2003 (5) TMI 43 - HC - Income Tax

Whether, Tribunal was justified in law in sustaining levy of interest under section 216 of the Income-tax Act? - before this court, Shri Gulati could not furnish any explanation for the difference of Rs. 48 lakhs in the first return and in the revised return, and thus, the assessee miserably failed to furnish any satisfactory explanation for this unexpected increase in the income to the extent of Rs. 48 lakhs, and that being a question of fact recorded by the Tribunal in the absence of any satisfactory explanation by the assessee, we are of the view that the Tribunal has rightly recorded the said finding setting aside the order passed by the appellate authority. - we answer the question in the affirmative, i.e., in favour of the Revenue and against the assessee.

Summary

Issues:
Levy of interest under section 216 of the Income-tax Act for underestimation in the revised return.

Analysis:
The case involved a company running a sugar mill that filed a revised return showing a significant increase in income. The assessing authority imposed interest under sections 215 and 216 of the Income-tax Act. The assessee contended that interest under section 216 was unjustified as there was no order by the assessing authority for such levy. The Revenue argued that the underestimation was deliberate to pay reduced tax, invoking section 216. The court analyzed various precedents to determine the applicability of interest under section 216. The Gauhati High Court emphasized that underestimation of advance tax is linked to current income estimation. The Allahabad High Court previously held that deliberate underestimation is required for section 216 to apply. However, the Bombay High Court ruled that any underestimation leading to reduced advance tax can trigger interest under section 216.

The Calcutta High Court highlighted that interest under section 216 is discretionary and requires a finding of default by the assessee. The Karnataka High Court stressed that a jurisdictional fact of underestimation must be established for interest to be levied. The Gujarat High Court clarified that underestimation may not always be intentional, and interest under section 216 is not automatically compensatory. The court emphasized that deliberate underestimation or deferred payment of advance tax triggers interest under section 216.

The Income-tax Appellate Tribunal upheld the imposition of interest under section 216, considering the unexpected increase in income and the lack of satisfactory explanations by the assessee. The Tribunal found the underestimation in the revised return to be substantial, justifying the levy of interest under section 216. The court concurred with the Tribunal's decision, affirming that the interest under section 216 was justified in this case due to the significant underestimation in the revised return.

In conclusion, the court upheld the Tribunal's decision, ruling in favor of the Revenue and affirming the levy of interest under section 216 of the Income-tax Act. The judgment emphasized the importance of deliberate underestimation or intentional reduction in advance tax payment to trigger interest under section 216.