Jagannadha Rao, J.
1. The question referred by the Income-tax Appellate Tribunal, Hyderabad, in this reference is as follows :
'Whether, on the facts and in the circumstances of the case, the interest on the sum of Rs. 14,86,360 paid on September 20, 1969, is payable under section 214 of the Income-tax Act, 1961 ?'
2. The following facts are stated by the Tribunal in the statement of cases : The assessee is the Andhra Pradesh State Road Transport Corporation, Hyderabad, plying buses on various routes in Andhra Pradesh. The assessee is a person hitherto assessed. In these proceedings we are concerned with the assessment year 1970-71 for which the financial year is 1969-70.
3. Advance tax was payable for the assessment year 1970-71 by the assessee. The latest regular assessment completed as at the beginning of the financial year 1969-70 was one for the assessment year 1964-65 by way of an assessment order dated March 28, 1969, which showed a loss of Rs. 1,63,425 as determined by the ITO. For the assessment year 1970-71 in question, the ITO did not give any notice under s. 210 of the I.T. Act for payment of any advance tax.
4. On September 12, 1969, the assessee filed an advance tax estimate computing the advance tax payable for 1970-71 assessment year at Rs. 44,59,079 as the company thought that this amount of advance tax was payable on the basis of the profit which it earned for the assessment year 1968-69, the details of which were already before the assessee as the first revised return for assessment year 1968-69 was filed on August 13, 1969, showing a profit of Rs. 81,07,416. What the assessee did was that since the losses were completely wiped out, it took the amount of Rs. 81,07,416 as the basis for the purpose of advance tax for the assessment year 1970-71. Accordingly, it sent a cheque dated September 11, 1969, for a sum of Rs. 14,47,000 being the first installment of advance tax for the assessment year 1970-71 payable out of the estimated advance tax of Rs. 44,59,079. This cheque was actually presented by the ITO on September 20 1969, for encashment. While submitting the estimate for advance tax for the assessment year 1970-71, the assessee wrote a letter to the ITO on September 11,1969, as follows :
'The latest completed assessment of the Corporation was foe 1964-65 which has resulted in loss. The latest return was filed for the assessment year 1968-69 showing an income of Rs. 81,07,619 and the return for 1969-70 will be filed by the end of this month. As such, as per the income returned for 1968-69, income-tax at 55% works out to Rs. 44,59,079. Out of this, a sum of Rs. 14,47,000 after deducting a sum of Rs. 39,360, being the income-tax deducted at source on the interest realised on Government securities and short-term deposits during the period April, 1, 1969, to August 31, 1969, is paid through cheque No. G. 842292, dated September 11, 1969, as first instalment of advance tax for the year 1970-71. Receipted challans may kindly be sent at an early date.
Form No. 29 showing income for 1970-71 is enclosed.'
5. After the assessee filed the advance tax estimate for the assessment year 1970-71 and paid Rs. 14,47,000 being the first installment of advance tax, the ITO on September 27, 1969, referred to the estimate filed by the assessee on September 12, 1969, and wrote to the assessee as follows :
'Please find your above-cited estimate, wherein you have shown Rs. 44,59,079 towards advance tax payment for the year 1970-71. As per that, each instalment payable (entire demand in three instalments) comes to Rs. 14,86,360. But you have paid only Rs. 14,47,000 leaving a balance of Rs. 39,360. Please pay the same as per the challan enclosed on or before October 5, 1969, under intimation to this office.'
6. Thereafter, the assessee wrote a reply on October 7, 1969, as follows :
'In your letter cited, you have asked to pay a sum of Rs. 39,360 as short payment of the first instalment of advance tax. I have clarified the reason for short payment in my letter of even number dated September 11, 1969, when cheque for Rs. 14,47,000 was enclosed. However, as desired by you, challan for Rs. 39,360 is sent herewith for your record.'
