Judgment :- N.V. BALASUBRAMANIAN, J. The above writ petition has been filed challenging the order of the CIT passed under s. 264 of the IT Act, 1961 (hereinafter referred to as 'the Act') and for a direction to the CIT to grant waiver of interest levied under s. 215 of the Act for the asst. yr. 1975-76. The above writ petition was heard along with other writ petitions, viz., M.P. Nos. 21111 to 21113 of 1994, 10022 and 10024 of 1996. The petitioner is a private limited company engaged in the business of manufacture and sale of typewriters and manufacture and supply of defence equipments/components to various defence establishments in the country. There were raids in the premises of the petitioner by the IT Department during December, 1966 and December, 1976. The petitioner approached the Settlement Commission (IT & WT), Additional Bench, Chennai (hereinafter referred to as 'the Settlement Commission') and filed applications under s. 245C of the Act to settle its tax liability under Chapter XIX-A of the Act for the asst. yrs. 1963-64 to 1982-83 on various dates, and the Settlement Commission also admitted the applications filed by the petitioner on various dates. Insofar as the asst. yr. 1975-76 is concerned, the petitioner filed its return of income on 15th September, 1975, showing a total income of Rs. 11, 79, 522 after claiming set off of carried forward loss of Rs. 4, 35, 412. There is no dispute that the first hearing of the case was posted by the AO on 3rd June, 1977. As already noticed, the petitioner had approached the Settlement Commission for the assessment years from 1963-64 to 1974-75 on 7th April, 1977, and on 25th July, 1977. The petitioner approached the Settlement Commission for the asst. yr. 1975-76 on 21st September, 1977 and the petition was admitted on 7th January, 1976. The petitioner offered a total income of Rs. 14, 92, 604 for the asst. yr. 1975-76 before the Settlement Commission. The Settlement Commission on 30th December, 1992, sent the case back to the AO relating to the asst. yr. 1975-76 along with the cases for other asst. yrs. The petitioner offered a total income of Rs. 14, 92, 604 for the asst. yr. 1975-76 before the Settlement Commission. The Settlement Commission on 30th December, 1992, sent the case back to the AO relating to the asst. yr. 1975-76 along with the cases for other asst. yrs. 1975-76 to 1982-83 by invoking the provisions of s. 245HA(1) of the act for the completion of the assessment proceeding in accordance with Act as if no application under s. 245C was filed.The AO, on the basis of the order of the Settlement Commission, completed the assessment for the asst. yrs. 1975-76 on 15th June, 1993, determining the total income of Rs. 20, 17, 040. The AO also levied interest under s. 215 of the Act of a sum of Rs. 13, 41, 065. The petitioner challenged the assessment before the CIT(A) who reduced the total income to Rs. 20, 10, 040. The petitioner challenged the order of the appellate authority before the Tribunal. The petitioner challenged the levy of interest before the Dy. CIT on the ground that the delay in the completion of assessment from 21st September, 1977 when the application under s. 245C of the Act was filed before the Settlement Commission for the asst. yr. 1975-76 till 30th December, 1992, when the Settlement Commission restored the proceedings to the AO under s. 245HA of the Act was not attributable to the petitioner and hence, there should be a complete waiver of interest under r. 40(1) of the IT Rules, 1962 (hereinafter referred to as 'the Rules'). The petitioner also contended that for the asst. yrs. 1963-64 to 1974-75 disposed of by the Settlement Commission, the interest under s. 215 of the Act was waived for the period beyond one year from the date of filing of the return and the same principle should be applied for waiver of interest levied under s. 215 of the Act for the asst. yr. 1975-76 also. The Dy. CIT, however, did not agree with the submission of the petitioner and rejected the application on the ground that the petitioner did not cooperate with the Settlement Commission from time to time which forced the Settlement Commission to send the case back to the AO. According to the Dy. CIT, the assessment was delayed by the petitioner by not cooperating with the functionaries of the Settlement Commission for rendering a final decision. The Dy. According to the Dy. CIT, the assessment was delayed by the petitioner by not cooperating with the functionaries of the Settlement Commission for rendering a final decision. The Dy. CIT therefore rejected the application. However, he found that when the return of income of the petitioner was filed on 15th September, 1975, the AO posted the case for hearing on 3rd June, 1977, after a period of more than one year and there was no material on record to hold that the delay in taking up the assessment proceedings before 3rd June, 1977, was attributable to the petitioner, and hence, he directed the waiver of interest for a period one year from the date of filing of the return, and in other respects, he found no justification to order waiver of interest.The petitioner thereupon challenged the order of the Dy. CIT before the CIT. The CIT found that the petitioner has not cooperated with the functionaries of the Settlement Commission in preparing a factual report on the application. The CIT after taking note of the order of the Settlement Commission, found that the petitioner did not cooperate with the functionaries of the Settlement Commission in