1996 (3) TMI 172 - AT - Income Tax

Advance Tax, Appellate Authority, Assessing Officer, Bona Fide, Estimated Income, Interest Payable By Assessee, Original Assessment, Regular Assessment

Summary

Issues Involved:
1. Applicability of Section 216 of the Income-tax Act.
2. Definition and interpretation of "regular assessment" under Section 209 of the Income-tax Act.
3. Discretionary nature of interest levied under Section 216.

Issue-wise Detailed Analysis:

1. Applicability of Section 216 of the Income-tax Act:
The primary issue in this case was whether the interest levied under Section 216 of the Income-tax Act was applicable. The Assessing Officer (AO) initiated proceedings to charge interest under Section 216 after completing the assessment, contending that the assessee had under-estimated the advance tax payable. The AO computed the interest at Rs. 8,70,000, relying on the decision of the Punjab & Haryana High Court in CIT v. Rohtak Delhi Transport (P.) Ltd [1981] 130 ITR 777. However, the assessee argued that Section 216 was not applicable as they had paid advance tax based on the statement filed under Section 209. The CIT(A) accepted the assessee's plea, referencing a similar case where interest levied in an earlier year was deleted in appeal. The Tribunal upheld the CIT(A)'s decision, noting that the facts for the year under consideration were different and that the assessee acted under a bona fide mistake.

2. Definition and Interpretation of "Regular Assessment" under Section 209 of the Income-tax Act:
A significant point of contention was the interpretation of "regular assessment" under Section 209. The AO argued that "regular assessment" meant the first assessment, not the revised one after the appeal effect. This interpretation was supported by the Supreme Court's decision in Modi Industries Ltd v. CIT [1995] 216 ITR 759, which held that "regular assessment" referred to the original assessment under Sections 143/144, not the consequential order. The Tribunal agreed with this interpretation, stating that for the purposes of Section 209, the assessee should have taken the income assessed in the first assessment (Rs. 3,21,33,420) rather than the revised figure (Rs. 3,03,94,290). The Tribunal emphasized that statutory requirements must be followed in fiscal matters, and equitable considerations should not sway the interpretation.

3. Discretionary Nature of Interest Levied under Section 216:
The Tribunal also examined whether the interest under Section 216 was mandatory or discretionary. Section 216 uses the word "may," indicating that the AO has discretion in directing the payment of interest. This contrasts with Sections 215 and 217, where the word "shall" is used, making the charging of interest mandatory. The Tribunal cited various High Court decisions, including CIT v. Elgin Mills Co. Ltd [1980] 123 ITR 712 and CIT v. Pure Beverages Ltd [1995] 214 ITR 57, to support the view that the levy of interest under Section 216 is not automatic but discretionary. The Tribunal concluded that the assessee acted under a bona fide mistake and had no intention to under-estimate the advance tax. Therefore, the provisions of Section 216 were wrongly applied by the AO, and the interest levy was not justified.

Conclusion:
The Tribunal dismissed the revenue's appeal, holding that the interest levied under Section 216 was not justified. The assessee's interpretation of "regular assessment" was reasonable, and the mistake was bona fide. The Tribunal directed the AO to refund the interest if already recovered, emphasizing the discretionary nature of Section 216 and the need for a careful examination of facts before levying interest.