2005 (10) TMI 57 - HC - Income Tax

Advance Tax - Whether, Tribunal was right in law in holding that interest under section 217 was not leviable for failure to revise the statement of income under section 209A(4), ignoring the clear provisions of section 209A(1) to the effect that statement of advance tax is required to be sent if the current income is likely to exceed Rs. 2,500 in company cases, as per section 208(2)? - Any requirement to pay interest is to be tested in the light of commercial principles also. If a person liable to pay advance tax fails to pay it, then its deprivation has to be compensated in terms of money. Even on application of this commercial principle, the assessee has failed to make out any case for denying the right of the Revenue to claim interest

Issues Involved:
1. Levy of interest under section 217 for failure to revise the statement of income under section 209A(4).
2. Obligation to file a statement of advance tax under section 209A(1).
3. Interpretation of the words "where he has not been assessed by way of regular assessment under this Act."
4. Applicability of commercial principles to the requirement of paying interest.

Detailed Analysis:

1. Levy of Interest under Section 217:
The primary issue revolves around whether interest under section 217 was correctly levied for the failure to revise the statement of income under section 209A(4). The Tribunal held that interest was not leviable, which was challenged by the Revenue. The court examined the statutory provisions and concluded that the assessee was obliged to file a statement of advance tax as required under section 209. The failure to do so justified the levy of interest under section 217.

2. Obligation to File a Statement of Advance Tax:
The court analyzed the requirement under section 209A(1), which mandates that every person whose current income is likely to exceed the specified amount must file a statement of advance tax payable. The assessee argued that since their last completed assessment showed a loss, no statement was required. However, the court found that the assessee had a positive income for the assessment year 1977-78, and thus, was required to file a statement. The court held that the obligation to file a statement was absolute if the current income exceeded the specified amount, and failure to do so warranted the levy of interest.

3. Interpretation of "Where He Has Not Been Assessed by Way of Regular Assessment":
The Revenue argued that this phrase should not exclude an assessee who has filed a return but has not been assessed. The court agreed, stating that irrespective of the absence of assessment for the previous year, the respondent-assessee was under an obligation to comply with section 209A. The court rejected the assessee's interpretation that only a fresh assessee, who had never been assessed, was obligated to file a statement.

4. Applicability of Commercial Principles:
The court also considered the commercial principle that if a person liable to pay advance tax fails to do so, the deprivation must be compensated in terms of money. The court concluded that the requirement to pay interest aligns with commercial principles, as it compensates the Revenue for the loss of money due to the assessee's failure to pay advance tax.

Conclusion:
The court answered the question in favor of the Revenue, holding that the Tribunal erred in its decision. The assessee was required to file a statement of advance tax and the failure to do so justified the levy of interest under section 217. The court emphasized the absolute obligation to file a statement if the current income exceeded the specified amount and upheld the application of commercial principles to the requirement of paying interest.

← Previous Next →