9911796707
TMI Blog1985 (10) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... the IAC (Assessment) had placed no material on record to hold that payment was excessive keeping in view the normal market conditions and that he failed to notice that the order of the Tribunal cited before him did not prescribe an upper limit of interest at the rate of 24 per cent and had merely held interest paid at the rate of 24 per cent by that assessee to be reasonable and further even in view of conditions taken into account by the Tribunal in the assessment year 1975-76 interest at the rate of 28 per cent in the assessment year 1981-82 could not be said to be unreasonable. Shri Sud further stated that neither any material was brought on record on assessment stage to justify the partial disallowance of interest paid nor was the assessee confronted by the IAC (Assessment) with-the grounds for making the disallowance. It was pointed out that a specific ground on this issue had been taken before the Commissioner (Appeals). It was further contended that for applying the provisions of section 40A(2) of the Income-tax Act, 1961 ('the Act') it was the IAC (Assessment), who was expected to place material on record to show the prevalent market rate of interest. It was next submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner (Appeals) is to be deleted. Further the two other arguments made by the assessee's counsel are quite persuasive, namely, when market rate of 24 per cent was considered to be reasonable for the assessment year 1975-76 by the Tribunal a rate of interest of 28 per cent cannot be said to be excessive six years later in the case of an inflationary economy like that of India and there is further the conduct of the ITO in allowing a rate of interest of 31 per cent in assessee's own case for the subsequent assessment year for the karta's loan in his individual capacity. Judging from all these angles, the addition sustained by the Commissioner (Appeals) has to be deleted and it is, therefore, deleted. 5. The second issue raised by the assessee is quite interesting. It has challenged the legal competence of the Commissioner (Appeals) to uphold the levy of interest under section 215 of the Act on the footing that neither it had been levied by the IAC (Assessment) nor it had been challenged in the grounds of appeal before him on that basis. The IAC (Assessment) by a separate order under section 217(1)(a) of the Act for the assessment year 1981-82 directed the charging of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here that is not noticed by the IAC (Assessment) in her order, namely, the income returned which may be higher than the income last assessed by the due date of 15-9-1980 for filing the statement. It was submitted that the last returned income as on 15-9-1980 was for the assessment year 1978-79 for which a loss of Rs. 2,860 was declared and this being also below the taxable limit no statement could be filed, as required by section 209A(1)(a). On these facts, it was further contended that neither the provisions of section 209A(2) nor of sub-section (4) of that section will be attracted in the assessee's case and in the eye of law the assessee was not at all required to file any estimate of advance tax payable. It was also stated that it is not a case where the IAC (Assessment) issued any notice demanding advance tax. It was pointed out that the Commissioner (Appeals) had accepted in para 15 of his order that interest under section 217(1)(a) was not leviable but he failed to observe that according to the provisions of section 209A the assessee was not required under the law even to file any estimate of income and advance tax payable, not even under sub-section (4) of section 209A and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 215 on the alternative basis. This omission is significant when it is kept in mind that the basis of levy of interest is different for section 217(1)(a) and section 215. Section 217(1)(a) is attracted when a statement under section 209A(1) for the payment of advance tax or estimate in lieu thereof as per section 209A(2) has not been furnished by an assessee and the interest is to be calculated upon the amount equal to the assessed tax, as defined in section 215(5). Under section 215(1) interest is to be calculated if the advance tax paid is found to be less than 75 per cent of the assessed tax and upon the amount by which the advance tax so paid falls short of the assessed tax. The IAC (Assessment), therefore, could levy the interest under section 215 only after recording a positive finding about the existence of circumstances required to exist for such a levy. The IAC (Assessment) merely stated that the estimate filed by the assessee may be presumed to be valid and then interest may be leviable under section 215. 8. Apart from the above aspect about in fact (sic) not charging of interest under section 215, we find great weight in the other argument of the assessee, namely, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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