVII and Chapter XIX-A, we would hold that it would not in any manner empower Commission to either waive or reduce interest which is statutorily payable under provisions of Part F of Chapter XVII. object of legislature in introducing this section is to see that protracted proceedings before authorities or in Courts are avoided by resorting to settlement of cases. In this process, assessee cannot expect any reduction in amounts statutorily payable under Act. While Settlement Commission arrives at taxable income of assessee on basis of records available before it, it has to levy mandatorily chargeable tax on such income arrived at by it and wherever interest is due under mandatory provisions like ss. 234A, 234B and 234C, it has to include said interest also in settlement." Finally in concluding para, Hon ble Supreme Court held that Settlement Commission does not have power to reduce or waive interest statutorily payable under these sections. "For reasons stated above, we hold that Commission in exercise of its power under s. 245D(4) and (6) does not have power to reduce or waive interest statutorily payable under ss. 234A, 234B and 234C except to extent of granting relief under circulars issued by Board under s. 119 of Act." Hon ble Supreme Court had another occasion to examine nature of these interests in CIT vs. Hindustan Bulk Carriers (2003) 179 CTR (SC) 362: (2003) 259 ITR 449 (SC). principles laid down by Constitution Bench in Anjum M.H. Ghaswala s case (supra) were summarised by Hon ble Supreme Court in Hindustan Bulk Carriers case (supra) as under: "1. Commission in exercise of its power under s. 245D(4) and (6), does not have power to reduce or waive interest statutorily payable under ss. 234A, 234B and 234C, except to extent of granting relief under Circulars dt. 23rd May, 1996, issued by Board under s. 119 of Act. While exercising power derived under circulars of Board, Commission does not act as subordinate to Board but will be enforcing relaxed provisions of circulars for benefit of assessee in process of settlement. Interest due under mandatory provisions like ss. 234A, 234B and 234C has to be included in settlement. Wherever Act contemplated power to waive or reduction of interest to be exercised by any particular authority in any particular situation it has done so like in ss. 139(8), 215(4), 216 and s. 220(2A) of Act. Prior to Finance Act, 1987, corresponding sections pertaining to imposition of interest used expression may but change brought about in Finance Act, 1987, is clear indication that intention of legislature was to make collection of statutory interest mandatory. expression shall is used deliberately." Further, reiterating on question as to whether interest chargeable under ss. 234A, 234B and 234C of Act is payable on income settled, Hon ble Supreme Court held in this case that this interest is mandatory in nature and power of waiver or reduction has not been expressly conferred on Commission. "The question which arises is whether assessee is required to pay any interest on amount of tax on income disclosed before Settlement Commission as contemplated under ss. 234A, 234B and 234C? That question is concluded by decision rendered by Constitution Bench of this Court in CIT vs. Anjum M.H. Ghaswala (2001) 171 CTR (SC) 1: (2001) 252 ITR 1 (SC): (2002) 1 SCC 633, where it was held that interest contemplated under ss. 234A, 234B and 234C is mandatory in nature and power of waiver or reduction having not been expressly conferred on Commission, waiver or reduction in payment of statutory interest is outside purview of settlement contemplated in Chapter XIX-A of Act." In another place in same order, Hon ble Supreme Court clearly said that Settlement Commission does not have power to waive or reduce interest payable for non-payment or delayed payment of tax found due. "In case of Anjum M.H. Ghaswala (supra) main question that fell for consideration before Supreme Court was whether Settlement Commission has power to waive interest for non-payment or delayed payment of tax found due. Supreme Court answered question holding that scheme contained in Chapter XIX-A does not empower Commission to waive interest payable for non-payment or delayed payment of tax found due. Brother Pasayat, J., has also reached same conclusion and I am in respectful agreement with same that such waiver of interest by Settlement Commission is neither intended in scheme of Chapter XIX-A nor can such power be inferred because conceding such power to Settlement Commission to waive interest would help tax evaders who did not disclose full income at relevant time and made disclosure subsequently." question about waiver of interest under ss. 234A, 234B and 234C of Act further arose before Hon ble Supreme Court in CIT vs. Sant Ram Mangat Ram Jewellers (2003) 264 ITR 564 (SC) and it held therein as under: "Appeal is filed against judgment and order dt. 20th Sept., 1999, passed by ITSC holding that for asst. yr. 1993-94 waiver of interest chargeable under s. 234B of IT Act, 1961, is restricted to 50 per cent. It is contention of learned counsel for appellant-Revenue that said order is illegal and erroneous, in view of judgment rendered by this Court in CIT vs. Anjum M.H. Ghaswala (supra), and also decision rendered by this Court in CIT vs. Hindustan Bulk Carriers (2002) 179 CTR (SC) 362: (2003) 259 ITR 449 (SC), Civil Appeal Nos. 7966-7967 of 1996 on 17th Dec., 2002. As against this, learned senior counsel appearing on behalf of respondents submitted that in judgments rendered by this Court in Ghaswala s case (supra) as well as in Hindustan Bulk Carriers case (supra), Court has not considered Expln. 1 under s. 234B of IT Act, and, therefore, said issue requires reconsideration. In our view, after pronouncement of judgment in Ghaswala s case (supra), it is not open to us to reconsider same as it has been specifically held that Settlement Commission has no power to waive mandatory interest as contemplated under ss. 234A, 234B and 234C of IT Act. In this view of matter, these appeals are allowed and impugned order passed by Settlement Commission is set aside. It would be open to Revenue to recover interest as provided under Act. There shall be no order as to costs." From above decisions of Hon ble Supreme Court, it is quite clear that Settlement Commission does not have power to waive or reduce interest under ss. 234A, 234B and 234C of Act if default of nature described i n those sections exists. powers of Hon ble Settlement Commission has been given in s. 245F, which reads as under: "245F(1) In addition to powers conferred on Settlement Commission under this Chapter, it shall have all powers, which are vested in IT authority under this Act." Thus, Settlement Commission has powers not only as conferred under Chapter XIX-A but also all powers, which are vested in IT authorities under this Act. Settlement Commission has to derive its power only from IT Act for settling cases and for levy of penalty or interest. If it is held that high power statutory body like ITSC created under IT Act under s. 245B, has no power to waive or reduce interest chargeable under ss. 234A, 234B and 234C of Act, and powers of Settlement Commission being coterminus with powers of IT authority under Act, then from it follows that no IT authorities has power to waive or reduce interests chargeable under ss. 234A, 234B and 234C of Act for sole reason that interest under these sections are mandatory as held by Hon ble Supreme Court in three decisions referred above. authorities like ITO/AO or CIT(A) are lower in rank as compared to ITSC. Whatever powers these authorities have, Settlement Commission also have same