Gauhati High Court
Commissioner Of Income-Tax vs Namdang Tea Co. India Ltd. on 26 March, 1993
Equivalent citations: [1993]202ITR414(GAUHATI)
Author: Chief Justice
Bench: Chief Justice
JUDGMENT U.L. Bhat, C.J.
1. The following question has been referred at the instance of the Revenue by the Appellate Tribunal under Section 256(1) of the Income-tax Act, 1961 :
" Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the interest charged under Section 216 of the Income-tax Act, 1961 ?"
2. We have heard both sides.
3. The assessee, a limited company, derives income from the manufacture and sale of tea. The dispute relates to the assessment year 1977-78. A notice under Section 210 of the Act was issued by the Inspecting Assistant Commissioner of Income-tax for payment of tax of Rs. 19,83,819. The assessee filed an estimate on June 1, 1976, showing a tax liability of Rs. 12,10,000. He filed a final estimate on March 14, 1977, showing the tax payable af Rs. 18,41,070. The Inspecting Assistant Commissioner completed the assessment determining the tax liability at Rs. 21,64,701 and surcharge of Rs. 1,08,235. The arrears amounted to Rs. 15,701. The Inspecting Assistant Commissioner charged full interest on Rs. 21,00,357 (first instalment) from March 15, 1976,, to March 15, 1977, and a similar amount (second instalment) from June 15, 1976 to March 15, 1977. In appeal, the Commissioner of Income-tax, holding that the assessee was not in default, deleted the charge of interest. On appeal by the Revenue, the Tribunal confirmed the order of the Commissioner stating that the Inspecting Assistant Commissioner did not pass a speaking order, and did not give reasons for its finding, and that, on the other hand, the Commissioner of Income-tax (Appeals), after consideration of the facts, concluded that the assessee was not in default.
4. Section 216 reads :
"216. Interest payable by assessee in case of underestimate, etc.-Where, on making the regular assessment, the Assessing Officer finds that any assessee has -
(a) under Section 209A or Section 212 underestimated the advance tax payable by him and thereby reduced the amount payable in either of the first two instalments ; or
(b) under Section 213 wrongly deferred the payment of advance tax on a part of his income, he may direct that the assessee shall pay simple interest at fifteen per cent per annum -
(i) 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."
5. Obviously, the Inspecting Assistant Commissioner must have thought that Clause (a) was attracted in the instant case and there was underestimation of the tax payable by the assessee and the assessee thereby reduced the amount payable in both the first and second instalments.
6. We will assume for the purpose of the present discussion that there was an underestimation in determining the advance tax payable. Section 216 does not make it mandatory for the Assessing Officer to charge interest in all cases of underestimation. The scheme of the provision is quite different from the scheme in Section 215 where the liability for interest is mandatory. Under Section 216, it is within the discretion of the assessing authority to charge or not to charge interest. He may charge interest if the underestimation was of such a nature and under such circumstances that it has to be regarded as devoid of bona fides. The Assessing Officer, in the instant case, did not apply his mind to this aspect ; he appears to have charged interest without being conscious of the fact that the power to charge interest is discretionary. He appears to have thought that he was bound to charge interest. He has committed a serious error of law.
7. It is true that the Commissioner of Income-tax (Appeals) being the first appellate authority could have considered the facts and circumstances of the case to see whether charging of interest was justified. The Commissioner of Income-tax (Appeals), however, did not do so. The Tribunal also did not consider the matter from this perspective. The Tribunal could have gone into the circumstances or could have remanded the case for consideration of the aspects on the basis of the correct principle of law.
8. We are, however, looking at the matter not as an appellate court but as a court of reference. Since the Inspecting Assistant Commissioner did not consider the relevant facts and circumstances of the case and did not apply his mind to the question whether he should exercise his discretion to charge interest, the Commissioner of Income-tax (Appeals) and the Tribunal were justified in deleting the interest charged.
9. In the result, the question is answered in the affirmative, i.e., in favour of the assessee and against the Revenue.
10. A copy of the judgment, under the signature of the Registrar and the seal of the High Court, shall be transmitted to the Appellate Tribunal. There will be no order as to costs.