Commissioner of Income Tax vs Sir Shadi Lal Enterprises Ltd.

The Income Tax Appellate Tribunal, Delhi, has referred the following question of law u/s 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), for the opinion of this court:

Whether, on the facts and circumstances of the case and in accordance with the provisions of law, the Tribunal was justified in confirming the order of the Commissioner of Income Tax (Appeals) cancelling the levy of interest u/s 217(1A)?

The reference relates to the assessment year 1973-74.

Briefly stated the facts giving rise of the present reference are as follows:

A demand of Rs. 29,88,105 was raised u/s 210 of the Act by the Department and the demand notice was served on June 9, 1972. The appellant-company paid up the entire demand in three equal instalments on June 15, 1972, September 15, 1972, and December 1, 1972. There was thus a proper compliance. It appears that the appellant-company considered itself liable to file a revised estimate u/s 212(3A) of the Act. Since the company had certain problems relating to its accounts and it had already sought extension of time from the Registrar of Companies, for holding its A.G.M., it submitted a petition to the Commissioner of Income Tax, Kanpur, on December 13, 1972, seeking extension of one month for revising the estimate by January 15, 1973. On the basis of its own accounts the appellant-company, however, made a further payment of Rs. 20,11,895 by way of advance tax on December 15, 1972. Thus, by the due date for payment of the last instalment, the appellant-company had already deposited Rs. 50 lakhs towards advance tax liability. On December 19, 1972, the appellant-company received acknowledgment from the Commissioner of Income Tax, Kanpur, who required Counsel to pay court fee. This was done by Counsel for the appellant-company on December 23, 1972. On January 15, 1973, the appellant-company filed an estimate of income of Rs. 96 lakhs on which the total tax payable worked out to Rs. 55 lakhs. The balance amount due Rs. 5.14 lakhs was also deposited by the appellant-company on January 15, 1973. Till this time, the appellant-company did not hear anything from the Commissioner of Income Tax, Kanpur, on its petition seeking extension of time by the month. It was on February 20, 1973, that the Commissioner of Income Tax, Kanpur, rejected the petition of the appellant-company under the provisions of the law. The reason for rejection of its petition was that the same did not lie with the Commissioner of Income Tax since the accounting year of the company had already expired. On March 31, 1973, the appellant-company paid a further sum of Rs. 5 lakhs towards advance tax on the basis of the financial picture emerging as a result of audit. Thus, the total tax paid (claimed by the appellant-company as advance tax) was Rs. 60.14 lakhs. The return of income was submitted by the appellant-company on November 30, 1973, on an income of Rs. 1,07,18,483. A sum of Rs. 6,76,000 was paid by way of self-assessment tax. The assessment was completed on December 31, 1975. The final assessed income amounted to Rs. 1,30,71,482. After giving credit for the prepaid taxes, further tax payable was determined at Rs. 8,58,779. Interest u/s 217(1A) of the Act was charged at Rs. 2,08,664. The appellant-company moved an application u/s 154 of the Act on May 17, 1982, for exclusion of interest u/s 217(1A) of the Act. On November 28, 1983, the same was rejected by the Inspecting Assistant Commissioner (Asstt.). This action was confirmed by the Commissioner of Income Tax (Appeals) on November 28, 1983. The Income Tax Appellate Tribunal apart from setting aside the matter to the Commissioner of Income Tax (Appeals) made advisory observation in regard to waiver of interest under Rule 40. On the basis of the same, the appellant-company moved waiver application on May 27, 1985. On September 5, 1988, the Deputy Commissioner (Asstt.) rejected the application for waiver of interest. On remand the Commissioner of Income Tax (Appeals) had deleted the levy of interest which order has been upheld by the Tribunal.

We have heard Sri A.N. Mahajan, learned standing Counsel appearing for the Revenue, and Sri S.D. Singh, learned Counsel appearing for the respondent-assessee.

It is not in dispute that the respondent-assessee had deposited the entire amount of advance tax as per the demand notice dated June 9, 1972, issued by the assessing authority in three instalments within the stipulated period. The respondent had filed an application dated December 13, 1972, much before the last date for depositing the last instalment, for extension of time for filing the statement of income for the purpose of depositing the advance tax on the ground of non-finalisation of accounts and audit. The application was kept pending. However, on December 15, 1972, the respondent had deposited a sum of Rs. 20 lakhs and odd making the total deposit of Rs. 50 lakhs and on January 15, 1973, it had filed revised estimate of income and deposited the balance amount of tax which came to Rs. 5 lakhs and odd. The application was rejected by the Commissioner of Income Tax on February 20, 1973, on the ground that the accounting period had already expired.

We are of the considered opinion that as the assessee had filed an application on December 13, 1972, seeking extension of time for filing the revised estimate of income which application was kept pending by the Commissioner of Income Tax the question of levy of interest u/s 217(1A) of the Act did not arise as the presumption would be that the time sought for had been extended.

In respect of extension for filing the return of income, the Punjab and Haryana High Court in the case of COMMISSIONER OF Income Tax Vs. SURINDER KUMAR PARMOD KUMAR AND OTHERS., has held that where an application has been filed seeking extension of time for filing the return and orders are not passed either way on the said application, the presumption would be that the time sought for has been extended. The apex court has dismissed the SLP filed against the aforesaid decision which is reported in [1993] 204 ITR 9. The same principle would be applicable in the present case also.

We are, therefore, of the considered opinion that the Tribunal had rightly upheld the order deleting the levy of interest u/s 217(1A) of the Act.

We, accordingly, answer the question referred to us in the affirmative, i.e., in favour of the assessee and against the Revenue. There will be no order as to costs.