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Commissioner of Income-tax Vs. Jagannath Narayan Kutumbik Trust - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 103 of 1980
Judge
Reported in[1983]144ITR526(MP)
ActsIncome Tax Act, 1961 - Sections 154, 207 to 213, 214, 214(1) and 218
AppellantCommissioner of Income-tax
RespondentJagannath Narayan Kutumbik Trust
Appellant AdvocateR.C. Mukati, Adv.
Respondent AdvocateChaudhari, Adv.
Excerpt:
.....on him to prove his innocence. conviction of appellant is liable to be set aside. - act have now been well defined by their lordships of the supreme court in t. '14. the above extract clearly shows that when there can be conceivably two opinions on a particular issue, the powers under section 154 of the i. act will include a mistake which an intelligent person may be able to point out after some research also. at worst it could only fetter the hands of the tribunal from taking a different view......court in a. sethumadhavan v. cit : [1980]122itr587(ker) , have held that if the assessee has not paid instalments of advance tax on the dates as prescribed under section 211 of the act he is not entitled to claim interest on the excess amount paid by him under section 214 even though the entire amount of advance tax has been paid before the end of the financial year. this line of reasoning has been adopted by the andhra pradesh high court and the kerala high court has, without giving any independent reasons of its own, followed the same. their lordships of the andhra pradesh high court have read section 214 in the light of section 218 of the act and have observed that an assessee who is a 'defaulter' under section 218 and, therefore, liable to pay penalty under section 221 of the act.....
Judgment:

Shukla, J.

1. This is a reference under Section 256(1) of the I.T. Act, 1961.

2. Facts as found and stated by the Income-tax Appellate Tribunal are as follows; For assessment year 1971-72, the assessee was assessed in the status of an association of persons (AOP/Trust), under Section 143(3) of the I.T. Act. The assessee had paid advance tax during the financial year in accordance with Sections 210 to 212 of the Act. The aggregate sum of instalments of advance tax paid during the financial year for which they were payable under Sections 207 to 213 exceeded the amount of the tax determined on regular assessment. The instalments of advance tax were not paid on due dates in accordance with Section 211 of the Act but the entire sum was paid before the end of the financial year. The ITO while passing the order did not credit any interest to the assessee under Section 214 of the Act, The assessee made an application under Section 154 of the Act for rectification of a mistake claiming that interest under Section 214 on the excess amount paid as advance tax should be paid to it. The ITO rejected the claim on the ground that the payment was made after the due dates of the instalments prescribed by Section 211 and, therefore, the assessee was not entitled to any interest under Section 214 of the Act.

3. The assessee appealed before the AAC. The learned AAC allowed the appeal and directed the ITO to accept the application of the assesses under Section 154 of the I.T. Act and allow interest under Section 214 as claimed.

4. The Department went up in appeal against the order of the AAC before the Income-tax Appellate Tribunal, Indore. Two questions were raised before the Tribunal. First was that the AAC erred in holding that the assessee was entitled to interest on the excess amount of advance tax under Section 214 of the Act. Second was that the issue was controversial and, therefore, rectification under Section 154 of the Act was not permissible. The Tribunal rejected both the contentions and held that interest was payable under Section 214 of the Act and the order of the ITO could be rectified under Section 154 of the Act since the issue was not controversial.

5. At the instance of the Commissioner, the Tribunal referred the following questions under Section 256(1) of the I.T. Act for our opinion

' I. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that interest Under Section 214 is payable to the assessee on the excess amount paid during the financial year evenon the date (s) subsequent to the date(s) stipulated Under Section 211 of the Income-tax Act, 1961, for payment of such instalments

2, Whether the Tribunal was justified in holding that the issue could not be said to be controversial and hence is covered Under Section 54 of the Income-tax Act, 1961 '

6. Question No. 1 :

Section 214(1) of the I.T. Act, which is relevant for answering this question, is as follows ; '214. (1) The Central Government shall pay simple interest at twelve 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 Sections 207 to 213 exceeds the amount of 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;.., '

7. To attract this provision the principal postulates are :

(1) instalments of advance tax must have been paid during the financial year in which they are payable under Sections 207 to 213;

(2) the aggregate sum of instalments should exceed the amount of tax determined on regular assessment.

8. If these two conditions are fulfilled interest becomes payable by the Central Govt. It may be noted that Section 214(1) does not refer to the dates on which instalments are payable under Section 211 of the Act. It only says that instalments must have been paid during the financial year in which they are payable. It is true that Section 214 refers to instalments payable under Sections 207 to 213 but there is no reference in Section 214 about the manner of payment of instalments. Therefore, it is not permissible according to us to read more in Section 214 than what is expressly stated.

9. The Gujarat High Court in Chandrakant Damodardas v. ITO [1980] 123 ITR 748, has held that, even if instalments of advance tax are not paid on the due dates as prescribed under Section 211 but have been paid during the financial year, interest on the amount paid in excess of the tax assessed on regular assessment becomes payable. It may be kept in mind that Sections 215 to 217 of the Act render an assessee liable to pay interest whenever the amount of advance tax falls short by a certain percentage:

of the assessed tax. It is, therefore, just and reasonable to apply the same yardstick against the Revenue.

