1988 (11) TMI 123 - AT - Income Tax

Summary

Issues:
1. Whether interest charged under section 216 of the IT Act, 1961, amounting to Rs. 15,46,328 should be allowed.

Analysis:
The case involved an appeal by the Revenue against the order of the CIT(A) regarding the levy of penal interest under section 216 of the IT Act, 1961, amounting to Rs. 15,46,328 on the assessee-company. The IAC(A) had charged this interest based on the assessee reducing its liabilities for advance tax in the first two instalments. The assessee contended that it estimated its income based on profits shown in its books of accounts and made advance tax payments accordingly. The IAC(A) rejected the assessee's arguments and imposed the interest. During the appellate proceedings, arguments similar to those before the IAC(A) were presented, citing a decision of the Allahabad High Court that the levy of interest under section 216 was discretionary and required proof of underestimation of income without justifiable cause.

The CIT(A), after considering the facts and applying the Allahabad High Court decision, canceled the interest levy. The Departmental Representative supported the IAC(A)'s order, arguing that the CIT(A) did not provide reasons for canceling the levy. The assessee's counsel supported the CIT(A)'s order, emphasizing that the company estimated income based on book accounts and revised estimates accordingly. The counsel presented detailed financial information and calculations to support the assessee's position, highlighting that no mala fide intention was attributed to the assessee.

Upon review, the Tribunal found that the assessee had filed advance tax estimates based on factual figures and projections. The Tribunal noted that the company, being primarily government-owned, had resources and qualified personnel for financial matters. The Tribunal emphasized that the levy of penal interest required proof of mala fide intention, which was absent in this case. Therefore, the Tribunal upheld the CIT(A)'s decision to cancel the interest levy, dismissing the Revenue's appeal.