Commissioner of Income Tax vs Bharat Motors Service

Hakeem, J.—u/s 256(1) of the Income Tax Act, 1961 (herein after referred to as "the Act"), the Income Tax Appellate Tribunal, Bangalore Bench, has referred the following two questions :

"(i) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was entitled to the benefit of interest u/s 214 of the Income Tax Act, 1961, in respect of the second instalment of advance tax paid by the assessee ?

(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the appeal filed by the assessee before the Appellate Assistant Commissioner against the Income Tax Officer''s refusal to grant interest u/s 214 of the Income Tax Act, 1961, was a competent one filed u/s 246(c) of the said Act ?"

The respondent is a firm. In respect of the assessment year 1975-76, the assessee paid the second instalment of advance tax by way of cheque dated September 13, 1974, which was encashed by the Income Tax Officer only on September 25, 1974. While framing the assessment for the year under reference, the Income Tax Officer did not determine the interest payable by the Department to the assessee as contemplated u/s 214 of the Act.

In the appeal before the Appellate Assistant Commissioner, the assessee submitted that the Income Tax Officer should have determined and paid interest to the assessee in respect of the instalment of advance tax paid by way of cheque on September 13, 1974. The Appellate Assistant Commissioner, however, held that since the assessee ought to have paid the instalment on September 15, 1974, it was not entitled to any interest u/s 214. According to the Appellate Assistant Commissioner, the date of handing over the cheque to the Income Tax Officer was not relevant for the purpose of granting interest u/s 214, but the relevant date was the date of encashment viz., September 25, 1974. So holding, the Appellate Assistant Commissioner rejected the appeal of the assessee.

Against the order of the Appellate Assistant Commissioner, the assessee preferred an appeal before the Tribunal. The Tribunal, upholding the claim of the assessee, has referred the above two questions.

So far as the first question is concerned, a similar question came up for consideration before this court in Commissioner of Income Tax Vs. P.V.S. Beedies (P.) Ltd., . There, this court following the judgment of the Supreme Court in COMMISSIONER OF Income Tax, BOMBAY SOUTH, BOMBAY Vs. OGALE GLASS WORKS LTD., , held that payment by cheque relates back to the date of delivery of the cheque.

Following the said decision, we answer the first question in the affirmative and against the Revenue.

So far as the second question is concerned, it is covered by the decision of this court in National Products Vs. Commissioner of Income Tax, Mysore, , wherein this court held that the appeal challenging the levy of interest was maintainable and the Appellate Assistant Commissioner was right in entertaining the appeal on this point against the order of the Income Tax Officer.

Following the said decision, we answer the second question also in the affirmative and against the Revenue.