power in addition to powers conferred by Chapter XIX-A. Clearly statute does not provide any power for waiver or reduction of these interests either to AO or to Settlement Commission. It cannot be case that such power of waiver or reduction is not provided to Settlement Commission but it is provided to AO. Therefore, assessing authority or CIT(A) cannot by implication or by express order waive such interest even though, default exists. Prior to amendment by Finance Act, 1987, ss. 215, 216 and 217 provided discretion to AO to waive interest, as per separate sub-section enacted therein [i.e. sub-s. (4) to s. 215, use of word "may" in s. 216, sub-s. (2) to s. 217]. But after amendment, there is no provision for waiver or reduction of these interests by AO or for that matter by any authority except only by Chief CITs under Instruction No. 400 dt. 23rd May, 1996 issued by CBDT under s. 119(2)(a). Thus, question arises as to whether by not specifically mentioning in assessment order about charging of interest even though default exists, whether AO has implicitly waived interest. In context of s. 215, Hon ble Gujarat High Court in case of CIT vs. Gordhanbhai Jethabhai (1993) 114 CTR (Guj) 196: (1994) 205 ITR 279 (Guj) held that by not mentioning anything in assessment order, waiver of interest could be implied. Thus, if AO does not mention anything in assessment order about charging of interest under ss. 234A, 234B and 234C of Act, it would imply that he has waived interest for which he has no power. Following observation of Hon ble Gujarat High Court, in that case, supports above view: ". . . Though order under s. 215 or s. 216 or s. 217 has to be made after regular assessment, law does not prohibit passing of order under s. 215, or s. 216 or s. 217 almost simultaneously with order of assessment and on same sheet of paper. Therefore, not recording finding and not passing specific order in favour of assessee cannot always be regarded as error justifying passing of rectification order. As general proposition, it can be said that act of waiver being conscious act, no inference of waiver can be drawn from omission or inaction. But as omission is not by person ignorant of law but by ITO who must be presumed to be and who is also otherwise likely to be well conversant with relevant provisions of ss. 215, 216 and 217, then such inference can be drawn. If ITO does not pass order for levy of interest even where levy of interest is mandatory, then only two inferences are possible. One is that he forgot to pass such order and other is that he had decided to waive interest because Court cannot assume or infer that even though he was aware of said provision, he deliberately did not pass that order. intention to act contrary to law cannot ordinarily be inferred. . . . Considering practice which is ordinarily followed by ITOs while making assessment orders and levying interest and nature of discretion conferred upon ITO and fairness with which he is expected to exercise his powers, better inference that can be drawn from omission to pass any order with respect to payment of interest under s. 215 after passing order of assessment would be that he had decided to waive payment of interest. Merely because discretion is not absolute and its exercise is dependent upon existence of certain facts and circumstances, it is difficult to appreciate how it can be said that no inference as stated above can be drawn from omission to pass order under s. 215." Since assessee has relied on decision in Ranchi Club Ltd. s case (supra), it is necessary to consider this decision and also other decisions of Hon ble Patna High Court on this issue. In Ranchi Club Ltd. vs. CIT (1996) 131 CTR (Pat) 368: (1996) 217 ITR 72 (Pat), Hon ble Patna High Court noted that dispute has been coming on since asst. yr. 1981-82 with regard to taxability of entrance fee, which led to addition by AO in returned income. Since, assessee was disputing such entrance fees as his income, on account of principle of mutuality, he could not have included same in return as it would have virtually amounted renouncing its claim. Further, Court noted that issue of taxability of entrance fees has already been decided by High Court in CIT vs. Ranchi Club Ltd. (1991) 100 CTR (Pat)(FB) 295: (1992) 196 ITR 137 (Pat)(FB) in assessee s favour, in its own case. This decision was confirmed by Supreme Court in CIT vs. Bankipur Club Ltd. (1997) 140 CTR (SC) 102: (1997) 226 ITR 97 (SC). If addition on account of entrance fee were deleted, interest levied would also automatically go. Court noted that assessee has not committed any default in filing return and payment of self-assessed/advance tax on basis of declared income. Thus, dispute in Ranchi Club centered only on question whether interest under s. 234A/234B would be levied on returned income or on assessed income. In this context, Hon ble Court held: Interest under s. 234A is leviable on tax on total income declared in return and not on total income assessed. That, "From facts mentioned hereinabove, it is clear that there was no default in filing return and payment of self-assessed/advance tax. In this context, some of observations of Hon ble Patna High Court in Ranchi Club Ltd. s case (supra) are important: "1. Although as stated above, context in which observations were made was somewhat different but principle laid down by their Lordships, in my opinion, would squarely cover cases of present nature. assessee is not supposed to pay interest on amount of tax which may be assessed in regular assessment under s. 143(3) or best of judgment under s. 144 as he is not supposed to know or anticipate that his return of income will not be accepted. On general principles also interest is payable in future only after dues are finally determined. Where assessee fails to file return of income either under s. 139(1) or (4) or s. 142(1), pursuant to notice issued thereunder, or files same after due date, in terms of s. 234A he is no doubt liable to pay interest. He is also liable to pay interest if he commits any default in payment of advance tax under provisions of s. 234B. object underlying s. 234A is to create additional liability to pay interest for default in furnishing return of income, object is not to penalise assessee, who has already filed return under s. 139 for not producing accounts or documents and so on under cl. (ii) or (iii) of s. 142(1). In my considered opinion, therefore, necessary conditions as required under s. 234A are not made out in instant case and, therefore, levy of interest is not justified." Thus, Hon ble Patna High Court in Ranchi Club Ltd. s case (supra) clearly held that interest under s. 234A is leviable but on returned income. Hon ble Supreme Court in CIT vs. Ranchi Club Ltd. (supra) affirmed decision of Patna High Court in this case, by observing as under: decision of Patna High Court in this case, by observing as under: "We have heard learned counsel for appellant. We find no merit in appeals. civil appeals are dismissed. No order as to costs." Thus, view of Hon ble Patna High Court in Ranchi Club Ltd. s case (supra) that interest has to be levied on returned income was affirmed. In Uday Mistanna Bhandar & Complex vs. CIT (1997) 137 CTR (Pat) 376: (1996) 222 ITR 44 (Pat) (in short UMB ), there were eight writ petitions. Five were filed by Ranchi Club. Two were filed by Smt. Tej Kumari Devi and one was filed by Uday Mistanna Bhandar. Out of five writ petitions filed by Ranchi Club, demand notices in four were quashed, on ground that, sections for charging interest were not specified. fifth one was allowed, following decision in Ranchi Club. Some of observations of Patna High Court in this case are relevant. They are as under: "1. Bench of this Court in Ranchi Club Ltd. vs. CIT, while interpreting ss. 234A and 234B of Act, held that interest under these sections should not be charged on excess tax as per income determined under s. 143(3)/144 of Act and said that interest under s. 234A was leviable on tax on total income as declared in return. correctness of this decision has been doubted before us by Revenue and it has been submitted that matter be referred to larger Bench for authoritative decision. We are, therefore, inclined to agree with Mr. Debi Prasad that decision of this Court in Ranchi Club Limited vs. CIT (supra) needs reconsideration and, accordingly, we refer following question to larger Bench in C.W.J.C. No. 3287 of 1995(R), C.W.J.C. No. 2732 of 1995(R) and C.W.J.C. No. 2780 of 1995(R): Whether interest under ss. 234A and 234B r/w Expln. 