1995 (3) TMI 130 - AT - Income Tax

Summary

Issues:
1. Whether interest under section 216 of the IT Act is justified based on the assessee's underestimation of income for advance tax payment.
2. Whether the relief granted by the ld. CIT(A) was valid considering the nature of the assessee's business activities in India and abroad.
3. Whether the Gujarat High Court decision cited by the assessee's counsel is applicable to the present case.

Detailed Analysis:
1. The case involved the assessee engaged in construction work in India and foreign countries, with the accounting year ending on 30th June, 1985. The assessee initially estimated income at Rs. 1.21 crores for advance tax payment but later revised it to Rs. 2.39 crores. The assessing officer (A.O.) charged interest under section 216 of the IT Act, citing deliberate underestimation of income for deferring advance tax payments. The ld. CIT(A) granted relief, considering the complexity of determining the exact profit due to construction activities. The revenue appealed, arguing that the relief was granted based solely on the foreign business activities, which was not a sufficient reason. The assessee contended that the underestimation was not intentional, citing a previous Tribunal decision and the Gujarat High Court case. The Tribunal observed a pattern of significant underestimation in previous years and concluded that the assessee deliberately underestimates income to defer tax payment, justifying the interest levy under section 216.

2. The ld. CIT(A) provided relief based on the complexity of determining profits due to the nature of the assessee's construction activities in India and abroad. The revenue contended that this reason alone was insufficient for granting relief and that interest under section 216 should be charged. The Tribunal considered the nature of the business activities but emphasized the deliberate underestimation pattern by the assessee, leading to the conclusion that the relief granted by the ld. CIT(A) was not valid in this case, and interest under section 216 was justified.

3. The assessee's counsel referenced a Gujarat High Court decision to argue that underestimation should be deliberate for interest under section 216 to apply. However, the Tribunal noted that the Gujarat High Court's decision was based on different circumstances where the ITO had not specifically found underestimation. In the present case, the Tribunal found a consistent pattern of deliberate underestimation by the assessee, making the Gujarat High Court decision inapplicable. The Tribunal upheld the A.O.'s decision to charge interest under section 216, distinguishing the current case from the previous year's decision where relief was granted. The appeal by the revenue was allowed, canceling the ld. CIT(A)'s order and restoring the A.O.'s decision to levy interest under section 216 of the IT Act.