1989 (9) TMI 145 - AT - Income Tax

Advance Tax, Assessment Year, Business Income, Profits And Gains Of Business, Reasonable Cause, Set Off, Total Income

Summary

Issues Involved:
1. Maintainability of the appeal against the levy of interest under Section 215 of the Income-tax Act, 1961.
2. Justification for the deletion of interest levied under Section 215.

Issue-wise Detailed Analysis:

1. Maintainability of the Appeal:

The primary issue was whether the appeal against the Income Tax Officer's (ITO) order levying interest under Section 215 was maintainable. The CIT(A) had entertained the appeal, but the revenue challenged this, arguing that there are no provisions in the Income-tax Act for such an appeal. The learned Departmental Representative cited the Supreme Court decision in Central Province Manganese Ore Co. Ltd. v. CIT and the Bombay High Court decision in CIT v. Daimler Benz A. G., asserting that the appeal was not maintainable as it was not a denial of liability. However, the CIT(A) held that if the assessee denies its liability to pay interest, an appeal can be entertained, and thus adjudicated the appeal. The Tribunal, however, concluded that the present case was not a denial of the assessee's liability to the levy of interest, but rather a challenge to the circumstances leading to the levy. Consequently, the Tribunal found that the appeal on this ground was not maintainable.

2. Justification for Deletion of Interest:

On the merits, the CIT(A) had deleted the interest of Rs. 7,33,346 levied under Section 215, reasoning that the assessee's estimate of advance-tax at 'nil' was based on a legitimate claim under Section 80J, which was subsequently denied due to an amendment by the Finance (No. 2) Act, 1980. The CIT(A) observed that if the relief computed in accordance with the Calcutta High Court decision was set off against the current year's business income, there would not have been any positive income liable to advance-tax. The Tribunal, however, held that once it is found that the advance-tax paid by the assessee was less than seventy-five percent of the assessed tax, there is no escape from the liability to interest under Section 215. The Tribunal emphasized that the reasonableness of the circumstances is not a factor in determining liability under Section 215, as interest is levied by way of compensation and not as a penalty. The Tribunal referred to the Supreme Court's observation that interest is a part of the process of assessment and can be disputed in appeal only if the assessee denies liability altogether.

The Tribunal also noted that the reduction in the 80J deduction was not solely due to the amendment but also because the assessee's claim was not permissible under the existing law, as clarified by the Supreme Court in Lohia Machines Ltd. v. Union of India. The Tribunal concluded that the assessee's claim of reasonable cause for filing the estimate at 'nil' or the assessment resulting in positive income due to lower 80J deduction did not amount to a denial of liability to interest under Section 215.

Conclusion:

The Tribunal reversed the order of the CIT(A), holding that the appeal was not maintainable on the ground of denial of liability and that the deletion of interest was not justified. The Tribunal allowed the revenue's appeal, reinstating the interest levied under Section 215.