4 is liable to be charged on returned income or assessed income?" Thus, in respect of three writs, two pertaining to Smt. Tej Kumari and one pertaining to Uday Mistanna Bhandar, matter was referred to larger Bench with above question. Here also, question in dispute was, as to whether interest has to be charged on returned income, or assessed income. This question was considered by Hon ble Patna High Court (Full Bench) in Tej Kumari s case (supra). In Smt. Tej Kumari vs. CIT (supra) following decisions were rendered: (i) decision rendered by Division Bench in Ranchi Club Ltd. s case (supra) and having been affirmed by Supreme Court in Civil Appeal No. 10360 of 1996 has correctly decided issues which are subject-matter of this reference. (ii) Interest under ss. 234A and 234B is leviable on tax on total income as declared in return and not on income as assessed and determined by assessing authority. (iii) In absence of any specific order of assessing authority interest could not be charged and recovered from assessee. From above, it would seem that, Hon ble Patna High Court (Full Bench), in Smt. Tej Kumari s case (supra), held that interest under ss. 234A, 234B and 234C cannot be charged without making any specific order by AO, and if it has to be charged by making specific order, then, it can be charged only o n returned income and not on assessed income. This view of Hon ble Patna High Court (Full Bench)goes well with view of Division Bench of Patna High Court in Uday Mistanna Bhandar & Complex vs. CIT (supra), wherein, it was observed that, "the assessee must be made to know that, AO after applying his mind, has ordered charging of interest, and under which of sections of Act." However, in this case also, Hon ble Patna High Court (Full Bench) did not have benefit of decisions of Hon ble Supreme Court in Anjum M.H. Ghaswala s case (supra), Hindustan Bulk Carrier s case (supra) and Sant Ram Mangat Ram Jewellers case (supra). It also seems that this decision was rendered per incurrium of Kalyan Kumar Ray vs. CIT (1992) 102 CTR (SC) 188: (1991) 191 ITR 634 (SC). Above views were considered by Hon ble Punjab & Haryana High Court, in Vinod Khurana vs. CIT (supra), and proceeded to decide case before them, o n basis of this test. They held that application of mind for charging of interest by AO should be apparent, assessment is complete when calculation of tax and due amount is done by AO, and passing of assessment order and signing of demand notice would complete process of assessment. They observed as under: "1. position may be different in case where AO merely gives direction charge interest as per rule and provision under which interest is to be charged as also amount are determined by some other officer. Such order shall, as observed by their Lordships of Patna High Court, be vague. application of mind by competent authority shall not be apparent. However, in case like present where provision and amount are decided and determined by AO himself on same day, position would be totally different. It deserves notice that even calculations, etc., are part of process of assessment. assessment is complete only when "taxable income" and due amount are duly determined. In view of above observations, it is clear that AO has to pass assessment order. He has to determine total income on which tax is leviable. job of making calculations can even be performed by office. However, it is only when order of assessment and computation sheet are signed or initialled by ITO that process of assessment is complete. On consideration of matter, we find that primary rationale for view taken by their Lordships of Patna High Court is that: assessee must be made to know that AO after applying his mind has ordered charging of interest and under which of sections of Act . In view of above observations, it is clear that AO has to pass assessment order. He has to determine total income on which tax is leviable. job of making calculations can even be performed by office. However, it is only when order of assessment and computation sheet are signed or initialled by ITO that process of assessment is complete. What is position in present case? assessment order, copy of which has been produced as Annex. P-4 and demand notice, copy of which is at Annex. P- 5 have been passed on same day and by same officer. It is only on passing of these two orders that assessment was complete and demand w s made. Resultantly, test as laid down in cases of Uday Mistanna/Ranchi Club (supra) is fully satisfied in present case." From above, it is clear that, if AO signs assessment order and initials computation sheet charging interest, then test laid down by Hon ble Patna High Court in Uday Mistanna Bhandar & Complex vs. CIT (supra) will be fulfilled. decision of Hon ble Supreme Court in Kalyan Kumar Ray vs. CIT (supra) supports above view. It was held therein that, there is no requirement in law that order assessing total income and determining tax payable, on basis of such assessment should be on same sheet of paper. It was also held that, ITNS-150 is part of assessment order. Above decision was not doubted either by Patna High Court, in either of cases on issue decided by it, not by Hon ble Supreme Court, while affirming decision in Ranchi Club Ltd. s case (supra). Some of important observations of Hon ble Supreme Court in Kalyan Kumar Ray s case (supra) throwing light on issue are as under: 1. "Assessment" is one integrated process involving not only assessment of total income but also determination of tax. latter is as crucial for assessee as former. In our opinion, therefore, learned counsel for petitioner is right in his submission that ITO has to determine, by order in writing, not only total income but also net sum which will be payable by assessee for assessment year in question and that demand notice under s. 156 has to be issued in consequence of such order. statute does not, however, require that both computations (i.e., of total income as well as of sum payable) should be done on same sheet of paper, sheet that is superscribed "assessment order". It does not prescribe any form for purpose. It will be appreciated that once assessment of total income is complete with indications of deductions, rebates, reliefs and adjustments available to assessee, calculation of net tax payable is process which is mostly arithmetical but generally time consuming. If, therefore, ITO first draws up order assessing total income and indicating adjustments to be made, directs office to compute tax payable on that basis and then approves of it, either immediately or some time later, no fault can be found with process, though it is only when both computation sheets are signed or initialled by ITO that process described in s. 143(3) will be