7. Thereafter, the ITO sent a further letter to the assessee on October 17, 1969, as follows :
'With reference to your letter cited above, the triplicate portion of challan is herewith returned for your record. Please note, the balance of tax should be paid in two instalments, each Rs. 14,86,360, on or before December 15, 1969 and March 15, 1970.'
8. As appears from the order of the Commissioner, the assessee thereafter filed a return on December 10, 1969, showing the the revised estimate as 'Nil', as the assessee found that no tax was actually payable for the year 1970-71.
9. The ITO took up the regular assessment for 1970-71 on February 19, 1973. He assessed the loss for the assessment year 1970-71 at Rs. 59,33,524 and ultimately concluded as follows :
'Tax Rs. NilRs.Advance tax paid 14,86,360Add: Interest u/s. 214 4,25,089----------Total 19,11,458Add: T.D.S. 86,000----------Total refund: 19,97,458'----------
10. In effect, the ITO applied the provisions of s. 214 and granted interest of Rs. 4,25,089.
11. The Commissioner thereafter took up proceeding under s. 263 of the I.T. Act and issued a notice dated September 3, 1974, to the principal officer of the Corporation to show cause as to why an order should not be passed withdrawing the interest allowed by the ITO, and for directing the ITO at collect the said amount of interest, the same having already been refunded to the assessee. In response to the said notice, the assessee filed an explanation before the Commissioner on September 24, 1974, and contended that the Corporation always regarded the payment of Rs. 14,86,360 as an advance tax payment for the assessment year 1970-71 and that the two letters issued by the ITO on September 27, 1969, and October 17, 1969, calling upon the Corporation to pay the amounts on the basis of its own estimate dated September 12, 1969, indicate that the Department had treated the payment made by the Corporation as an advance tax payment.
12. The Commissioner, on an examination of the assessment records, thought that the ITO wrongly allowed interest under s. 214 as the payment that was made by the assessee was not on account of advance tax but was a mere voluntary payment by the assessee for which there was no basis whatsoever. Accordingly, the Commissioner overruled the objections filed by the assessee and modified the order of the ITO to the extent of the amount of interest of Rs. 4,25,098 and directed the ITO to collect the said amount from the assessee.
13. Against the said order of the Commissioner, the assessee appealed to the Income-tax Appellate Tribunal, Hyderabad. On behalf of the assessee, three contentions were raised before the Tribunal :
'(1) That though no formal orders under section 210 were passed directing the assessee to pay advance tax, from the correspondence on the file emanating from the Income-tax Officer it would be clear that there has been substantial compliance in regard to the payment of advance tax.
(2) That having treated the payment made by the assessee as advance tax it is not open to the Revenue now to say that the payment is not advance tax.
(3) That the assessee at any rate is liable to pay the advance tax as per the provisions of the Act (sections 207 to 209) and it has complied with the same in paying the advance tax.'
14. On the other hand, the Revenue contended before the Tribunal that the Act contemplated a formal order under s. 210 which only created the liability for payment by the assessee and since no such order was passed, any payment made by the assessee by itself, could not be treated as advance tax. It was further contended that there could be no estoppel against the statute and the ITO cannot go beyond the provisions of the Act in treating any payment as advance tax. With regard to the third contention of the assessee, the Revenue contended that there could be no liability on the part of the assessee on the facts of the case. According to the Revenue, there were only two classes of assessees who had to pay advance tax-(a) an old assessee, and (b) a new assessee. In the case of a new assessee he had to pay advance tax on his own. In the case of an old assessee, payment was to be made only when the demand was made by the ITO.