finalising the proceedings before the Settlement Commission, and the delay in the finalisation of the proceedings was clearly attributable to the non-cooperative attitude of the petitioner and the Settlement Commission was left with no other alternative but to send back the case to the AO because of the non-cooperative attitude of the petitioner. The CIT also found that though there was an admitted income, the petitioner has not paid advance-tax and delayed the finalisation of the assessment proceedings for more than 15 years. The CIT was of the view that the petitioner is not entitled to waiver of interest besides what was allowed by the Dy. CIT. It is this order which is subject-matter of this writ petition. The main case of the petitioner is that under r. 40 of the Rules, where assessment is completed after more than one year from the date of submission of return and the delay in assessment is not attributable to the assessee, the AO is empowered to reduce or waive interest payable under s. 215 or 217 of the Act. The main case of the petitioner is that under r. 40 of the Rules, where assessment is completed after more than one year from the date of submission of return and the delay in assessment is not attributable to the assessee, the AO is empowered to reduce or waive interest payable under s. 215 or 217 of the Act. It is stated that on the facts of the case, the case was posted for first hearing on 3rd June, 1977, whereas the return was filed on 15th September, 1975, and soon thereafter, an application was filed before the Settlement Commission and after the Settlement Commission admitted the application, the petitioner had no occasion to take part in the assessment proceedings and only when the matter was sent back to the AO by the Settlement Commission under s. 245HA of the Act the AO would have jurisdiction to take part in the assessment proceedings. It is therefore submitted that the petitioner could appear before the AO only after the case was sent back from the Settlement Commission and the period from the date when the application was filed before the Settlement Commission till the date on which the matter was sent back from the Settlement Commission should be taken into account for arriving at the period of delay. It is therefore, submitted that the delay in the assessment was not attributable to the petitioner and hence, the entire interest levied has to be waived. Though in the petition, a reference has been made to rr. 40(1) and 40(v) of the Rules, learned senior counsel appearing for the petitioner mainly focussed his attention on r. 40(i) of the Rules. The petitioner has also taken up a plea that the petitioner cooperated with the Settlement Commission and notwithstanding the cooperation extended by the petitioner, the Settlement Commission was of the view that the assessment proceedings should be reverted back to the AO and the only option that was available to the Settlement Commission was to invoke the powers under s. 245HA of the Act. According to the petitioner, the Department was also aware that the petitioner has fully cooperated with the Settlement Commission and the finding regarding non-cooperation was rendered for the limited purpose of sending the case back to the AO under s. 245HA of the Act.In the counter-affidavit filed by the respondent, the respondent has taken a stand that the petitioner has not cooperated with the Settlement Commission by not filing necessary documents and records and hence, the matter was remitted by the Settlement Commission. The contention of the petitioner that the Settlement Commission has decided to send back the case and hence, invoked the power under s. 245HA of the Act was denied. According to the respondent, the plea of the petitioner was not borne out of the records or from the order of the Settlement Commission. It is therefore, stated that the CIT has taken into account all aspects of the matter and found no justification to reduce the interest. The petitioner also filed a reply statement. I heard Mr. V. Ramachandran, learned senior counsel appearing for the petitioner and Mr. S. V. Subramaniam, learned senior counsel for the IT Department and also Mr. C. V. Rajan, learned senior standing counsel for the Department. In my view, the matter should be remitted back to the CIT. The CIT has not considered the entire issue in proper perspective. The interest under s. 215 of the Act is levied on the shortfall of the advance tax paid between the assessed tax and the tax paid by the assessee, if the shortfall is more than 25 per cent in case of normal assessees and 16-2/3 per cent in the case of assessees who are companies. The petitioner, no doubt, has not paid any advance tax. The petitioner filed its return of income from the asst. yr. 1975-76 on 15th September, 1975, showing total income of Rs. 11, 79, 522 after claiming set off of carried forward loss of Rs. 4, 35, 412. The petitioner, no doubt, has not paid any advance tax. The petitioner filed its return of income from the asst. yr. 1975-76 on 15th September, 1975, showing total income of Rs. 11, 79, 522 after claiming set off of carried forward loss of Rs. 4, 35, 412. There is also no dispute that the AO posted the case for the first time on 3rd June, 1977, after more than one year from the date of filing of the return and there are no materials to show that the delay was attributable to the assessee.The main question that arises is whether for the period from the date of filing of the petitioner under s. 245C of the Act