1998 (6) TMI 74 - HC - Income Tax

Summary

Issues Involved:
1. Whether an appeal lies against the levy of interest under section 139(8) of the Income-tax Act.
2. Whether instalments of advance tax paid beyond the due dates stipulated in section 211 should be treated as advance tax and given credit for the purposes of charging interest under section 139(8).

Detailed Analysis:

1. Appeal Against Levy of Interest under Section 139(8):
The first issue was whether the Income-tax Appellate Tribunal was justified in holding that an appeal lies against the levy of interest under section 139(8). The court examined the provisions of section 139(8) and the circumstances under which the interest was levied. The assessee filed a belated return for the assessment year 1979-80, resulting in the levy of interest under section 139(8). The Commissioner of Income-tax (Appeals) directed the Income-tax Officer to recompute the interest after giving credit for advance tax paid. The Tribunal held that an appeal against the levy of interest was maintainable, despite the Revenue's contention that no such right of appeal existed.

The court referred to the Supreme Court decision in Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961, which allowed an appeal if the assessee denied liability to pay such interest. The court concluded that the improper exercise of power by the assessing authority, such as ignoring appellate directions, rendered the order appealable. Thus, the Tribunal's decision that an appeal lies against the levy of interest under section 139(8) was upheld.

2. Treatment of Belated Advance Tax Payments:
The second issue was whether instalments of advance tax paid beyond the due dates should be treated as advance tax and credited for the purpose of charging interest under section 139(8). The assessee paid advance tax of Rs. 2,04,600 before March 31, 1979, but some instalments were paid after the due dates. The Income-tax Officer treated these late payments as deposits, not advance tax, and did not credit them when calculating interest under section 139(8).

The court analyzed sections 211 and 219 of the Income-tax Act. Section 219 mandates that any sum paid as advance tax shall be treated as payment of tax and credited in the regular assessment. The court noted that the advance tax was paid within the financial year, and thus, should be credited for determining tax liability and interest under section 139(8). The Tribunal's view was supported by the Kerala High Court decision in Santha S. Shenoy v. Union of India [1982] 135 ITR 39, which held that belated payments within the financial year should still be treated as advance tax.

The court concluded that the amounts of advance tax paid beyond the stipulated dates should be treated as advance tax and credited for the purpose of charging interest under section 139(8). The Tribunal's decision was justified, and the second proposition of law was answered in favor of the assessee.

Conclusion:
The court answered both issues in favor of the assessee, upholding the Tribunal's decisions. An appeal lies against the levy of interest under section 139(8), and belated advance tax payments within the financial year should be treated as advance tax for the purpose of charging interest under section 139(8).