15. On the basis of these rival contentions, the Tribunal took up the first two contentions together as according to it they were inter-connected. The Tribunal found that in the case under reference the assessee bona fide thought that the liability accrued for payment of advance tax and that the assessee took into account the profits for the assessment year 1968-69 which were known to it by the time the advance tax estimate was filed for the assessment year 1970-71 and that the assessee started with the figure of Rs. 81,07,416 relatable to the year 1968-69 and calculated the advance tax for 1970-71 on that basis. The Tribunal held that though the assessee was under a misconception in regard to its liability for payment of advance tax, all the same, it cannot be said that the assessee did not act bona fide in filing its estimate for payment of advance tax. It also held that the ITO also acted upon the estimate filed by the assessee and encashed the cheque and credited it towards advance tax. The Tribunal also noticed the letters of the ITO dated September 27, 1969, and October 17, 1969, and came to the conclusion that the ITO took note of the estimate as well as the advance tax paid by the assessee and that he had in fact asked the assessee to make good the deficiency of advance tax of Rs. 39,360. In the last letter, the ITO had in fact directed the assessee to pay the remaining two instalments of advance tax also. On the basis of the above facts, the Tribunal came to the conclusion that in substance the ITO purported to issue an order under s. 210 of the I.T. Act for payment of advance tax even though the order came, as it was, ex post facto. Though the initial payment of advance tax did not emanate from an order of the ITO, nevertheless the subsequent action of the ITO shows that he proceeded on the basis as if an order had been passed by him in order to regularise the initial payment made by the assessee. What all particulars that were necessary for an order under s. 210 were all mentioned in the letter of the ITO, dated October 17, 1969. An order in terms of s. 210 was not necessary, provided the letter was in substance in compliance with the contents of s. 210. The Tribunal accepted the contention raised by the the assessee that even though the ITO initially passed an 'irregular' order which was complied with by the assessee, the payment made in accordance with the irregular order could be treated as a valid payment. It also noticed that the entire conduct of the assessee as well as the ITO would show that the payment made by the assessee was only towards advance tax. It also accepted the contention of the assessee that once the payment had been made and accepted by the Revenue as advance tax and credited in the account under the head 'Advance tax', it was not open to the Revenue to take a contrary stand. The contention that there was no estoppel against a statute was rejected by the Tribunal stating that the said principle was not applicable. It, therefore, held that the order of the Commissioner was wrong and the direction given by the Commissioner to the ITO was set aside.
16. This reference, therefore, raises an interesting question regarding the claim of interest on an amount which the assessee had paid as advance tax. There is no direct authority on the point and, therefore, we have proceeded to decide the question on an interpretation of the statutory provisions as applied to the facts and circumstances of this case.
17. We shall now consider the relevant provisions of the I.T. Act, 1961, as they stood at the relevant time.
18. Chapter XVII contains four sub-divisions A,B,C and D. Sections 207 to 219 in sub-division C deal with advance tax and s. 214 with which we are concerned is contained in this sub-division.
19. Section 207 imposes the liability to pay advance tax and s. 208 prescribes the conditions of liability to pay advance tax. Section 209 deals with the 'computation' of advance tax, s. 210 provides for an order by the ITO while s. 211 deals with the instalments of advance tax and s. 212 with the estimate by the assessee. Section 214 provides for the interest payable by the Government.
20. Section 214(1) read as follows with effect from April 1, 1969, at the relevant period :
'214. Interest payable by Government - (1) The Central Government shall pay simple interest at nine per cent. per annum on the amount by which the aggregate sum of any instalments of advance tax paid during any financial year in which they are payable under section 207 to 213 exceeds the amount of the tax determined on regular assessment, from the 1st day of April, next following the said financial year to the date of the regular assessment for the assessment year immediately following the said financial year, and where any such instalment is paid after the expiry of the financial year during which it is payable by reason of the provisions of section 213, interest as aforesaid shall also be payable on that instalment from the date of its payment to the date of regular assessment.'
(By Act No. 16 of 1974 interest was payable at 12% p.a. w.e.f. 1-4-72).
Thus Government shall have to pay interest under s. 214 on the difference between the total advance tax paid and the amount of tax determined later on regular assessment.