before the Settlement Commission, i.e., 7th January, 1976, till the dt., 30th December, 1992, when the Settlement Commission remitted the matter back to the AO under s. 245HA of the Act has to be included or excluded while levying interest under s. 215 of the Act or the interest levied is liable to be waived under r. 40 of the Rules. The petitioner as well as the Department has taken divergent views on this aspect. The case of the petitioner is that though the petitioner extended full co-operation before the Settlement Commission, the Settlement Commission remitted the matter to the AO for the asst. yrs. 1975-76 to 1982-83, while for the asst. yr. 1963-64 to 1974-75 it settled the matter. According to the petitioner, the Settlement Commission remitted the matter under s. 245HA of the Act so that the AO could do assessment on the basis of its earlier order for the asst. yrs. 1963-64 to 1974-75. The case of the Department, on the other hand, is that the petitioner has not extended its co-operation for the asst. yrs. 1975-76 to 1982-83 and that is the reason for the Settlement Commission to remit the matter to the AO. To decide the controversy, it is necessary to notice the order of the Settlement Commission. In the order it is stated that the hearing for the final settlement was fixed on 21st October, 1992, and it was adjourned from time to time and on 21st December, 1992, the Settlement Commission required the petitioner to file a detailed paperbook covering all the issues that requires settlement in respect of the asst. yrs. 1975-76 to 1982-83. In the order it is stated that the hearing for the final settlement was fixed on 21st October, 1992, and it was adjourned from time to time and on 21st December, 1992, the Settlement Commission required the petitioner to file a detailed paperbook covering all the issues that requires settlement in respect of the asst. yrs. 1975-76 to 1982-83. A letter also seems to have sent on 3rd December, 1992, requiring the petitioner to file the paperbook, but the petitioner did not file the paperbook by 21st December, 1992. A show-cause notice dt. 23rd December, 1992, was issued to the petitioner requiring the petitioner to explain as to why it should not be taken that the petitioner did not cooperate with the Settlement Commission and the case should not be remitted back to the AO. The petitioner sent a reply dt. 24th December, 1992, expressing its no objection to send the case back to the AO. The Settlement Commission passed the following order : "We have for acknowledgment your letter dt. 23rd December, 1992, in the above matter. Considering the assessments to be carried out in respect of the assessment years, in question, - virtually original assessments - we have no objection if the cases are sent back to the AO, as proposed by you, in your letter under reply." Though there is some force in the argument of Mr. V. Ramachandran, learned senior counsel that the Settlement Commission has remitted the matter in view of the fact that it passed orders settling the cases for the asst. yrs. 1963-64 to 1974-75 and what the AO was required to do was to follow the guidelines adopted by the Settlement Commission for the earlier assessment years to complete the assessments for subsequent assessment years and in the absence of any specific provision, the Settlement Commission resorted to s. 245HA of the Act, yet, the order of the Settlement Commission on record does not disclose the Settlement Commission remitted that matter because it was of the view that the AO should follow its directions given for the earlier assessment years. The order proceeds on the basis that there was non-co-operation on the part of the petitioner. It is relevant to notice here that the Dy. The order proceeds on the basis that there was non-co-operation on the part of the petitioner. It is relevant to notice here that the Dy. CIT proceeded on the basis that though the assessment for the relevant assessment years was completed after more than one year from the date of returns and the delay was not attributable to the petitioner, he levied interest excluding a period of one year from the date of filing of the return. Rule 40(1) of the Rules contemplates that the authority is required to find out whether the assessee is the cause for the delay in completing the assessment beyond the period of one year and whether the cause is attributable to the assessee and when the delay is not attributable to the assessee in the completion of assessment beyond a period of one year, the waiver should be extended to the assessee from the end of one year from the date of filing return up to the date of completion of the assessment.The Board's Circular No. 492, dt. 27th July, 1997 1987 (66) CTR(St) 19] postulates that the waiver is provided for in r. 40(1) of the Rules for the period from the end of the first year till the date of the completion of the assessment. The Dy. CIT has found that till the date of the first notice issued dt. 3rd June, 1977, the delay was not attributable to the petitioner, but he waived interest only for a period of one year. In my view, the Dy. CIT is not correct in his view, that the waiver of interest should be limited to the period of one year from the date of filing of the return. As already observed by me, the waiver is provided for under r. 40(1) of the Rules from the end of the first year till the date of completion of assessment. Hence, the order of the Dy. CIT applying the provisions of r. 40 of the Rules in a manner not contemplated