complete. In this context, one may take notice of fact that, initially, r. 15(2) of IT Rules prescribed Form No. 8, sheet containing computation of tax, though there was no form prescribed for assessment of income. This sub-rule was dropped in 1964. Thereafter, matter has been governed by Departmental instructions. Under these, two forms are in vogue. One is form of what is described as "assessment order" (IT 30 or ITNS 65). other is what is described as "Income-tax Computation Form" or "Form for assessment of tax/refund" (ITNS 150). practice is that, after "assessment order" is made by ITO, tax is calculated and necessary columns of ITNS 150 are filled up showing net amount payable in respect of assessment year. This form is generally prepared by staff but it is checked and signed or initialled by ITO and notice of demand follows thereafter. statute does not, in terms, require service of assessment order or other form on assessee and contemplates only service of notice of demand. It seems that while "assessment order" used to be generally sent to assessee, other form was retained on file and copy occasionally sent to assessee. ITNS 150 is also form for determination of tax payable and when it is signed or initialled by ITO, it is certainly order in writing by ITO, determining tax payable, within meaning of s. 143(3). It may be, as stated in CIT vs. Himalaya Drug Co. We are unable to see why this document, which is also in writing and which has received imprimatur of ITO, should not be treated as part of has received imprimatur of ITO, should not be treated as part of assessment order in wider sense in which expression has to be understood in context of s. 143(3). There is no dispute in present case that ITO has signed Form ITNS 150. We, therefore, think that statutory provision has been duly complied with and that assessment order was not, in any manner, vitiated. Thus, if assessment order along with ITNS-150 are signed on same day and interest is charged in ITNS-150 there will be sufficient compliance of provisions of Act. That is, charging of interest through ITNS-150 will be in order. There are two distinct levies on assessee. One is tax and other is interest. Tax is imposed by charging section and interest is payable when tax dues are withheld. If assessee is not liable to pay tax at all he is also not liable to pay interest. But, if assessee is liable to pay tax, as he falls within charging section, then he is also liable to pay interest, if there is default in making payment of taxes in accordance with law. So once provisions of ss. 234A, 234B and 234C created automatic liability on default, such liability cannot be foregone just for reason that there is no order in assessment for quantification of these interests. If AO omits/ignores passing of assessment order or if assessment gets time barred, question arises as to whether assessee is liable to pay taxes and whatever has been paid by him as advance tax or self-assessment tax will have to be refunded to him. question has been answered by Hon ble Supreme Court in CIT vs. Shelly Products (2003) 181 CTR (SC) 564: (2003) 261 ITR 367 (SC) as under: "1. Thus assessee who has defaulted or delayed payment of advance tax or instalment of advance tax, is liable to pay interest. provisions of Act, therefore, cast obligation on assessee to pay advance tax by making deposits in instalments as required by provisions of Act, and after taking into account tax paid in advance, to pay balance of tax and interest, if any, payable, while filing return of income. Similar is provision with regard to income-tax deducted at source. It cannot, therefore, be contended that deposit of advance tax or deduction of income-tax at source is not authorised by law in view of clear mandatory provisions of Act. question is whether charge itself fails if there is no computation of total income by AO and whether as consequence thereof tax paid as advance tax or self-assessment tax or TDS, cannot be retained by Department without violating provisions of Art. 265 of Constitution of India. scheme of Act clearly indicates that liability to pay income-tax chargeable under s. 4(1) of Act does not depend upon assessment being made by ITO but depends on enactment by any Central Act prescribing rate or rates for any assessment year. Thus, as soon as rates are prescribed by appropriate legislation, liability to pay tax arises on total income, which is to be computed by assessee in accordance with provisions of Act. By process of self-assessment, assessee is required to pay tax on basis of his return and such tax is treated as assessed tax. Therefore, until it is disturbed by any further regular assessment, it remains as tax levied and collected in accordance with law." Full Bench of Gujarat High Court in Saurashtra Cement & Chemical Industries Ltd. vs. ITO (1992) 102 CTR (Guj)(FB) 212: (1992) 194 ITR 659 (Guj)(FB) observed on p. 674 and quoted by Hon ble Supreme Court in Shelly Products case (supra): "On filing of returns under s. 139, provisions of self-assessment contained in s. 140A come into play and as, inter alia, provided therein, where any tax is payable on basis of any return required to be furnished under s. 139 or s. 148, after taking into account amount of tax, if any, already paid under any provision of this Act, assessee shall be liable to pay such tax together with interest payable under any provision of Act for any delay in furnishing return or for any default or delay in payment of advance tax, before furnishing return and return shall be accompanied by proof of payment of tax and interest. These provisions eloquently indicate that liability to pay tax is not dependent on regular assessment being made by AO and where returns are filed under s. 139 on basis of which tax is payable, assessee is made liable to pay such tax together with interest payable for any delay in furnishing return or any default or delay in payment of advance tax. On filing of return under s. 139, wherein such total income is indicated, s. 140A, providing for self-assessment, comes into operation and it becomes obligatory on part of assessee to discharge his liability which has arisen to pay tax together with interest that may be payable for late furnishing of returns. tax payable on basis of returns filed by assessee is treated as "assessed tax". It is not at all made dependent on any regular assessment being made though, in event of regular assessment, amount paid under sub-s. (1) of s. 140A is deemed to have been paid towards regular assessment. Therefore, by no stretch of imagination, can tax paid and collected under s. 140A be described as mere ad hoc or interim payment which can be said to fail in absence of regular assessment, as was sought to be contended on behalf of petitioners." From these observations, it is clear that liability to tax and liability to pay tax arises under s. 4 and does not depend upon passing of assessment order. Similarly, levy of interest arises by operation of law contained in ss. 234A, 234B and 234C and is payable under s. 140A at time of filing of return on basis of returned income. Therefore, it is strange to canvass that charging of mandatory interest depends upon passing of order. It is clearly held by Hon ble Gujarat High Court (Full Bench) in Saurashtra Cements & Chemical Industries Ltd. s case (supra) (that) liability to pay tax together with interest that may be payable on late furnishing of returns arises as soon as return under s. 139 is furnished, then s. 140A comes into operation and assessee has to discharge total liability of tax together with interest at time of filing of return. question of paying tax along