Firstly, it was contended for the Revenue that no order had been passed by the ITO as contemplated by s. 210 of the Act and no advance tax was determined in accordance with the provisions of ss. 207, 208 and 209. Secondly, it was contended that unless the advance tax was one 'payable' under ss. 207 to 213 as mentioned in s. 214, the Government was not liable to pay interest.
Therefore, the first point is whether the provisions of s. 210 are complied with on the facts of the case, and the second point is whether the advance tax was 'payable' under ss. 207 to 213 We shall take up the first point, and that brings us to the crucial provisions, namely, s. 210, which, at the material time, read as follows in so far as sub-cls. (1) and (2) are concerned : '210. Order by Income-tax Officer - (1) Where a person has been previously assessed by way of regular assessment under this Act or under the Indian Income-tax Act, 1922, the Income-tax Officer may, on or after the 1st day of April, in the financial year, by order in writing, require him to pay to the credit of the Central Government advance tax determined in accordance with the provisions of sections 207, 208 and 209.
(2) The notice of demand issued under section 156 in pursuance of such order shall specify the instalments in which the advance tax is payable under section 211.' and that would naturally invite our attention also to s. 211 which, in its turn, refers to s. 212.
We shall now elaborate the rival contentions on the first point. While the Revenue contends that the assessee paid the advance tax without any order of the ITO under s. 210(1) or a consequential demand under s. 210(2), it is the contention of the assessee that while initially the assessee remitted the advance tax of Rs. 14,47,000 by cheque and letter dated September 11, 1969, the ITO instead of refusing to receive the same, had not only accepted and encashed the amount and credited it towards advance tax, but had gone a step further and had written a letter dated September 27, 1969, accepting the said sum as advance tax and making a further demand of Rs. 39,360 towards balance of advance tax.
A reading of s. 210 (1) and (2) would show that unless the following conditions are satisfied, the said section cannot be said to be attracted :
(a) the assessee must have been previously assessee by way of a 'regular' assessment;
(b) the ITO must have passed an order in writing on or after the 1st day of April, in the financial year;
(c) the said order must have required the assessee to pay to the credit of the Central Government advance tax determined in accordance with ss. 207, 208 and 209;
(d) a notice of demand must issued under s. 156 specifying the instalments of advances tax payable under s. 211.
Let us once again read the letter of the ITO, dated September 27, 1969, closely to find out whether these conditions are satisfied. For convenience we shall extract the said letter of the ITO once again : 'Please find your above-cited estimate, wherein you have shown Rs. 44,59,079 towards advances tax payment for the year 1970-71. As per that, each instalment (payable entire demand in three instalment) comes to Rs. 14,86,360. But you have paid only Rs. 14,47,000 leaving a balance of Rs. 39,360. Please pay the same as per the challan enclosed on or before October 5, 1969, under intimation to this office.'
21. Now, firstly, there is no dispute that the assessee was previously assessee by way of regular assessment under the 1961 Act. Secondly, there is, in our opinion, also an order in writing of the ITO on or after 1st April of the 'financial year', i.e., the one dated September 27, 1969, which falls in the financial year April 1, 1969, to March 31, 1970 (corresponding to the assessment year 1970-71. Thirdly, the said letter treats the earlier payment of Rs. 14,47,000, dated September 11, 1969, as 'advance tax' and demands a further balance of Rs. 39,360 also as advance tax. We shall deal with the fourth condition, i.e., s. 211 a little later.
22. In our opinion, the fact that the assessee paid Rs. 14,47,000 voluntarily as advance tax before an order under s. 210(1) or a demand under s. 210(2) was issued makes no difference in principle or in substance.
23. The ITO had received the advance tax of Rs. 14,47,000 by means of a cheque dated September 11, 1969, with a covering letter which made it clear to him the head under which the assessee was remitting the amount, viz., as advance tax. It was not a cheque simpliciter but a cheque coupled with a letter which put him on clear notice as to the character of the amount remitted by means of the cheque. The assessee's letter dated September 11, 1969, also put him on notice that the remittance was based on an estimated income of Rs. 81,07,619, being the income as per the latest return for the assessment year 1968-69, and that 55% of the tax worked out to Rs. 44,59,079.
