The discretionary power of the Income Tax Officer to waive interest under S.139(8) does not imply an automatic waiver upon a finding of sufficient cause.

1. By his order Ext. P1 Dated 6-12-1977 the 1st respondent, the Income Tax Officer, C Ward, Trivandrum assessed the income of the petitioner for the assessment year 1975-76 and determined the tax payable at Rs. 1,11,50,375. In addition to this he charged Rs. 5,57,515 as interest under S.139(8) of the Income Tax Act ("the Act") on the ground that the income tax return which was due to be filed on or before 31-7-1975 was filed out of time on 23-1-1976. From the order of assessment the petitioner preferred an appeal before the Appellate Authority. In giving effect to the Appellate Authority's decision the first respondent by his order Ext. P2 dated 31-3-1978 reduced the interest to Rs. 5,09,770. Thereafter the petitioner moved a petition Ext. P3 dated 25-8-1973 under the proviso to S.139(8)(a) before the 1st respondent seeking waiver of the interest on the plea that it was prevented by sufficient cause from furnishing the return within the prescribed time. The first respondent however rejected the petition by his order Ext. P4 dated 5-9-1978. The petitioner carried the order Ext. P4 in revision under S.264 before the 2nd respondent, the Commissioner of Income Tax, Ernakulam. Ext. P5 is a copy of the revision petition. During the pendency of the revision the first respondent passed an order Ext. P6 dated 22-9-1979 levying a penalty of Rs. 6,11,724 under S.271(1)(a) holding that he was not satisfied that reasonable cause existed for the delayed submission of the return by the petitioner. The petitioner challenged the order Ext. P6 before the Commissioner of Income Tax (Appeals). By the order Ext. P7 dated 14-1-1980 the Commissioner of Income Tax (Appeals) cancelled the penalty in the view that the petitioner was prevented by sufficient cause from furnishing the return within the time. The petitioner brought to the notice of the 2nd respondent the above order of the Commissioner of Income Tax (Appeals). On 27-5-1980 the 2nd respondent passed the order Ext. P8, declining to vacate the order Ext. P4 but reducing the interest charged by Rs. 1 lakh. The petitioner seeks to quash Exts. P4 and P8 briefly on the following grounds:
(i) Once the assessing authority is satisfied that an assessee was prevented by sufficient cause from furnishing the return in time, he is bound to waive the interest liable to be charged under S.139(8)(a) because the power to waive interest is coupled with a duty especially as the levy is more in the nature of a penalty. In Ext. P8 the 2nd respondent has also observed that the evidence had satisfied the Income Tax Officer that "the petitioner Company was prevented by sufficient cause from furnishing the return within time." On this finding the 2nd respondent ought to have waived the entire interest.
(ii) The proviso to S.139(8)(a) read along with R.117(A)(v) of the Income Tax Rules makes it clear that on such a finding, the assessing authority is bound to waive the interest. The word "reduce" in the proviso to S.139(8) and R.117A must mean "to rescind or annul"; else there would be scope for the exercise of arbitrary power under the proviso to S.139(8)(a). The fact that the power conferred is not to reduce the rate of interest also indicates that reduction can only mean complete obliteration of the interest on the prescribed conditions being satisfied. Whether it is for the reduction or waiver of the interest, the assessee must satisfy the same prescriptions as is shown by R.117A. The word 'reduce" must therefore mean abate, rescind or annul.
(iii) The statement in Ext. P8 that there was loss in Government revenue on account of the postponement of the payme