Commissioner of Income Tax vs Partap Steel Rolling Mills (Asr) (P) Ltd.

This reference has been made by the Tribunal, Amritsar u/s 256 of the Income Tax Act, 1961 (hereinafter referred to as the "the Act") seeking opinion of this Court on the following question of law, arising out of its order dated 6-1-1986 in ITA No. 622/Asr/1981 for the assessment year 1978-79:

Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in cancelling the interest charged u/s 216 of the Act?

The assessing officer finalised the assessment for the year in question on 30-3-1981 and directed that interest be charged u/s 216 of the Act. Accordingly, it was stated in the order that notice had already been issued to the assessee u/s 210 of the Act on 28-5-1977 for advance tax payment. The assessee initially declared nil payment of advance tax and subsequently estimated advance tax at a lower figure and thus, delayed payment of advance-tax. On appeal, the order of the assessing officer was upheld. The Tribunal, however, accepted the appeal of the assessee and cancelled the amount of tax sic.--interest. It was held as under:

We do not find force in the stand of the revenue. It is undisputed that the Inspecting Assistant Commissioner (Asst.) did not give an opportunity to the assessee to state its case before the charging of interest u/s 216. It may be mentioned that levy of interest u/s 216 is even appealable u/s 246(1) of the Income Tax Act. The Section 216(a), which is stated to be attracted in this case, itself refers to an assessee under estimating the advance tax payable by him and thereby reducing the amount payable in either of the first two instalments. The assessee was served with a notice u/s 210 on 28-5-1977 and it filed its estimate dated 14-6-1977 on 15-6-1977 estimating nil payment of advance tax. Before the due date for making final estimate for payment of advance tax on 15-12-1977, the assessee filed an estimate dated 7-12-1977 on 14-12-1977 estimating advance tax payment at Rs. 12,50,000 and paid the tax accordingly. All these facts are mentioned in the penalty order of Inspecting Assistant Commissioner (Asst.). From these facts alone, it cannot be held, as has been done by the Inspecting Assistant Commissioner (Asst.) that the assessee had underestimated the advance tax payable by him in the estimate filed on 28-5-1977. The Inspecting Assistant Commissioner (Asst.)s approach was clearly wrong. The assessee was to be heard about the basis of his earlier estimate and the reasons for later revised estimate. No opportunity having been given by the assessing officer prior to the passing of impugned order, the criticism of the assessee is justified that the levy is invalid. We accept the contention of the assessees counsel and cancel the amount of interest charged u/s 216 and allow the appeal of the assessee.

3.We find that the assessee was given due opportunity and it could not be shown in any manner how underestimation was justified. Reference may be made to the order of the Commissioner (Appeals) dealing with this issue.

The approach of the Tribunal cannot be held to be sound. No justification whatsoever was shown by the assessee for first declaring nil estimates and then revising the same to a lower figure than the actual advance tax due. In these circumstances, it could not be held that action of the assessee was justified. If the assessee wanted to avoid the liability of interest, the assessee was required to show that underestimation was justified. The assessing officer, thus, correctly held that there was no justification for underestimation and liability of interest accrued, which view was rightly upheld by the Commissioner (Appeals).

Accordingly, we answer the reference in favour of the revenue and against the assessee.

The reference is disposed of.