24. On the above undeniable facts, the Revenue cannot be heard to say that the ITO received the amount as an 'on-account' or 'deposit' or 'suspense account' payment as characterised by the Commissioner.
25. Neither the assessee nor the ITO had any doubt whatsoever that the amount was paid and received as advance tax. If there was any doubt in this regard, it was set at rest by the categorical statement of the ITO in the letter dated September 27, 1969, demanding the balance of Rs. 39,360 as advance tax for which he also stated that challan was being enclosed by him.
26. In our opinion, the ITO by his letter dated September 27, 1969, unequivocally treated the earlier remittance of Rs. 14,47,000 as if it were a payment in pursuance of a demand issued by him under s. 156. The demand for the balance of Rs. 39,360 as advance tax also, in substance, conforms to a demand under s. 156, especially when the assessee had complied with the said demand in the letter dated September 27, 1969, remitting the balance amount of Rs. 39,360 also as advance tax on October 7, 1969.
27. The ITO has made his position more than clear by his further letter dated October 17, 1969, by -
(a) returning the triplicate portion of the challan for Rs. 39,360 already remitted on October 7, 1969, and
(b) demanding the further two instalments of advance tax due -
(i) on December 15, 1969, and
(ii) on March 15, 1970.
28. This leads us to the fourth condition prescribed by s. 210 namely, that the instalments due under s. 211 should have been demanded. In our opinion, the letter of the ITO, dated October 17, 1969, satisfied the above requirement.
29. A reading of s. 211(2) of the Act would make it clear that under that provision, advance tax is payable in three instalments on, (a) 15th September, (b) 15th December, and (c) 15th March, in cases where the financial year of the assessee is from 1st April, of one year to 31st March, of the next year. On the facts of the present case, (a) Rs. 14,47,000 was paid on September 11, 1969, and (b) the balance of Rs. 39,360 on September 27, 1969, was demanded as shortfall due before September 15, 1969.
30. Having regard to the nature of the payments as well as the nature of the demands, it is clear that they were made by the assessee and treated/demanded by the Revenue as made in due compliance with s. 211 in respect of the first instalment due on or before September 15, 1969, and this is explicit from the ITO's letter dated October 17, 1969.
31. For the above reasons, we are of the opinion, on the first point, that all the four requirements of s. 210 are satisfied and that there is substantial compliance with the provisions of s. 210 of the I.T. Act, 1961.
32. Now we shall take up the second point.
33. On this point, it is contended by the learned counsel for the Revenue that no advance tax became 'payable' under ss. 207 to 213 as contemplated by s. 214.
34. In our opinion, the word 'payable' in s. 214 has to be understood in the context of an order made under s. 210 demanding the said amount. It is the order and demand that make the amount 'payable'. The letter dated September 27, 1969, of the ITO treated the amount of Rs. 14,47,000 paid on September 11, 1969, as duly 'payable' by September 15, 1969, under s. 211 and also demanded a further sum of Rs. 39,360 as further 'payable' by September 15, 1969, but not paid. The word 'payable' in the context does not mean payable according to the ultimate/regular order of assessment but payable pursuant to an order under s. 210.
35. Stress is laid by the learned counsel for the Department that for purpose of s. 214 read with s. 210 the amount must have been determined as advance tax in accordance with ss. 207, 208 and 209 and that under s. 209(a)(i), the advance tax is the one that is 'payable' on the basis of the total income of the latest previous year in respect of which a regular assessment as defined under s. 2(40) has been made, i.e., 1964-65, and not the one based on the income returned for the previous assessment year 1068-69 of Rs. 81,07,619. It is, therefore, contended by the Department that the order dated September 27, 1969, of the ITO and the demand made thereunder were void an initio.
