Income Tax Appellate Tribunal - Mumbai
Deputy Commissioner Of Income-Tax vs Asia Foundations And Construction Ltd. on 29 March, 1995
Equivalent citations: [1995]53ITD421(MUM)
ORDER
J.K. Verma, Accountant Member
1. The assessee in this case is stated to be engaged in the business of construction work of major projects in India as well as in foreign countries. Its accounting year ended on 30th June, 1985. It had filed an estimate of advance tax on 13-6-1985 and had paid the first instalment on the basis of estimating its income at Rs. 1,21,00,000. Since the tax worked out to Rs. 76,23,000 and since the tax deducted at source was Rs. 1.05 crores, no advance tax was paid by the assessee in the first instalment. The second instalment was paid on the same basis. Only when the 3rd instalment was to be paid, the assessee revised its estimate on 12-12-1985 and estimated total income at Rs. 2,39,42,873. Since the tax deducted at source was Rs. 1,22,60,000 by that time and since the appellant deposited Rs. 7 lakhs with the IDBI it paid Rs. 9 lakhs as advance tax on 12-12-1985. Subsequently the assessee filed a return of its income at Rs. 2,39,58,881. The assessment was completed on a total income of Rs. 3,41,18,718 which was reduced to Rs. 2,79,87,252. The A.O. passed an order under Section 216 of the IT Act in which, after giving the basic facts, he took the view that it was clear from those facts that the assessee had deferred the payment of first and second instalments of advance tax by under-estimating the income subject to advance tax and hence he charged interest under Section 216 of the IT Act.
2. When the matter came up in appeal before the Ld. CIT (A), he discussed these facts and took the view that since the company was engaged in certain construction activities in India and abroad it was likely that the exact profit of the company could be determined only on finalisation of the accounts. He also observed that since substantial amount of tax had been deducted at source, it was not a fit case for levy of interest under Section 216 of the IT Act.
3. Being aggrieved by this order, the revenue is in appeal before us.
4. The Ld. D.R. argued that the deferment of advance tax had nothing to do with the relief given by the Ld. CIT(A) which was mentioned in his order and hence the'only basis on which the Ld. CIT(A) appears to have allowed relief was that the assessee was engaged in business in foreign countries. This, according to the Ld. D.R., could not be said to be a proper reason and according to him, unless a specific reason was given for allowing the relief, the interest under Section 216 had to be charged.
5. The Ld. Counsel for the assessee on the other hand submitted that it was a case where the assessee had paid about Rs. 1.22 crores by way of TDS and only Rs. 9 lakhs had remained to be paid. She submitted that the shortfall was thus, hardly about 6% which could not be said to be intentional or deliberate. She relied on the decision of the Hon'ble Gujarat High Court in the case of CIT v. Nagri Mills Ltd. [1987] 166 ITR 292. According to Ld. Counsel, as per the ratio of decision in that case, there can be "under-estimation" only when it was deliberate or intentional. Further, in assessee's case, there was no question of "deferment" because the tax had already been paid by way of TDS. She further submitted that in similar circumstances, the interest levied in the A.Y. 1985-86 was deleted by Tribunal vide its orders dated 24th February, 1994, a copy of which has been filed before us.
6. We have carefully considered the rival submissions. We find that last year when assessee's accounting year was to end on 30-6-1984, the assessee had filed an estimate of advance tax estimating its income of Rs. 53,40,000 on 15-6-1984. However, while paying the 3rd instalment in December 1984, the assessee revised its estimate to an income of Rs. 2,22,98,980 on which after making deposit with the IDBI, balance of Rs. 9,50,000, was paid-in December 1984. This year when assessee's accounting year was to end on 30-6-1985, it estimated its income at Rs. 1.21 crores on 13-6-1985 but on 12-12-1985 revised it to Rs. 2.39 crores. This would show that there is a regular pattern where the assessee grossly underestimates its income while paying the first two instalments of advance tax but revises it by more than double the original estimate of income while paying the 3rd instalment. Thus, last year the first estimate was at an income of Rs. 53,40,000 while the 3rd instalment was paid estimating income at about Rs. 2.23 crores. This year also the first instalment was paid estimatingtthe income at Rs. 1.20 crores but while paying the 3rd instalment the income was estimated at Rs. 2.39 crores. Another point which we have taken into account is that the provisions of Section 216 were applicable even in the cases of those assessees whose accounting year ended on 31st March and whose first instalment was to be paid and estimate of advance tax was to be filed by 15th of Sept. of the preceding calendar year, ie. about more than six months before the close of the accounting year. Yet, if it was found that the estimate of advance tax for the first two instalments was an "under-estimate" they were liable for payment of interest under Section 216. In the case of the assessee since the accounting year was to end on 30th June every year, the first estimate of advance tax was to be filed only 15 days before the close of the accounting year. It is not possible to believe that the conduct of the assessee-company would be bonajide in its income at less than half or 1/4th of the income as per its books of account when the accounts are closed only 15 days later. This feature is seen in the regular pattern mentioned earlier, that is last year as well as this year, when the first instalments were paid on the basis of estimate of income at figures which were less than half or even 1/4th of the income as per account books and it leads only to one inference and that is that the assessee has been deliberately following a method by which it under-estimates the advance tax payable by it in the first two instalments and thereby defers payment of correct tax in the first two instalments.
7. So far as the Ld. counsel's reference to the Gujarat High Court decision is concerned, we find that in that particular case, the ITO had not given a finding that the assessee had under-estimated the advance tax and their Lordship had taken the view that in the absence of such a finding having been recorded by the ITO and in view of the fact that order under Section 216 was an appellable order, the appellate authority would not be able to determine whether or not interest had been levied correctly under Section 216. They had finally opined that since the Tribunal had held that "no interest was chargeable under Section 216 because the ITO had failed to record a finding that there had been under-estimate of advance tax by the assessee, no question of law arose for reference to the High Court". It would be clear that the ratio of the Gujarat High Court decision is not applicable to the facts and circumstances of assessee's case.
8. Taking all these factors into account, we are of the opinion that the A.O. was justified in charging interest under Section 216. We may further mention that the facts and circumstances on the basis of which the Tribunal had given its decision last year were different than what we have found for this year and hence while last year the assessee had been allowed relief, we are upholding the levy of interest under Section 216 of the Act this year.
9. Accordingly, the appeal filed by the revenue is allowed. The order of the Ld. CIT(A) is cancelled and the order of the A.O. is restored.