2005 (2) TMI 76 - HC - Income Tax

Interest levied under section 215 under estimation of advance tax - Whether Tribunal is right in law and on facts in deleting the interest levied under section 215 of the Act when the additions made by the Assessing Officer were confirmed by the Tribunal and the advance tax paid by the assessee was less than 75 per cent, of the assessed tax? - Nothing has been brought on record to rebut the finding of fact, viz., the method of valuation of closing stock being identical in past years. In the circumstances, it is not possible to state in the light of the scheme of computation of payment of advance tax that the assessee had committed any default by virtue of which, the assessee became liable to be charged interest under section 215 Tribunal was right in law in deleting the interest levied under section 215

Summary

Issues:
1. Interpretation of section 215 of the Income-tax Act, 1961 regarding the levy of interest.
2. Validity of interest deletion when additions made by Assessing Officer were confirmed by Tribunal and advance tax paid was less than 75% of assessed tax.

Analysis:

1. The main issue in this case was the interpretation of section 215 of the Income-tax Act, 1961, regarding the levy of interest. The Tribunal had to determine whether the Assessing Officer was correct in charging interest under section 215 when the assessed income exceeded the estimated income by more than the statutory percentage. The Tribunal found that the interest charged was not justified as the assessee had followed the same method of valuation for closing stock in the past, and the addition made could not have been anticipated by the assessee when estimating the advance tax payable. The Tribunal concluded that the assessee had not committed any default that would make them liable for interest under section 215.

2. The second issue revolved around the validity of deleting the interest when the additions made by the Assessing Officer were confirmed by the Tribunal, and the advance tax paid was less than 75% of the assessed tax. The Tribunal upheld the addition in principle but held that the interest charged was improper and should not be an additional liability for the assessee. The Tribunal's decision to delete the interest levy was based on the fact that the assessee had not erred in estimating the advance tax payable, considering the method used for valuation of closing stock and past practices.

In conclusion, the High Court held that the Tribunal was correct in law in deleting the interest levied under section 215 of the Act. The Court agreed with the Tribunal's findings that the assessee had not committed any default justifying the levy of interest, especially considering the method of valuation of closing stock and past practices. The judgment favored the assessee and ruled against the Revenue, disposing of the reference with no costs awarded.