JUDGMENT :

K.R. SHRIRAM, J.

1. Petitioner is challenging the legality and validity of the impugned orders dated 31st December 2007 passed by respondent no.2 under Section 245D(4) of the Income Tax Act, 1961 (the Act) to the extent applicable to Block Assessment Years 1985-1986 to 1996-1997 applying interest under Section 220(2) of the Act, the order dated 10th December 2008 confirming interest under Section 220(2) of the Act and applying surcharge under Section 113 of the Act and orders passed on 18th June 2008 by respondent no.3 while giving effect to the order dated 31st December 2007 passed by respondent no.2.

2. The Income Tax Department had, on 23rd November 1995, carried out search and seizure operations under Section 132 of the Act and thereafter, issued notice under Section 158BC of the Act. In response, petitioner filed on 11th November 1996 return of income for Block Period from 1st April 1985 to 11th November 1995 covering Assessment Years 1985- 1986 to 1996-1997 and declaring undisclosed income of Rs.71,70,000/-. Thereafter, respondent no.3 passed block assessment order on 27th November 1996 under Section 158BC of the Act determining total income of Rs.6,24,54,530/-.

3. Petitioner made an application to respondent no.2 under Section 245C of the Act. The application came to be admitted by respondent no.2 by an order dated 9th April 1997 passed under Section 245D(1) of the Act. A final order under Section 245D(4) of the Act was passed by respondent no.2 on 31st December 2007 determining the total income of petitioner at Rs.1,67,82,072/- after making addition of Rs.96,12,072/- to the income of Rs.71,70,000/- as per block return of income filed on 20th November 1996. While passing the order under Section 245D(4) of the Act, respondent no.2 had issued directions to waive interest under Section 220(2) of the Act to the extent of 75%. Ofcourse, petitioner was unhappy with only this 75% waiver and wanted entire 100% to be waived. Mr. Gandhi stated that petitioner is not pressing this issue.

4. Respondent no.3, by an order dated 18th June 2008, gave effect to the order dated 31st December 2007 passed by respondent no.2. While passing the said order quantifying interest under Section 220(2) of the Act at Rs.1,35,63,666/-, respondent no.3 computed interest for the period starting from the date of order under Section 158BC of the Act passed on 27th November 1996 till the date of final order dated 31st December 2007 passed by respondent no.2 under Section 245D(4) of the Act and levied surcharge under Section 113 of the Act at the rate of 15%.

5. This was followed by petitioner filing a rectification application under Section 154 of the Act to respondent no.2 requesting respondent no.2 to delete the levy of interest under Section 220(2) of the Act from the date of admission of the application under Section 245D(1) of the Act, i.e., 9th April 1997, to the date of final disposal order dated 31st December 2007 passed under Section 245D(4) of the Act and the levy of surcharge under Section 113 of the Act. This application of petitioner was rejected by respondent no.2.

6. Petitioner preferred an appeal against the order of respondent no.3 under Section 246A of the Act before Commissioner of Income Tax (Appeals) in which petitioner challenged the levy of interest under Section 220(2) of the Act, which appeal, even today, is pending adjudication. Mr. Gandhi states that if the Court accepts the petition, then that appeal will be rendered infructuous and within such time, as directed by the Court, petitioner will withdraw that appeal.

7. Thereafter, petitioner once again preferred an application for rectification on 2nd April 2008 under Section 154 of the Act before respondent no.3 for waiver of full interest under Section 220(2) of the Act and also for deletion of the levy of surcharge under Section 113 of the Act applied retrospectively on the amount of income tax paid under the block assessment. Various communications were exchanged between p