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Interpretation of Section 216 of the Income-tax Act, 1961 regarding charging interest on advance tax payments. Analysis: The judgment delivered by D. V. Sehgal J. and S. P. Goyal addressed a reference under section 256(1) of the Income-tax Act, 1961, where the Income-tax Appellate Tribunal referred a question of law to the High Court. The question pertained to the correctness of vacating the order of the Commissioner of Income-tax under section 263, concerning charging interest under section 216 of the Act when no tax liability was found due upon regular assessment. The case involved a company, referred to as "the assessee," which received a notice to pay advance tax based on income estimates. The company revised its income estimates during the year, leading to a discrepancy in advance tax payments made. The Commissioner of Income-tax initiated proceedings under section 263, alleging deliberate underestimation of advance tax by the assessee. The High Court analyzed the provisions of section 216 of the Act, emphasizing that the determination of underestimation of advance tax occurs during the regular assessment. In this case, the regular assessment revealed an income tax liability of Rs. 85,233, which was less than the advance tax paid by the assessee. The court clarified that the relevant factor for assessing underestimation is the tax payable upon regular assessment, not the revised estimates submitted during the year. The court concluded that the Commissioner's interpretation of section 216 was incorrect, as the provisions were not attracted in the assessee's case. Therefore, the court ruled in favor of the assessee, stating that the question raised should be answered in the affirmative, against the Revenue. No costs were awarded in the judgment.
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