36. We are of the opinion that the above submission of the Department is not correct. The scheme of the Act, as mentioned earlier, is that s. 207 imposes the liability, s. 208 mentions the financial limits of income attracting advance tax and s. 209 provides the basis for 'computation'. All that s. 209(a)(i) does is to state the 'method of computation of tax.'
37. An error made by the ITO under s. 209(a)(i) in adopting the income as per the return in the 1968-69 assessment year instead of the income of the latest previous year of regular assessment (1964-65) does not, in out opinion, amount to the exercise of a jurisdiction not vested in him. According to us, it is only an error made in the exercise of a valid jurisdiction but by adopting an erroneous mode of 'computation' under s. 209(a)(i) and as such the demand by the letter dated September 27, 1969, of the ITO is not void but only irregular. The demand was, therefore, 'payable' under s. 207 read with ss. 208, 209, 210 and 211, and cannot be ignored as non est for the purposes of s. 214.
38. As long as the demand in the letter dated September 27, 1969, is not complied with and as long as the same is not set aside by a direct attack by legal remedies taken out for that purpose, the assessee cannot merely ignore the same all by himself collaterally by assuming that the demand was void. The demand was very much there and the amount was 'payable' as per the demand. We have already held that there has been substantial compliance with the provisions of ss. 210 and 211. The fact that a part of the advance tax has been remitted voluntarily by the assessee did not, as already stated, make any difference in principle as the same was treated by the ITO as a remittance made pursuant to an earlier demand as he clearly and categorically received it as advance tax and made a further demand for the shortfall of Rs. 39,360.
39. Further, the contention of the Revenue that the demand of the ITO was void and, therefore, s. 214 could not be applied, if accepted, would lead to the anomaly that while the Revenue would be liable for interest upon an irregular or erroneous collection of advance tax, it would be totally absolved of that responsibility in making a collection which was wholly without jurisdiction. The argument does not sound logical.
40. It is nextly contended by the Department that the ITO acted totally without jurisdiction in thinking that the advance tax was payable on the income returned for 1968-69 instead of on the income assessee for 1964-65 as required by s. 209(a)(i) and that hence there was no estoppel against the statue.
41. We are of the opinion that for the reasons already mentioned above, the ITO's orders are not without jurisdiction but amount only to an irregular computation of advance tax on an erroneous basis which is not contemplated by s. 209(a)(i). It cannot be said to be wholly without jurisdiction. In any event, by not only collecting but retaining the money so collected from 1969, till 1973, the Department could not, as already stated, be in a better, position than if the advance tax was irregularly collected. We have already held that ss. 210 and 214 have been substantially complied with and the orders were within the statue. Therefore, there is no room for the application of the doctrine that there is no estoppel against statue. once there is no doubt that the ITO in his letters dated September 27, encashed on September 20, 1969, and Rs. 39,360 remitted on October, 7, 1969, as advance tax payable under the first instalment and that he also demanded the further two instalments, the position, in our opinion, is not different from what it would have been, had the ITO himself initially passed an order under s. 210 and issued a demand under s. 156 in the manner contemplated by s. 211. While it was open to him to return the initial payment of Rs. 14,47,000 on the ground that it was wrongly computed on the basis of the income returned for 1968-69 instead of the income assessee for 1964-65 as per s. 209(a)(i), the ITO had also adopted the same method of computation and accepted it as advance tax in the same manner as if it had been paid pursuant to an order and demand by him under s. 210. The character of the money does not alter merely because the assessee initiated the payment rather than the ITO demanding the same, and once it was received and appropriated by the ITO as advance tax due and payable, s. 214 was clearly attracted and interest became payable by the Government to the assessee.
42. The second point urged on behalf of the Revenue is, therefore, without force.
43. The Tribunal, therefore, decided the question correctly. Accordingly, we answer the question referred to us in the affirmative and in favour of the assessee.