with interest under s. 140A was considered by Hon ble Kerala High Court in CIT vs. R. Ramalingair (2000) 158 CTR (Ker) 628: (2000) 241 ITR 753 (Ker). question involved was about appealability against levy of interest under ss. 234A, 234B and 234C. In that context, Hon ble Kerala High Court observed that since assessee is required to file return under s. 139(1), he calculates his tax liability on basis of return of income and after adjusting advance tax and TDS already paid by him or on his behalf, he has to make payment of balance of tax along with statutory interest payable under ss. 234A, 234B and 234C for default committed by assessee of nature described in those sections. Hon ble Kerala High Court, in above case, observed as under: "The automatic nature of levy is further apparent from s. 140A of Act, which reads as follows: 140A. (1) Where any tax is payable on basis of any return required to be furnished under s. 139 or s. 142 or, as case may be, s. 148, after taking into account amount of tax, if any, already paid under any provision of this Act, assessee shall be liable to pay such tax, together with interest payable under any provision of this Act for any delay in furnishing return or any default or delay in payment of advance tax, before furnishing return and return shall be accompanied by proof of payment of such tax and interest. Explanation. Where amount paid by assessee under this sub- section falls short of aggregate of tax and interest as aforesaid, amount so paid shall first be adjusted towards interest payable as aforesaid and balance, if any, shall be adjusted towards tax payable. requirement of s. 140A(1) is payment of not only tax payable on basis of any return required to be furnished under s. 139 or s. 142, or, as case may be, s. 148 after taking into account amount of tax, if any, already paid, but also interest payable under any provision of Act, for any delay in furnishing interest or any default or delay in payment of advance tax. With effect from 1st April, 1989, requirement to pay interest on self-assessment became mandatory. requirement with relation to return under s. 142 was introduced by Finance (No. 2) Act, 1991, w.e.f. 27th Sept., 1991. Obviously, assessee is to make self-computation of such interest because of mandatory and automatic nature of levy. Considered in that background also, question of giving any notice before levy does not arise. inevitable conclusion is that levy is mandatory." Hon ble Kerala High Court also distinguished earlier provisions of ss. 215, 216 and 217 from present ss. 234A, 234B and 234C and held that in order to simplify provisions relating to charging of interest and removing discretion of assessing authorities, new provisions were introduced by Direct Tax Laws (Amendment) Act, 1987. In this context, it observed as under: "A brief reference to provisions is necessary. Sec. 234A was introduced by Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1st April, 1989. said provision was introduced along with ss. 234B and 234C. Earlier, s. 139(8) related to levy of interest for late filing or non-filing of return of income. There were several provisions which gave assessing authorities power to charge interest and also to levy penalties for default. Along with s. 139(8), s. 215 related to levy of interest for under-payment of advance tax; s. 216 related to levy of interest for deferment of instalments of advance tax and s. 217 related to levy of interest for non-payment of advance tax. Similarly, ss. 271(1)(a), 273 and 140A(3) related to levy of penalties for failure to file return of income or to file it in time, or failure to file statement/estimate, or filing untrue statement/estimate of advance tax payable or failure to pay tax on self-assessment. It appears that with view to simplify aforesaid provisions and also to remove discretion of assessing authorities, which had led to litigation and consequent delay in realisation of dues, Amending Act, 1987, has substituted above provisions by simple scheme of payment of mandatory interest for defaults mentioned therein. Mandatory interest chargeable under these sections in not appealable. At time of filing return of income, such mandatory interest, if payable, is to be calculated on basis of returned income and paid along with tax on self-assessment under s. 140A. This is clearly borne out by Circular No. 549, dt. 31st Oct., 1989. Sec. 234A replaced old provisions of ss. 139(8), 140A(3) and 271(1)(a). Similarly, s. 234B replaced old provisions of ss. 215 and 217. Sec. 234A, inserted by Amending Act, 1987, provided for calculation of interest under that section only on completion of regular assessment." While introducing Direct Tax Laws (Amendment) Act, 1989 Circular No. 549, dt. 31st Aug., 1989 was issued elaborating scope and effect of new ss. 234A, 234B and 234C. It was clearly intended that these interests are new ss. 234A, 234B and 234C. It was clearly intended that these interests are mandatory in nature and new sections have been introduced to remove discretion of assessing authorities and to avoid litigation and consequent delay in realisation of dues. Further no appeal was provided against levy of these interests. It would be of benefit to quote from this circular as follows: "10.1 Payment of mandatory interest to replace various interests and penalties. old provisions in IT Act, which gave assessing authorities discretionary powers to charge interest and also to levy penalties for same default, were found to be rather complicated. These were contained in following sections of Act: (i) Sec. 139(8) relating to levy of interest for late filing or non-filing of return of income. (ii) Sec. 215 relating to levy of interest for underpayment of advance tax. (iii) Sec. 216 relating to levy of interest for deferment of instalments of advance tax. (iv) Sec. 217 relating to levy of interest for non-payment of advance tax. (v) Sec. 271(1)(a) relating to levy of penalty for failure to file return of income or to file it in time. (vi) Sec. 273 relating to levy of penalty for failure to file statement/estimate or for filing untrue statement/estimate of advance tax payable. (vii) Sec. 140A(3) relating to levy of penalty for failure to pay tax on self- assessment. With view to simplify aforesaid provisions and also to remove discretion of assessing authorities, which had led to litigation and consequent delay in realisation of dues, Amending Act, 1987 has substituted above provisions by simple scheme of payment of mandatory interest for defaults mentioned therein. provisions relating charge of mandatory interest are contained in new ss. 234A, 234B and 234C inserted by Amending Act, 1987. mandatory interests chargeable under these sections are not appealable. At time filing return of income, such mandatory interest, if payable, is to be calculated on basis of returned income and paid along with tax on self-assessment under s. 140A. Charge of mandatory interest for non-filing or late filing of return of income (new s. 234A) provisions of new s. 234A inserted by Amending Act, 1987, which have replaced old provisions of ss. 139(8), 140A(3) and 271(1)(a), are as follows: (i) to (v)** ** ** and 10.5** ** ** Charge of mandatory interest of non-payment or underpayment of advance tax (new s. 234B) provisions of new s. 234B inserted by Amending Act, 1987, which have replaced old provisions of ss. 215 and 217, are as under: (i) to (iv)** ** ** ** ** ** Charge of mandatory interest for deferment of instalments of advance tax (new s. 234C) provisions of new s. 234C inserted by Amending Act, 1987, which have replaced old provisions of s. 216, are as follows:" (Emphasis, italicised