2007 (5) TMI 232 - HC - Income Tax

Levy of interest under section 217(1A) advance tax - held that where an application has been filed seeking extension of time for filing the revised estimate of income which application was kept pending by the Commissioner the question of levy of interest u/s 217(1A) did not arise as the presumption would be that the time sought for had been extended - question referred is answered in favour of the assessee

Summary

Issues:
1. Interpretation of section 217(1A) of the Income-tax Act, 1961.
2. Justification for confirming the order cancelling the levy of interest under section 217(1A).
3. Application for extension of time for filing revised income estimate.
4. Presumption of extension of time in case of pending applications.
5. Comparison with relevant case law regarding extension of time for filing returns.

Analysis:
1. The primary issue in this case was the interpretation of section 217(1A) of the Income-tax Act, 1961, concerning the levy of interest. The Tribunal had confirmed the order cancelling the levy of interest under this section, prompting a reference to the High Court for opinion.

2. The facts of the case revolved around the assessment year 1973-74, where a demand notice was issued under section 210 of the Act. The appellant-company complied with the demand by paying in instalments and also made additional payments towards advance tax. Despite seeking an extension for revising the income estimate, the application was rejected after the due date for the final instalment.

3. The High Court considered the application for extension of time for filing the revised income estimate crucial in determining the justification for cancelling the levy of interest under section 217(1A). It was noted that the application was filed before the last date for depositing the final instalment, and as it was kept pending by the Commissioner of Income-tax, the presumption was that the time sought for extension had been granted.

4. Drawing on relevant case law, particularly the decision of the Punjab and Haryana High Court in CIT v. Surinder Kumar Parmod Kumar, the High Court emphasized that in cases where applications for extension are pending without a decision, the presumption is that the time sought for has been extended. This principle was deemed applicable in the present case, supporting the decision to delete the levy of interest under section 217(1A).

5. Ultimately, the High Court upheld the Tribunal's decision to cancel the levy of interest under section 217(1A) in favor of the assessee, citing the presumption of extension due to the pending application for revising the income estimate. The judgment was delivered in favor of the assessee, with no order as to costs.