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TMI Blog1981 (6) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at a lower figure in the first instance in September 1977 and subsequently revised at a higher figure leading to the shortfall in the first two instalments as compared to the March instalment. The assessee filed an appeal before the first appellate authority, which happened to be in this case the Commissioner (Appeals). In this appeal, the assessee had urged that the ITO was wrong in charging interest under section 216, that there was nothing on record to show that the ITO before directing the assessee to pay interest under section 216, had applied his mind to the facts and circumstances of the case and had found as required under that section that the assessee-firm had underestimated the advance tax payable by it and thereby reduced the amount payable. It was claimed in the grounds of appeal that because of this the levy of interest under section 216 was null and void. 2. The Commissioner (Appeals) considered this claim (which he considered to be an objection of a fundamental nature) in detail. He also took into account the decision of the Calcutta High Court in the case of Hindustan Sanitaryware Industries Ltd. v. CIT [1978] 114 ITR 85. The Commissioner (Appeals) required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lments. This finding is obvious from the records and, therefore, there is no need for the ITO to give a finding in writing to this effect. It is pointed out that even otherwise it must be considered that the ITO has given a finding to the effect that he has stated that penalty proceedings under section 273(a) of the Act can only be on the ground that there was an underestimate by the assessee. Since this finding is there, the levy of interest under section 216 should be considered to have been validly made. It is pointed out that the Commissioner (Appeals) has not given a finding that section 216 cannot be brought into play in the circumstances of the case. 3A. On behalf of the assessee, it is contended that section 216 requires a finding to be given by the ITO before he proceeds to levy interest under section 216. This finding is unavoidable and mandatory. It is also contended that the levy of interest under section 216 is not mandatory but it is only discretionary. Reliance is placed in this regard on the observations of the Madras High Court in CIT v. City Palayacot Co. [1980] 122 ITR 430. It is also pointed out that interest under section 216 is charged for the deferment of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the ITO may direct the levy of interest if he "finds" that the assessee has under-estimated the advance tax under the relevant sub-sections of section 212. 5. It has been contended on behalf of the revenue that the provision is brought into play once it is seen that the payments of advance tax in the first two instalments are less than one-third of the total advance tax paid by the assessee during the year. It is contended that all that is required for applying this provision is to find out by an arithmetical calculation that the first two instalments or either of them are deficient when compared to the total advance tax payable by the assessee and, therefore, the finding of the ITO as required under this section is merely a question of observing this arithmetical deficiency in the first two instalments. The other contention put forward is that the levy of interest under section 216 is mandatory once such deficiency is noticed by the ITO. According to the revenue the word "may" appearing in the operative portion of this provision should be read as "shall". 6. We are unable to agree with either of these contentions. It has been held by the Calcutta High Court in Hindustan S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the penalty proceedings under section 273(a) had come to a conclusion that an estimate of total income of Rs. 5,00,000 made on 14-9-1977 was an under-estimate. On facts, we are unable to agree that the ITO, by initiating the penalty proceedings under section 273(a) had come to a finding that there was an under-estimate on 14-9-1977 leading to the levy of interest under section 216. 7. We are also not able to agree that the levy of interest under section 216 is mandatory. As explained earlier, the contention of the department is that once the arithmetical position is clear to the ITO, the levy of interest is mandatory. The crucial word that is used in this context is "may". The word "may" can sometimes be taken to mean "shall", but in the context of this provision, we are of the opinion that it cannot be taken to mean "shall", vesting this provision with a mandatory nature. Under section 246 an appeal is provided against the order of the ITO levying penalty under section 216. If the provision is mandatory there may not be any reason for providing an appeal against the order levying interest. Under section 273(a) penalty can be levied only if it is found that the estimate filed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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