9911796707
TMI Blog1979 (11) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... s Company Ltd., Kanpur, is a public limited company. For the assessment years 1967-68 and 1968-69, the accounting period ended on September 30, 1966, and September 30, 1967, respectively. Thereafter, the assessee opted for the calendar year as its year of accounting and for the assessment years 1969-70 and 1970-71 the accounting period ended on December 31, 1968, and December 31, 1969, respectively. Thus, for the assessment year 1969-70, the period of assessment was fifteen months. For the assessment years 1967-68 and 1968-69, notices were served on the assessee under s. 210/156 of the Income-tax Act, 1961 (hereinafter " the Act "), requiring it to pay Rs. 20,60,079 and Rs. 5,99,909, respectively, payable in equal quarterly instalments on the 1st day of June, 1st day of September, 1st day of December and 1st day of March of the relevant financial years. The assessee filed estimates of its income and advance tax payable thereon for these years in May, 1966, and in May, 1967, respectively. The income disclosed in these estimates was Rs. 22,00,000 and Rs. 10,00,000 on which advance tax payable was Rs. 11,42,000 and Rs. 5,50,000. The assessee paid the first three instalments accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed of the appeals for the assess ment years 1967-68, 1968-69 and 1970-71 by one order dated October 17, 1973, and the appeal for the assessment year 1969-70 by another order dated 28th July, 1973. According to the AAC, the ITO had not given any details nor any proper reason for charging interest. In his opinion, the estimates filed in the month of May for the financial years relevant to each of these four years were on the basis of the actual accounts as made up to the month of April in each year and thus for the first two instalments in each of these years there was proper justification and the assessee could not have been expected to revise the estimates filed earlier. As for the 3rd instalment, which was payable in the month of December, according to the AAC, since the assessee had closed its accounts by 30th September, there was no justification for not revising the original estimates. Hence, in respect of the third instalment, relevant to each of these four years, in the opinion of the AAC, interest was chargeable under s. 216 and he directed the ITO to revise the amount thereof counting the period of shortage from 15th December in each of these years. As has been noted above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and other games of any sort or from gambling or betting of any form or nature whatsoever. The condition of liability to pay advance tax is provided in s. 208 and in the case of a company or a local authority if the total income exclusive of capital gains and income referred to in s. 2(24)(ix) amounts to Rs. 2,500 or more, advance tax would be payable. The mode of computation of advance tax is provided in s. 209. Sub-section (1) says that the amount of advance tax payable by an assessee in the financial year shall be computed on the basis of his total income of the relevant previous year in respect of which he has been assessed by way of regular assessment. From that income the amount of capital gains and income referred to in s. 2(24)(ix) shall be deducted and on the balance income-tax shall be calculated at the rates in force in the financial year. The expression " financial years " has not been defined in the Act and we shall have to go to the definition of this expression as contained in the General Clauses Act. Section 3(21) of that Act defines financial year to mean : " The year commencing on the first day of April." This computation which is to be made by the ITO under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis that his income subject to advance tax for the period which would be the previous year for the immediately following assessment year was less than the income on which he was required to pay such tax. The assessee could thus file an estimate of his total income exclusive of capital gains of such period and the advance tax payable thereon and then pay such amount in equal instalments on the dates specified in s. 211. Sub-section (2) gave an option to the assessee to send a revised estimate before any one of the dates specified in s. 211 and adjust any excess or deficiency in respect of any instalment already paid in a subsequent instalment or instalments. It would be seen that the right or option given to an assessee under this sub-section is discretionary in nature and not obligatory. If, however, an assessee has not been previously assessed by way of regular assessment under this Act or under the Act of 1922, then sub-s. (3) creates an obligation on him to file an estimate before the first day of March in each financial year, if his income exclusive of capital gains of the period which would be the previous year for the immediately following assessment year, is likely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Interest is chargeable under s. 215 if in a financial year an assessee has paid advance tax on the basis of his own estimate made under s. 212 and if that tax is less than 75 per cent. of the tax determined on the basis of the regular assessment, then simple interest at a certain rate shall be chargeable from the first day of April next following the said financial year up to the date of the said regular assessment. Thus, interest shall be charged on the amount by which the advance tax so paid falls short of the said 75 per cent. In case of underestimate interest is made payable under s. 216 and since it is relevant for our purposes we would examine this section in somewhat greater details. This section as applicable for the first two years read as under : " 216. Interest payable by assessee in case of underestimate, etc.--Where, on making the regular assessment, the Income-tax Officer finds that any assessee has-- (a) under sub-section (1) or sub-section (2) or sub-section (3) of section 212 underestimated the advance tax payable by him and thereby reduced the amount payable in any of the first three instalments; or (b) under section 213 wrongly deferred the payment of ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of valuing or appraised value ; a statement of the amount for which certain work will be done by one who undertakes to do it " while " underestimate " means " to set too low a value on; to estimate below the truth ". In Random House Dictionary of English Language the meaning of the word " estimate " is given as to form an approximate judgment or opinion regarding the value, amount, size, weight, etc., and " underestimate " means " to estimate at too low a value, rate or the like." The word " approximate " means " being nearly or more or less as specified Thus, according to the dictionary meaning, the word " underestimate signifies an estimate which is below the truth or which is, at too low a rate. In other words, both for making an estimate and, an underestimate an application of the mind, is required on the part of the maker. As for the point of time with reference to which an estimate is to be judged, in our opinion, it has to be the date and time when the estimate is filed. We are not prepared to agree that while making an estimate the maker projects or should project himself in future. If at the time when the estimate is filed there is proper basis and justification shown for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. As for the 3rd instalment, which in the assessment years 1967-68 and 1968-69 fell due on 1st of December, the AAC confirmed the orders of the ITO charging interest in respect thereof. The assessee did not file any appeal against that part of the order and hence that question is no longer before us. As for the other two years, the AAC's order was the same but the assessee appealed and the Tribunal allowed those appeals. However, we need not go into the question as to whether or not the Tribunal was justified in accepting the assessee's contention with regard to the third instalment because of the amendment made in s. 216 whereby instead of " in any of the first three instalments " the expression " in either of the first two instalments " was substituted. That being so, it could not be said that the assessee reduced the amount payable in any such third instalment. Thus, in our opinion, the charging of interest under s. 216 is not automatic as contended by the counsel for the revenue. It is discretionary and for the exercise of discretion the ITO is required to examine the matter from the view-point as to whether the estimate filed by the assessee was in fact an underestimate. Of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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