in print, supplied) mandatory nature of interest was also considered in some earlier decisions, in context of s. 18A of IT Act, 1922. s. 18A was inserted in IT Act, 1922 by Act of XI of 1944 to provide for machinery for assessment and collection of advance tax. Sub-ss. (6) to (8) of s. 18A provided for levy of interest. These sub-sections as originally stood did not provide for any discretion to AOs in matter of levy of interest. No appeal was provided against s. 18A(6) (equivalent to s. 234B of IT Act, 1961). While interpreting this section, Hon ble Bombay High Court in CIT vs. Jagdish Prasad Ramnath (1955) 27 ITR 192 (Bom) held that: levy of interest follows assessment. Levy of interest is matter of simple calculation than anything else. appeal should be against assessment where assessee can agitate of points which fix his liability to pay advance tax and for there is no right of appeal against levy of interest by itself. In Santamal Pitambar Prasad vs. ITO (1963) 47 ITR 562 (All), it was held that interest under s. 18A(6) was obligatory on part of ITO. As per headnotes: "Sec. 18A of IT Act, 1922, as it stood before amendment in 1953, it was obligatory on ITO to levy penal interest when advance tax paid was less than 80 per cent of tax determined. liability for penal interest under provisions could be created by mere calculation and entry in assessment form without separate order in that behalf." At time, before amendment of IT Act, 1953 (sic-1922), provision of s. 18A(6) stood as under: Sec. 18A(6) of 1922 Act "18A(6) Where in any year assessee has paid tax under sub-s. (2) or sub-s. (3) on basis of his own estimate, and tax so paid is less than eighty per cent of tax determined on basis of regular assessment (reduced by amount of tax deductible in accordance with provisions of s. 18 on any income, other than income chargeable under head Salaries , included in such assessment), so far as such tax relates to income other than income chargeable under head Salaries and so far as it is not due to variation in rates of tax made by Finance Act enacted for year for which regular assessment is made, simple interest at rate of six per cent per annum from first day of January in financial year in which tax was paid upto date of said regular assessment shall be payable by assessee upon amount by which tax so paid falls short of said eighty per cent: Provided further that in such cases and under such circumstances as may b e prescribed, ITO may reduce or waive interest payable by assessee (w.e.f. 1st April, 1952)." (Emphasis, italicised in print, supplied) It may be observed that word used in s. 18A(6) was also "shall" as it is in ss. 234A, 234B and 234C as at present. From this it follows that it is not necessary to pass separate order for charging of mandatory interest. In sub-s. (6) of s. 18A of old IT Act, 1922, proviso was introduced w.e.f. 1st April, 1982, which stated "provided further that only cases on such circumstances as may be prescribed ITO may reduce or waive interest payable by assessee". Thus, discretion was given to assessee to reduce or waive interest payable by assessee under ss. 18A(6) and 18A(8) only after 1st April, 1952. From this it follows that earlier to this there was no discretion with ITO to waive this interest. These sub-ss. (6), (7) and (8) of s. 18A are substituted with ss. 215, 216 and 217 in IT Act, 1961 besides s. 139(8). These sections provided for levy of interest for various defaults along with provision for waiver or reduction by ITO. However, as stated above, new scheme for levy of interest was completely recast by Direct Tax Laws (Amendment) Act, 1987 with introduction of new ss. 234A, 234B and 234C which provide automatically levy of interest w.e.f. 1st April, 1989. AO has no discretion in matter of levy of interest if default of nature described in those sections exists. Like s. 18A as originally inserted in old Act, levy of interest is automatic by operation of law and follows assessment. There are many decisions of Tribunal and Courts which have held, following decision of Anjum M.H. Ghaswala s case (supra) that interest chargeable under ss. 234A, 234B and 234C is mandatory. Some of them are: K.C.N. Chandrashekar vs. Asstt. CIT (2000) 66 TTJ (Bang) 355 in ITA No. 882/Bang/1997 (interest under ss. 234A, 234B and 234C is mandatory). Asstt. CIT vs. Santosh Kumar Soni (1997) 57 ITD 220 (All) in ITA No. 2492/All/1992 Deshmukh Consultants vs. Dy. CIT (ITA Nos. 46 to 50 and 155 to 157/Pune/1998, dt. 1st April, 2002) asst. yrs. 1985-86 to 1992-93. Sanjeev Batra vs. Asstt. CIT (1999) 65 TTJ (Del) 799: (1999) 69 ITD 23 (Del) in (ITA No. 5529/Del/1996) Asstt. CIT vs. Chemicals Corpn. (ITA No. 5221/Del/1997) Harsha Bhogle vs. AO (supra) TransIndia Freight Services (P) Ltd. vs. Asstt. CIT (ITA No. 637/Mum/2001, dt. 28th Oct., 2004) for asst. yr. 1999-2000. MB Stock Holdings (P) Ltd. vs. Asstt. CIT (2002) 75 TTJ (Ahd) 898: (2003) 84 ITD 542 (Ahd) (ITA Nos. 943, 5152/Ahd/1995, 2557/Ahd/2000) S.K. Patel Family Trust vs. Asstt. CIT (2001) 71 TTJ (Ahd) 121 (ITA No. 5000/Ahd/1995) for asst. yr. 1992-93, dt. 10th Jan., 2001) In all above cases, it has been held that interest under ss. 234A, 234B and 234C are mandatory in nature and is to be charged by AO if default of nature as described therein exists. omission to charge interest under s. 18A(6) prior to amendment w.e.f. 1st April, 1952, was also held as mistake apparent from record, which could b e rectified under s. 35 of IT Act, 1922. In following cases, this view was supported: (i) M. Velayudhan vs. Addl. ITO (1957) 32 ITR 724 (Ker) "The following new proviso was added to sub-s. (6) of s. 18A on 24th May, 1953, to come into effect from 1st April, 1952: Provided further that in such cases and under such circumstances as may b e prescribed, ITO may reduce or waive interest payable by assessee. Therefore, ITO had no power to waive interest on 25th June, 1952, though such power to waive was conferred on him on 24th May, 1953, retrospectively. When ITO had no power to waive interest, no waiver can be implied on basis of his inaction in pursuing proceedings taken by him under s. 18A(8) of Act. We, therefore, hold that respondent did not waive his right to claim interest from assessee under s. 18A(6) of Act. Lastly, it is argued that provisions of s. 35 did not apply to facts of this case. Under s. 35, ITO may, at any time within four years, from date of any assessment order, rectify any mistake apparent from record of assessment. assessment in this case was made on 13th March, 1952, and, under said section, ITO could rectify any mistake apparent from record of assessment within four years from date. alleged mistake was corrected in present case within prescribed time. only question is whether there is mistake apparent from record of assessment. We have held that statutory obligation is cast on ITO under s. 18A(8) to add interest payable under sub-s. (6) to tax as determined on basis of regular assessment. ITO by mistake did not add interest payable by assessee to tax determined by him on basis of regular assessment. He, therefore, committed clear mistake, which is apparent from record of assessment. In this view, provisions of s. 35 are directly attracted and ITO was within his rights in rectifying mistake. In result, appeal fails and is dismissed with costs." (ii) N.V.N. Nagappa Chettiar vs. ITO (1958) 34 ITR 583 (Mad) "The contention of Mr. Srinivasan that error which can be rectified under s. 35 must be something obvious and must not be something to ascertain which prolonged investigation, particularly investigation of controversial nature, is involved, is correct. But, then, it