10. There are, however, two decisions taking a contrary view. The Andhra Pradesh High Court in Kangundi Industrial Works (P.) Ltd, v. ITO [1980] 12 ITR 339, and the Kerala High Court in A. Sethumadhavan v. CIT : [1980]122ITR587(Ker) , have held that if the assessee has not paid instalments of advance tax on the dates as prescribed under Section 211 of the Act he is not entitled to claim interest on the excess amount paid by him under Section 214 even though the entire amount of advance tax has been paid before the end of the financial year. This line of reasoning has been adopted by the Andhra Pradesh High Court and the Kerala High Court has, without giving any independent reasons of its own, followed the same. Their Lordships of the Andhra Pradesh High Court have read Section 214 in the light of Section 218 of the Act and have observed that an assessee who is a 'defaulter' under Section 218 and, therefore, liable to pay penalty under Section 221 of the Act is not entitled to claim interest under Section 214 of the Act. With respect, we cannot subscribe, to this view. Section 214 is a self-contained provision and according to us it is not necessary to interpret this section with reference to another provision of the Act, i.e., Section 218, for limiting or enlarging its scope. According to us, Section 218 of the Act deals with a totally different situation. Thus, we are of the opinion that an assessee is entitled to interest on the fulfilment of the conditions stated in Section 214 even though he may be a defaulter under Section 218 of the Act and liable to penalty under Section 221 of the Act.

11. We, therefore, answer question No. 1 in the affirmative and hold that on the facts and in the circumstances of the case, the Tribunale was justified in holding that interest under Section 214 is payable to the assessee on the excess amount paid during the financial year on dates subsequent to the dates stipulated under Section 211 of the I.T. Act, 1961, for payment of such instalments.

12. Question No. 2:

This question presents some difficulty. At one stage we are of the view that the second question should be answered first because according to us as a result of our answer to this question it would not have been necessary to answer question No. 1. Learned counsel for the assessee, however, insisted that since both the questions have been referred for our advice it will be proper if both are answered, though, in view of our answer to question No. 2, the assessee will not get any relief even though our answer to question No. 1 is in its favour.

13. The powers of rectification under Section 154 of the I.T. Act have now been well defined by their Lordships of the Supreme Court in T. S. Balaram, ITO v. Volkart Brothers : [1971]82ITR50(SC) , and it has been held that (headnote) :

'A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. '

14. The above extract clearly shows that when there can be conceivably two opinions on a particular issue, the powers under Section 154 of the I.T. Act cannot be exercised.

15. Learned counsel for the assessee referred to an earlier decision of the Madras High Court in T. S. Rajam v. CED : [1968]69ITR342(Mad) , and contended that a mistake apparent from the record under Section 154 of the I.T. Act will include a mistake which an intelligent person may be able to point out after some research also. It is not necessary to discuss the Madras case on the scope of the jurisdiction of the ITO under Section 154 of the Act because the matter as on today is settled by the dicta of the Supreme Court in Balaram's case : [1971]82ITR50(SC) .

16. Learned counsel for the assessee then contended that whatever controversies might have been raised about the interpretation of Section 214 of the Act on account of the Andhra Pradesh and Kerala decisions as against the Gujarat decision when the Appellate Tribunal passed the order, the issue had been aswered in favour of the assessee by the Gujarat High Court and the Appellate Tribunal was bound by that decision. Therefore, according to him the Appellate Tribunal at that point of time, i. e., on the date of its order, was justified in holding that there was a mistake apparent on the record which was rectifiable under Section 154 of the Act by the ITO. There is an obvious fallacy in this reasoning. Whether the issue is debatable or not will depend on its intrinsic character and not on what a particular High Court holds at a particular time. The Appellate Tribunal felt that the decision of the Gujarat High Court in CIT v. Kohinoor Flour Mills : [1975]99ITR54(Guj) , clinched the issue with respect to the interpretation of Section 214 of the Act and it was bound by that decision. We have perused the decision and we do not think that the Gujarat High Court was specifically dealing with Section 214 as such. Therefore, the premise on which this argument was advanced by the learned counsel for the assessee does not appear to be justified. But even assuming that the, Gujarat High Court had taken a decision in favour of the assessee in interpreting the language of Section 214 it did not mean that the issue becamenon-controversial or free from debate. At worst it could only fetter the hands of the Tribunal from taking a different view. The Calcutta High Court in Jiyajeerao Cotton Mills Lid. v. ITO : [1981]130ITR710(Cal) , has observed that merely because the Supreme Court had resolved the conflict of opinion it did not obliterate the existence of such a conflict prior to such a decision and, therefore, the ITO had no jurisdiction to rectify an order under Section 154 of the Act. We are, therefore, of the view that the ITO was not competent to rectify his order acting under Section 154 of the I.T. Act because the issue about the right of the assessee to claim interest under Section 214 of the Act was a debatable issue.

17. We, therefore, answer question No. 2 in the negative and hold that, on the facts and circumstances of the case, the issue about the assessee's entitlement to interest under Section 214 of the I.T. Act was a controversial issue and could not be rectified by the ITO exercising his powers under Section 154 of the I.T. Act, 1961.

18.There will be no order as to costs of this reference.


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