JUDGMENT [ENTITY], C.J.
1. At the instance of the Revenue, the following questions have been referred for opinion of this court under [SECTION] of the [ACT] (in short, "the Act") by the Income-tax Appellate Tribunal, Cochin Bench (in short "the Tribunal") :
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that levy of interest cannot be made under [SECTION] and [SECTION] without affording an opportunity of being heard to the assessee ?
(2) Whether, on the facts and in the circumstances of the case, is not levy of interest under [SECTION] and [SECTION] (and under the earlier provisions) automatic and axiomatic ?"
2. As the questions referred are purely of law, detailed reference to factual position is unnecessary. Stated in brief, the same is as follows: The asses-see is a partnership firm carrying on business in paper, paper products, office stationery, etc. For the assessment year 1991-92, it filed a return of income on August 31, 1992, declaring a total income of Rs. 8,23,510. The return was processed under [SECTION] of the Act and the total income was determined at Rs. 8,25,260. As per intimation issued under [SECTION], there was levy of interest of Rs. 9,730 under [SECTION] and interest of Rs. 16,545 under [SECTION] Subsequently, the assessment was completed under [SECTION] on March 28, 1994, and in the order of assessment, interest under [SECTION] was enhanced to Rs. 30,460 and under [SECTION] to Rs. 1,02,322. Such levy was challenged by the assessee before the Commissioner of Income-tax (Appeals) (in short, "the CIT(A)"). Getting no relief from the said authority the matter was taken before the Tribunal amongst other grounds of challenge. The Tribunal, relying on an earlier decision rendered by it, held that without affording an opportunity of being heard to the assessee, the levy of interest cannot be made under [SECTION] and [SECTION] of the Act. Aggrieved by the said order, the Revenue sought for a reference, which was, as aforestated, accepted.
3. Learned counsel for the Revenue submitted that the Tribunal has erroneously come to the conclusion that there is a requirement of granting of opportunity of being heard before levy of interest. There is no appearance on behalf of the assessee, in spite of the notice.
4. A brief reference to the provisions is necessary. [SECTION] was introduced by the [ACT], with effect from April 1, 1989. The said provision was introduced along with [SECTION] and [SECTION] Earlier, [SECTION] 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 [SECTION], [SECTION] related to levy of interest for under-payment of advance tax ; [SECTION] related to levy of interest for deferment of instalments of advance tax and [SECTION] related to levy of interest for non-payment of advance tax. Similarly, [SECTION], [SECTION] and [SECTION] 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 an untrue statement/estimate of advance tax payable or failure to pay tax on self-assesment. It appears that with a view to simplify the aforesaid provisions and also to remove the discretion of the assessing authorities, which had led to litigation and consequent delay in realisation of dues, the [ACT], has substituted the above provisions by a simple scheme of payment of mandatory interest for the defaults mentioned therein. Mandatory interest chargeable under these Sections is not appealable. At the time of filing the return of income, such mandatory interest, if payable, is to be calculated on the basis of the returned income and paid along with tax oh self-assessment under [SECTION] This is clearly borne out by [CASE NUMBER], dated October 31, 1989. [SECTION] replaced the old provisions of [SECTION], [SECTION] and [SECTION]. Similarly, [SECTION] replaced the old provisions of [SECTION] and [SECTION]. [SECTION], inserted by the [ACT], provided for calculation of interest under that Section only on completion of regular assessment. It did not provide for calculation of interest under certain circumstances like assessment under [SECTION], without completing a regular assessment. By the [ACT], Sub-section (1) of the said Section was amended to provide for calculation and charging of interest on the basis of total income determined under the provisions of the new [SECTION]. Consequently, the amendments were also made in Sub-section (3) of said Section. An Explanation in Sub-section (1) was inserted to provide for calculation and payment of interest by the assessee under [SECTION] at the time of filing of its return. [SECTION] makes a provision for charging of interest for delay in filing and non-filing of return of income. Charge of interest under this Section is mandatory in nature. The same is the position under [SECTION] In the aforesaid background, it is to be seen whether any notice is required to be given before the levy. Corresponding rules relating to [SECTION] and [SECTION] are [SECTION] and [SECTION] of the [ACT] (in short, "the Rules"). Considering the nature of levy, the Rajasthan High Court in [PRECEDENT], observed that a plain reading of the aforesaid provisions and their harmonious construction would lead to the inevitable conclusion that the liability for payment of interest thereunder is incurred automatically in the event of default by the assessee. That being so, the question of giving any show-cause notice prior to fixing the liability for payment of interest by an order does not arise. Liability for interest is attracted automatically by operation of law without the further requirement of any order to that effect. The order made merely quantifies the amount of interest. However, the Income-tax Officer is empowered to reduce or even waive interest at the instance of the assessee, if good cause is shown for the same by it. It is, therefore, obvious that no prior show-cause notice is required to be given to the assessee since liability to pay interest is attracted automatically by operation of law, but the rigour thereof is mitigated by empowering the Income-tax Officer to reduce or even waive the amount, if good cause is shown by the assessee after incurring that liability. There is no breach of any principle of natural justice inasmuch as the assessee has an opportunity given by the statute to apply for reduction or even waiver of the amount by showing proper cause. The basic requirement of the principles of natural justice are, therefore, fully satisfied.
