1989 (7) TMI 168 - AT - Income Tax

Summary

Issues:
1. Levy of interest under section 216 of the IT Act, 1961 based on the difference in advance tax payments made by the assessee.

Comprehensive Analysis:
The judgment involves an appeal by a limited company against the levy of interest under section 216 of the IT Act, 1961. The case revolves around the discrepancy in advance tax payments made by the assessee. The assessee initially filed a statement of income for advance tax purposes based on the last assessed income, followed by a revised estimate of income. The Income Tax Officer (ITO) levied interest under section 216 due to the difference in the first two instalments of advance tax paid compared to the last instalment, without seeking clarification from the assessee. The assessee contended that it had complied with the law by filing the statement of income and that interest should not be charged. The dispute centered on whether the statement of income and estimate of income had the same meaning or different implications.

The judgment delves into the legislative provisions pre and post the changes effective from June 1, 1978, regarding advance tax payments. Before this date, existing assessees were required to pay advance tax based on notices from the ITO, while new assessees had to estimate their income before the last instalment. The changes aimed to address the issue of existing assessees not paying advance tax promptly. Post the amendment, existing assessees were mandated to file a statement of current income based on the last assessed or returned income and pay advance tax accordingly. The law differentiated between filing a statement of income and estimating income for advance tax purposes.

The judgment interprets section 216 of the IT Act, which pertains to underestimation of advance tax payable. It clarifies that section 216 applies when an assessee files an estimate of income and pays advance tax based on that estimate. In this case, since the assessee paid the first two instalments based on the statement of income, not an estimate, the section should not apply. The court emphasizes that the intention of the legislature was to distinguish between statements of income and estimates of income for advance tax purposes. As the assessee had not reduced the first two instalments of advance tax deliberately, the initiation of proceedings under section 216 was deemed inappropriate. Consequently, the order charging interest was quashed, and the appeal was allowed in favor of the assessee.