in the Rules is erroneous in law. The CIT has also not exercised his revisional power in a proper manner. Hence, the order of the Dy. CIT applying the provisions of r. 40 of the Rules in a manner not contemplated in the Rules is erroneous in law. The CIT has also not exercised his revisional power in a proper manner. The CIT proceeded on the basis that the delay in the completion of assessment between 21st September, 1977, when the application under s. 245C of the Act was filed till 30th December, 1992, when the Settlement Commission passed orders under s. 245HA of the Act, the petitioner did not co-operate with the Settlement Commission. The CIT recorded the finding that there was non-cooperation on the part of the petitioner before the Settlement Commission on the basis of the order passed by the Settlement Commission under s. 245HA of the Act. The CIT while so holding has not examined the records before the Settlement Commission as to what happened between 21st September, 1977 and 30th December, 1992. The CIT also has not examined the question whether there was no co-operation by the petitioner before the Settlement Commission and the period of non-cooperation by the petitioner and whether it was for the entire period from the date of filing the application till the order was passed by the Settlement Commission or for a part of the period. In other words, the CIT has not determined when the non-cooperation by the petitioner commenced how long it extended and the period of non-cooperation.I called for the records from the Settlement Commission and perused the same. The order of the Settlement Commission discloses that the first hearing itself was fixed on 21st October, 1992. The order of the Settlement Commission also proceeds on the basis that the Settlement for the asst. yr. 1977-78 was allowed to be proceeded by order dt. 24th April, 1981, and for the asst. yrs. 1980-81 and 1981-82 the settlement was allowed to be proceeded by order dt. 25th August, 1982, and for the asst. yr. 1982-83, the settlement was allowed to be proceeded by order dt. 25th July, 1983. But, it is clear from the order that it is only on 27th May, 1992, the Settlement Commission directed that the petitioner should fully cooperate with the Dy. Director of Income-tax (Investigation) of the Settlement Commission in supplying all materials required for the purpose of scrutinising the cases as though routine assessments were being made by the Commission itself. But, it is clear from the order that it is only on 27th May, 1992, the Settlement Commission directed that the petitioner should fully cooperate with the Dy. Director of Income-tax (Investigation) of the Settlement Commission in supplying all materials required for the purpose of scrutinising the cases as though routine assessments were being made by the Commission itself. It is not clear as to what happened between the date of application till 27th May, 1992. The CIT was chiefly influenced by the finding of the Settlement Commission that since the petitioner did not corporate with the Settlement Commission, the Settlement Commission passed an order under s. 245HA of the Act. However, the CIT did not examine the question whether the petitioner was responsible for the delay in completing the settlement proceedings for the entire period from the date of application before the settlement of commission till 27th May, 1992, when the notice was issued by the Settlement Commission. The order of the CIT does not disclose that he has examined the records before the Settlement Commission. The CIT while exercising the power under s. 264 of the Act, has the necessary powers to summon the records and examine the question whether the petitioner has cooperated with the Settlement Commission between the date of application till 27th May, 1992. I am, therefore, of the view that the conclusion arrived at by the CIT that the petitioner has not cooperated with the Settlement Commission from the date of application before the Settlement Commission till the order was passed on 30th December, 1992, is not based on the materials on record. The CIT has also not examined the effect of the provisions of ss. 245F(2) of the Act which provided that after application is admitted, the Settlement Commission has the exclusive jurisdiction to exercise the powers and perform the functions of AO in relation to the case. The CIT has also not examined the effect of the provisions of ss. 245F(2) of the Act which provided that after application is admitted, the Settlement Commission has the exclusive jurisdiction to exercise the powers and perform the functions of AO in relation to the case. In other words, the AO has no jurisdiction during the period from the date of admission of the application filed before the Settlement Commission till the date whom order is passed under s. 245D of the Act.The CIT has also not considered the affect of r. 40 of the Rules when the case was pending before the Settlement Commission and the whether it could be held that the assessee had delayed the assessment proceedings when the AO had no jurisdiction to complete the assessment during that period. I therefore, hold that the CIT has not applied the proper tests is rejecting the application for waiver of interest. I therefore, set aside the order of the CIT and remit the matter back to the CIT to reconsider the matter in the light of the observations made above. The result is the writ petition is allowed. However, in the circumstances, there will be no order as to costs.