5. The provisions are clear to the effect that the liability to pay interest is automatic and arises by operation of law. As the levy is automatic, the question of granting an opportunity of having a say in the matter does not arise. As observed by the apex court in [PRECEDENT], it is well known that when a statute levies a tax, it does so by inserting a charging Section by which a liability is created or fixed and then proceeds to provide the machinery to make the liability effective. It, therefore, provides the machinery for the assessment of liability already fixed by the charging Section and then provides the mode for the recovery and collection of tax including penal provisions meant to deal with defaulters. Provision is also made for charging interest on delayed payments, etc. Ordinarily the charging Section which fixes the liability is strictly construed but that rule of strict construction is not extended to the machinery provisions which are construed like any other statute. The machinery provisions must, no doubt, be so construed as would effectuate the object and purpose of the statute and not defeat the same (see [PRECEDENT] ; CIT v. Mahaliram Ramjidas [19[SECTION]] 8 ITR 442 (PC) ; [PRECEDENT] and Gursahai Saigal v. CIT [1963] 48 ITR 1 (SC . But it must also be realised that the provision by which, the authority is empowered to levy and collect interest, even if construed as forming part of the machinery provisions, is substantive law for the simple reason that in the absence of contract or usage interest can be levied under law and it cannot be recovered by way of damages for wrongful detention of the amount (see [PRECEDENT] and [PRECEDENT]). A Full Bench of this court in [PRECEDENT], considered a similar provision under the [ACT] (in short, the [ACT]). It was observed that the liability to pay interest automatically arises and there is no necessity for sending a show-cause notice and granting an opportunity of being heard. There is no question of the taxing authority exercising any discretion under the statute ; no discretion is contemplated or vested in the authority and failure to pay tax along with return automatically attracts penal interest. As there is no discretion left in the assessing authority by statute itself, there is no question of exercise of discretion and no notice before the exercise of discretion.
6. The automatic nature of the levy is further apparent from [SECTION] of the Act, which reads as follows :
"1[SECTION]A.(1) Where any tax is payable on the basis of any return required to be furnished under [SECTION] or [SECTION] or, as the case may be, [SECTION], after taking into account the amount of tax, if any, already paid under any provision of this Act, the assessee shall be liable to pay such tax, together with interest payable under any provision of this Act for any delay in furnishing the return or any default or delay in payment of advance tax, before furnishing the return and the return shall be accompanied by proof of payment of such tax and interest.
Explanation. Where the amount paid by the assessee under this subSection falls short of the aggregate of the tax and interest as aforesaid, the amount so paid shall first be adjusted towards the interest payable as aforesaid and the balance, if any, shall be adjusted towards the tax payable."
7. The requirement of [SECTION] is payment of not only tax payable on the basis of any return required to be furnished under [SECTION] or [SECTION], or, as the case may be, [SECTION] after taking into account the amount of tax, if any, already paid, but also interest payable under any provision of the Act, for any delay in furnishing the interest or any default or delay in payment of advance tax. With effect from April 1, 1989, the requirement to pay interest on self-assessment became mandatory. The requirement with relation to the return under [SECTION] was introduced by the [ACT], with effect from September 27, 1991. Obviously, the assessee is to make self-computation of such interest because of mandatory and automatic nature of the levy. Considered in that background also, the question of giving any notice before levy does not arise.
8. The inevitable conclusion is that the levy is mandatory. The Chief Commissioners and the Directors-General (Investigation) are empowered to reduce or waive penal interest for late furnishing of return of income, non-payment or inadequate payment of advance tax, etc. The Central Board of Direct Taxes had issued a press release to that effect as is noticed from [PRECEDENT].
9. In view of the aforesaid position, the questions referred are to be answered in favour of the Revenue and against the assessee. We do so. Reference is accordingly disposed of.