2015 (2) TMI 675 - HC - Income Tax

Rectification of mistake - whether on an application under section 154 of the Income-tax Act interest under section 214 of the Income-tax Act could be granted on advance tax payments, made after the prescribed dates but within the financial year? - Held that - On a perusal of section 210 r.w.s 211 it is clear that the due dates are prescribed to mean that advance tax is required to be paid by an assessee within the prescribed dates and credit is given of the amount paid as advance tax. Tax can be paid up to the end of the financial year, i.e., 31st March and is also to be treated as an advance tax. Any tax paid after 31st March shall be self-assessment tax. The controversy in the present matter is narrow and we are required to answer the question of allowance of interest under section 214 in a case where the instalment of advance tax though paid after the due date but before the close of the financial year, i.e., March 31, 1975. It is true that majority of the judgments have held that interest in a case like this would be allowed under section 214, however, we are considering the case with regard to an application having been moved under section 154. If we peruse the phraseology of section 154, then it is clear that only a mistake apparent on the face of record can be said to be rectifiable. A debatable issue cannot be said to be rectifiable. Thus the assessee was not entitled to interest under section 214 as the issue was debatable. - Decided in favour of the Revenue.

Issues Involved:
1. Whether the Tribunal was justified in directing the Assessing Officer to allow interest on payments made after the prescribed date but within the financial year.
2. Whether interest under section 214 of the Income-tax Act could be granted on advance tax payments made after the prescribed dates but within the financial year under section 154 of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Justification of Tribunal's Direction to Allow Interest:
The Tribunal directed the Assessing Officer to allow interest on payments of Rs. 15,16,166 deposited in the financial year, despite being made on December 26, 1974, beyond the prescribed date under section 211 relevant for interest under section 214. The Tribunal's decision was based on the majority view of various High Courts that interest under section 214 is payable if advance tax is paid within the financial year, even if after the due dates. However, the Tribunal's decision was challenged on the grounds that the payment was not made on or before the due dates specified in section 211, making the issue debatable and not rectifiable under section 154.

2. Grant of Interest on Advance Tax Payments under Section 154:
The core issue was whether interest under section 214 could be granted on advance tax payments made after the prescribed dates but within the financial year through an application under section 154. The Assessing Officer and the Commissioner of Income-tax (Appeals) rejected the application under section 154, deeming the issue debatable. The Tribunal, however, allowed the claim, stating that the majority of High Courts supported the view that interest is payable if the tax is paid within the financial year. The Tribunal also noted that the issue was not debatable, as there was no application of mind by the Assessing Officer at the time of the assessment order.

Analysis of Legal Arguments and Judgments:

Revenue's Arguments:
The Revenue argued that section 211 prescribes specific dates for advance tax payments, and payments made beyond these dates but within the financial year cannot be considered advance tax for the purpose of section 214. They contended that an application under section 154 can only rectify apparent mistakes, not debatable issues. They cited various judgments, including T. S. Balaram, ITO v. Volkart Brothers, to support their stance that the issue was debatable and thus not rectifiable under section 154.

Assessee's Arguments:
The assessee argued that the payment made on December 26, 1974, was treated as advance tax by the Assessing Officer, entitling them to interest under section 214. They contended that the issue was not debatable, as the majority of High Courts had ruled in favor of granting interest for payments made within the financial year. They cited several judgments, including Bharat Textile Works v. ITO and CIT v. Traub (India) P. Ltd., supporting their claim.

Court's Analysis:
The court examined the provisions of sections 210 and 211 of the Income-tax Act, which prescribe due dates for advance tax payments. It acknowledged that payments made within the financial year but after the due dates could be treated as advance tax, as supported by the majority of High Courts. However, the court emphasized that section 154 allows rectification of only apparent mistakes, not debatable issues. It referred to several judgments, including Associated Stone Industries v. CIT and CIT v. Moti Sagar Kapoor, which held that debatable issues cannot be rectified under section 154.

Judgment:
The court concluded that the issue of granting interest under section 214 for payments made after the due dates but within the financial year was debatable. Therefore, it could not be rectified under section 154. The court chose to follow the view expressed in previous judgments, including Associated Stone Industries v. CIT, and held that the assessee was not entitled to interest under section 214 as the issue was debatable. The reference was answered in favor of the Revenue, and the tax reference was allowed without any order as to costs.

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