Commissioner of Income Tax vs Indian Express Newspapers (Bombay) Pvt. Ltd.

T.D. Sugla, J.—The question of law raised in this reference at the instance of the Department reads thus :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that since penalty proceedings u/s 273(a) have been dropped by the Income Tax Officer, section 216 which provides for the levy of interest in cases of underestimate is clearly not applicable and, therefore, the levy of interest u/s 216 is a mistake apparent from the record and needs cancellation u/s 154 of the Act, even though a specific appeal lies against the levy of interest u/s 216 in section 246 of the Act ?"

The assessee is a company. The proceedings relate to the assessment year 1968-69. The assessment was completed u/s 143 on March 20, 1969, in which interest u/s 216 was directed to be charged Proceedings under the penal provisions of section 273(a) were also initiated but were subsequently dropped.

The assessee did not file an appeal against charging of interest u/s 216. However, when penalty proceedings u/s 273(a) were dropped by the Income Tax Officer, it filed an application for rectification u/s 154 of the Act on February 20, 1971. The application was rejected by the Income Tax Officer. The appeal was dismissed by the Appellate Assistant Commissioner. Before the Tribunal, it was, inter alia, urged for the first time that penalty proceedings having been dropped, it was obvious that interest u/s 216 could not have been charged. In other words, the submission was that if the finding that the assessee had furnished a statement of advance tax payable by him which he knew or had reason to believe to be untrue could not be upheld and this was so in this case as the penalty proceedings were dropped, it could not be held that the assessee had underestimated the advance tax payable by him within the meaning of section 216. The Tribunal accepted this submission of the assessee and held that the Income Tax Officer should have rectified the assessment and deleted the interest charged u/s 216 in an application filed by the assessee before him u/s 154 of the Income Tax Act, 1961.

Dr. Balasubramanian, learned counsel for the Department, submitted that the provisions of section 273(a) and section 216 were materially different. In any event, it will have to be argued whether the word "underestimated" used in section 216 meant the same thing as a statement which the assessee knew or had reason to believe to be untrue within the meaning of section 273(a). The argument thus was that unless charging of interest u/s 216 must automatically fail with the dropping of the penalty proceedings u/s 273(a), the case would not fall within the ambit of section 154.

Shri Dalvi, learned counsel for the assessee, on the other hand, relied in the Gujarat High Court decision in the case of Commissioner of Income Tax Vs. Nagri Mills Ltd., , where as application filed by the Department u/s 256(2) was dismissed. The Tribunal had, he pointed out, taken the dew that the word "underestimated" in section 216 meant underestimate of advance tax payable made knowingly. His submission thus was that there was no material difference between the provisions of section 273(a) and the provisions of section 216 and, therefore, the Tribunal was justified a the view taken by it.

It may be that it is possible in a particular case to come to the conclusion that because penalty proceedings u/s 273(a) have been dropped, interest u/s 216 was not chargeable. However, it would require arguments to convince the court or the Tribunal that it would be so. As pointed out by Dr. Balasubramanian, the provision in the two sections, to say the least, are not in pari materia. The phraseology used is different. It is, therefore, not possible to accept Shri Dalvi''s submission that the charging of interest in the facts of the case amounted to an obvious and glaring mistake so that it could be rectified in proceedings u/s 154.

In the above view of the matter, we answer the question in the negative and in the favour of the Revenue. No order as to costs.