is not confined to mistakes which are clerical or arithmetical in character. Under sub-s. (8) of s. 18A, there is statutory duty cast on ITO to add interest where no advance payment of tax has been made. ITO has no discretion in matter. He is bound to charge interest. And I have no difficulty in holding that when he has omitted to do so that omission is mistake apparent from record. I find that similar view was taken in Meka Venkatappiah vs. Addl. ITO." (iii) V.N.S. Sockalingam Chettiar vs. ITO (1959) 36 ITR 451 (Mad) "Where no payment of tax in advance has been made in accordance with s. 18A of IT Act, provisions of sub-s. (8) of that section apply and interest calculated in manner laid down in sub-s. (6) may be added in regular assessment. penalty under s. 18A(9)(b) is for failure to furnish estimate of tax payable by assessee. interest levied under s. 18A(8) is not penal interest. If order of assessment shows that interest in accordance with s. 18A(8) has not been added to tax determined on basis of regular assessment and such omission is mistake, s. 35 of IT Act applies and mistake can be rectified under that section. mistake that can be rectified under s. 35 need not be in assessment as such." (iv) Pamulapati Ankineedu & Kota Venkatasubbiah Rice Mill Co. vs. Addl. ITO (1961) 43 ITR 522 (AP) "The ITO has ample authority, in rectification proceedings under s. 35 of IT Act, to add interest in assessment in accordance with s. 18A(6), where assessee is new one within ambit of s. 18A(3), despite fact that no estimate was submitted by assessee." (v) Shantilal Rawji vs. M.C. Nair, ITO (1958) 34 ITR 439 (Bom) "(i) if it were clear that under s. 18A(6) it was incumbent upon ITO to charge interest then his failure to do so would be error apparent on face of record capable of being rectified by him under s. 35; (ii) fifth proviso to s. 18A(6) which was inserted in Act in May, 1953, with retrospective effect from 1st April, 1952 (and which must, therefore, be deemed to have been part of Act on date of assessment order) vested discretion in ITO to reduce or waive interest payable by assessee; (iii) as there was nothing on record to show that failure to charge interest was due to failure to discharge his obligation under s. 18A(6), it was impossible to hold that omission to charge interest must necessarily be ascribed to error of law on part of ITO;" In ITO vs. M.R. Vidyasagar (1962) 44 ITR 732 (SC) while dealing with s. 18A of IT Act, 1922 r/w s. 48 corresponding to s. 215 of IT Act, 1961 r/w r. 40 of IT Rules, it was held that ITO has no discretion in matter of levy of interest and was bound to impose liability for default in payment of interest. While completing assessment under s. 6(2) of Surtax Act, AO had obligation to levy interest in terms of s. 7C of Surtax Act. Failure to levy interest while completing assessment under s. 6(2) of Surtax Act was only omission and it can be rectified under s. 13 of Surtax Act by AO. In context, Hon ble Kerala High Court in CIT vs. Malayala Manorama Co. Ltd. (No. 2) (2002) 172 CTR (Ker) 316: (2002) 253 ITR 791 (Ker) held as under: "Held (i) that interest omitted to be levied by original order of assessment could be brought in by way of rectification in exercise of power under s. 13 of Act." In s. 139(8), legislature had also used words "shall be liable" while authorising AO to charge interest for late filing of return. In this connection, it was held that if AO had omitted to levy interest under s. 139(8), then it can be rectified by rectification under s. 154 because interest under s. 139(8) is mandatory in nature. observation of Hon ble Courts in following two cases are relevant: (i) Mulchand Patti Mfg. Co. vs. CIT (1995) 126 CTR (Raj) 438: (1995) 215 ITR 746 (Raj) "The use of words shall be liable in s. 139(8) of IT Act, 1961, shows that assessing authority has no discretion in matter of levying shows that assessing authority has no discretion in matter of levying interest. charge of interest under s. 139(8) is mandatory. proviso to s. 139(8) which is by way of exception gives power to reduce or waive interest. proviso requires that power of waiver is not applicable to all cases, but is restricted to such cases and under such circumstances as may be prescribed. Rule 117A of IT Rules, 1962, has prescribed circumstances which, besides other conditions, lays down that assessee should have been prevented by sufficient cause from furnishing return within time. failure on part of ITO to charge interest under s. 139(8) is mistake which can be rectified under s. 154 of Act." (ii) CIT vs. Tiwary Bechar & Co. (1987) 62 CTR (Pat) 8: (1987) 165 ITR 78 (Pat) "The liability to charge interest for delay in filing return has been made obligatory under s. 139(8) of IT Act, 1961. taxing officer has no discretion in that behalf since 1962 when IT Act, 1961, came into being. only relief which assessee could expect is by order for reduction or for waiver in terms of r. 117A of IT Rules, 1962. Rule 117A empowers ITO to waive charging of interest in terms of cls. (iv) and (v) of r. 117A. Those provisions, however, are hedged in by proviso which lays down that where amount of interest exceeds Rs. 1,000, reduction or waiver can be ordered only with previous approval of IAC. Where there was delay in filing return by assessee and ITO omitted to levy interest under s. 139(8) and thereafter ITO initiated rectification proceedings under s. 154 and levied interest exceeding Rs. 1,000 (the ITO having no discretion in such cases to waive interest without prior approval of IAC): Held that failure to charge interest did not amount to waiver, that ITO was bound to levy interest and that failure to exercise that jurisdiction was error apparent from record which could be rectified under s. 154." Now question arises as to what will happen if AO omits to charge interest in assessment order or does not even specify anything in demand notice and challan i.e. he altogether omits to consider charging of interest under these sections either in assessment order or in ITNS-150. There may be also case where nothing is mentioned in assessment order but interest is charged through ITNS-150 and DN like in present case. In our view, non-charging of interest is equal to its waiver as held by Hon ble Gujarat High Court in Gordhanbhai Jethabhai s case (supra). Since there is no power of waiver with AO, then only course open to AO is to recover this interest through order under s. 154. Our view is supported by three decisions of various High Courts. Though these decisions relate to powers of Settlement Commission, but they are equally applicable to assessing authorities. These decisions are as follows: AOP of Sanjaybhai R. Patel vs. Asstt. CIT (2004) 187 CTR (Guj) 583: (2004) 267 ITR 129 (Guj) Andrew Nettikkadan vs. Asstt. CIT (2004) 187 CTR (Ker) 602: (2004) 266 ITR 708 (Ker) Queens Saree Collection vs. ITSC (2004) 190 CTR (Kar) 193: (2004) 270 ITR 401 (Kar) In all these cases, Settlement Commission had waived interest partially or fully while settling cases but after decision of Hon ble Supreme Court in Anjum M.H. Ghaswala s case (supra), Hon ble Settlement Commission issued notice under s. 154 to withdraw such waiver/reduction. These notices and orders under s. 154 were challenged by petitioners before High Courts. It was held that Settlement Commission has power to rectify orders under s. 154 because decision of Hon ble Supreme Court in Anjum M.H. Ghaswala s case (supra) is law as it was since inception and, therefore, not following law declared by Hon ble Supreme Court will be mistake apparent from record, which will be rectified by Settlement Commission. Therefore, high