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TMI Blog1996 (12) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... presented that in view of the brought forward losses the assessee estimated its income at Rs. 5,00,000 for the assessment year 1980-81 and accordingly paid the advance tax instalment of Rs. 1,00,000. However, having noticed the marked difference between the cost of materials and the price of finished products in that year the assessee realised that substantial income was likely, so it estimated the income at Rs. 40,00,000 and filed a revised return on September 13, 1979. Along with the returns for the said assessment year, declaring the income of Rs. 30,06,487 the assessee claimed brought forward losses of Rs. 1,28,095; for the assessment year 1979-80 there was an unadjusted brought forward loss of Rs. 60,045 which was to be adjusted against the income for the assessment year 1980-81. On the ground of underestimation of advance tax at the time of payment of the first instalment of tax the Income-tax Officer charged interest of Rs. 33,972 under section 216 of the Act. On appeal the Commissioner of Income-tax (Appeals) held that the assessee's conduct appeared to be straightforward and it could not be accused of deliberately underestimating the advance tax payable for the first insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case referred to in clause (a), for the period during which the payment was deficient, on the difference between the amount paid in each such instalment and the amount which should have been paid, having regard to the aggregate advance tax actually paid during the year; and (ii) in the case referred to in clause (b), for the period during which the payment of advance tax was so deferred. Explanation.--For the purposes of this section, any instalment due before the expiry of six months from the commencement of the previous year in respect of which it is to be paid shall be deemed to have become due fifteen days after the expiry of the said six months. " A plain reading of the provision, extracted above, shows that it empowers the Income-tax Officer to direct the assessee to pay simple interest at 12 per cent. per annum if on making regular assessment he finds that the assessee has underestimated the advance tax payable by him under sections 209A and 212 of the Act and thereby reduced the amount payable in either of the first two instalments or has wrongly deferred the payment of advance tax on a part of his income under section 213 of the Act. The period for which the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able by him would be less than or exceed the amount which he is required to pay (as the case may be) then in the first situation, he is given an option and in the second situation he is obliged to send to the Income-tax Officer an estimate of (a) the current income, and (b) the estimate of the advance tax payable by him on the current income calculated in the manner laid down under section 209 of the Act and has to pay such amount of advance tax according to his estimate in equal instalments on the dates applicable to him under section 211 as have not expired or in one sum if only the last of such dates has not expired. Sub-section (2) of section 212 enables an assessee to send a revised estimate of advance tax payable by him on or before any one of the dates specified in section 211 and adjust any excess or deficiency in respect of any instalment already paid in a subsequent instalment or instalments. Though section 212 contemplates the filing of an estimate of current income and an estimate of the advance tax payable on such income yet the liability to pay interest under section 216 arises for underestimation of the advance tax and reducing the amount payable in either of the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal. A Division Bench of our High Court, in Vazir Sultan Tobacco Co. Ltd.'s case [1980] 122 ITR 251 considered the scope of section 216 of the Act. In that case the assessee, a public limited company, was required to pay advance tax in four equal instalments by order passed under section 210 of the Act. The assessee, however, filed estimates of income from time to time and paid the instalments of advance tax on that basis. Finding that the advance tax paid was less than the actual tax payable, the Income-tax Officer added interest. The Appellate Assistant Commissioner, on appeal, held that the assessee had been careful enough to file from time to time the successive estimates disclosing progressively higher figures of income and that the mere fact that the instalments of tax were paid late, did not attract the levy of interest unless it was shown that the late payment was with the sole intention of deferring payments to a later date. The Income-tax Appellate Tribunal dismissed the appeal of the Revenue against the said order of the Appellate Assistant Commissioner, holding that interest under section 216 was leviable only in a case where the advance tax payable was underesti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... timation of one out of the two estimates, viz., (i) estimate of income, and (ii) estimate of advance tax which the assessee is required to file under section 212(1) the Act. As such section 216 would be attracted if the estimate of advance tax payable by the assessee was not due to underestimation of income on that part of the assessee, like wrong calculation or proceeding on wrong footing with regard to estimation of advance tax. We are unable to persuade ourselves to agree with the said reasoning. Though it is true that underestimation of advance tax may be the effect of a variety of causes, yet no real distinction can be drawn among the various causes of the underestimation of advance tax for purposes of levy of interest which is payable on the underestimation of advance tax, for whatever reason. We have already indicated above that section 216 imposes interest not with reference to any causes which might have resulted in underestimation of advance tax but on the effect, viz., underestimation of advance tax. Therefore, it follows that if the underestimation of advance tax is due to underestimation of income or due to any other reason, the provisions of section 216 would be attr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the Commissioner. On a reference to the Calcutta High Court it was held that on the facts it would have been open to the authorities to come to a finding that the assessee had underestimated the advance tax payable by it so far as the second instalment was concerned but that finding had not been recorded either by the Commissioner or by the Tribunal. Having regard to the small amount of interest involved the High Court declined to answer the question. However, dissenting from the view taken by our High Court in Vazir Sultan Tobacco Co. Ltd.'s case [1980] 122 ITR 251, the Bench held that if advance tax was underestimated by reason of underestimation of the assessee's current income as compared to the final income actually ascertained at the end of the year, the provisions of section 216 of the Act would be attracted. In Oudh Sugar Mills Ltd. v. CIT [19941 210 ITR 692, the Division Bench of the Bombay High Court considered the question of applicability of section 216 of the Act. It was observed that the estimation of advance tax under section 212(3A) was dependent on the estimation of current income, so it was not possible to separate the two artificially and that sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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