powered authority like Settlement Commission can withdraw waiver or reduction of interest, which was allowed by them while settling cases under s. 245D(4). It was conscious act on their part while settling case to allow waiver or reduction presuming they had power to do so. Once Hon ble Supreme Court held in case of Anjum M.H. Ghaswala s case (supra) that Settlement Commission does not have power to waive or reduce interest, they carried out rectification to withdraw such waiver or reduction, which was upheld by Hon ble High Courts as stated above. In our view, it follows that where AO has implicitly waived interest by not charging it through assessment order or through DN, he can charge it by resorting to rectification under s. 154. If Settlement Commission has power to rectify waiver or reduction of interest and charge same through order under s. 154, there is no reason why AO and CIT(A) cannot do so and charge interest, if default exists, by resorting to rectification under s. 154. In fact and in law too, CIT(A) committed, in this case, mistake in not correcting error of AO in not properly and correctly quantifying interest otherwise payable by assessee by operation of law. CIT(A) has power coterminus with AO. He erred in law in not exercising these powers to correct mistake, which was so clear and apparent from record. assessee filed return late. He had taxable income. He had deferred advance tax. interest was clearly payable on returned income for late filing of return and for not paying advance tax in time. Since CIT(A) had admitted appeal, though wrongly, he has statutory duty to rectify error of AO in not quantifying interest in assessment order and in DN. Regarding powers of CIT(A) that it is coterminus with that of ITO, Hon ble Supreme Court has in CIT vs. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC) held that ACC has plenary power in disposing of appeal. scope of his power is coterminus with that of ITO. He can do what ITO can do and also direct ITO to do what he has failed to do. In V. Subramoniya Iyer vs. CIT 1977 CTR (Ker) 12: (1978) 113 ITR 685 (Ker), Hon ble Kerala High Court held that amplitude and width of power of appellate authority is no less wider than that of ITO and they can substitute order of ITO by their own. Not mentioning in assessment order at all or not properly mentioning interest to be paid by assessee means either it is forgone or waived; if not, then it is only omission. Since AO has no power of waiver, it cannot be presumed that by not mentioning or not properly mentioning in assessment order, AO has waived interest or foregone his right to levy interest. only inference, therefore, is that he has omitted to charge interest in accordance with law even though default existed. From foregoing interest in accordance with law even though default existed. From foregoing discussion held after driving support from various judicial pronouncements as discussed above, we infer that: (i) Mandatory interest under ss. 234A, 234B and 234C has to be charged, if default existed. (ii) It may be charged through assessment order and/or through DN. (iii) If there is omission, AO can correct omission by way of rectification. learned counsel for assessee has cited decision of Hon ble Delhi High Court in case of CIT vs. Kishan Lal (HUF) (supra) and CIT vs. Autolite (India) (P) Ltd. (supra). Hon ble Delhi High Court in case of Kishan Lal (HUF) (supra) held that interest under these sections cannot be charged unless mentioned in assessment order. For this decision they relied on decision in case of CIT vs. Ranchi Club Ltd. (supra) and Ranchi Club Ltd. vs. CIT (supra), Uday Mistanna Bhandar & Complex s case (supra) and Smt. Tej Kumari vs. CIT (supra), which are discussed above. These decisions d i d not consider decision of Hon ble Supreme Court in Anjum M.H. Ghaswala s case (supra), Hindustan Bulk Carrier s case (supra) and Sant Ram Mangat Ram Jewellers case (supra) wherein it was held that interest under these sections is mandatory in nature. In any case, there is no dispute with proposition that interest should be charged by mentioning in assessment order but it cannot be foregone merely because it is not charged through assessment order. Such omission can always be rectified by way of order under s. 154 as held above. Hon ble Rajasthan High Court in case of Autolite (India) (P) Ltd. (supra) has considered chargeability of interest under ss. 139 and 217. Since power of waiver was available to AO under these sections, it was held that interest has to be charged by appropriately mentioning in assessment order. In this decision also effect of decision of Hon ble Supreme Court in case of Anjum M.H. Ghaswala (supra) and others could not be considered. In view of detailed discussion held above, these two decisions are distinguishable on facts as well as in law. Hon ble Patna High Court (Full Bench) rendered decision in case of Smt. Tej Kumari (supra) earlier without benefit of decision of Hon ble Supreme Court in Anjum M.H. Ghaswala s case (supra) and per incurium of Kalyan Kumar Ray s case (supra). In fact, there is no major deviation in situation emerging after decision in Smt. Tej Kumari s case (supra) from situation emerging after decision in Anjum M.H. Ghaswala s case (supra). Smt. Tej Kumari s case (supra) covers one part of spectrum i.e. assessment order should mention/specify about charging of interest, while other part of spectrum is that interest is mandatory and it cannot be forgone or waived merely by not specifying in assessment order. Therefore, omission to specify interest in assessment order cannot be vital to leviability of interest if default existed. Hence, remedy for mistake of not specifying in assessment order lies in correcting mistake. Notwithstanding, we feel that decision of Hon ble Supreme Court in Anjum M.H. Ghaswala s case (supra) and others will carry greater binding effect as compared to decision rendered by Hon ble Patna High Court (Full Bench) in Smt. Tej Kumari s case (supra), when we have to decide question as to whether interest, though declared mandatory, can be foregone, if not specified in assessment order even if default exists. In view of above, we hold that: (1) Interest under ss. 234A, 234B and 234C are mandatory in nature and AO has no power to waive or reduce it by implication or otherwise by not specifying in assessment order and/or in ITNS-150 and/or in DN. Only Chief CIT has been provided power of waiver or reduction in accordance with instructions issued by CBDT Notification No. F. No. 400/234/95-IT(B), dt. 23rd May, 1996 under circumstances and conditions laid down therein. (2) By not mentioning anywhere in assessment order, or in ITNS-150 or i n DN about chargeability of this interest, it is deemed that AO has waived interest. (3) AO is competent to rectify omission with order under s. 154 t o charge interest if he has already not charged or incorrectly charged or not correctly specified in assessment order or DN. (4) CIT(A) has coterminus power with AO and if he admits appeal on question of chargeability of interest, he too can correct error crept in order of AO in respect of chargeability of these interests, if otherwise default is proved. Therefore, we set aside case to file of CIT(A) for verifying facts about defaults of nature as mentioned in ss. 234A, 234B and 234C and rectifying error crept in assessment order by not correctly charging interest. He will quantify interest chargeable under these sections and direct AO, accordingly, to recover same. In result, appeal of Revenue is allowed for statistical purpose. *** INCOME TAX OFFICER, WARD 5(1), KALYAN, MUMBAI v. PRABHU K. CHANDNANI