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Adarsh Chemicals and Fertilizers Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Ahmedabad
Decided On
Judge
Reported in(1983)6ITD729(Ahd.)
AppellantAdarsh Chemicals and Fertilizers
Respondentincome-tax Officer
Excerpt:
.....out, inter alia, that "section 215 simply states that if in a financial year an asscssee had paid advance tax on the basis of his own estimate and if the advance tax so paid is less than 75 per cent of the assessed tax, then simple interest at the rate of 12 per cent per annum shall be charged from the first day of april next following the next financial year. there is nothing in the section to suggest that interest should be charged if the short payment on the part of the assessee is without any reasonable cause, or if there is deliberate under payment of advance tax".6. the learned commissioner (appeals) also examined the facts of the case of bharat machinery & hardware mart (supra) and held that the facts of the said case were altogether different from the facts of the.....
Judgment:
1. The first controversy in the present appeal is whether, on the facts and in the circumstances of the case, the department is justified in charging interest under Section 215 of the Income-tax Act, 1961 ('the Act') from the assessee for the assessment year 1977-78.

2. The accounting period of the assessee is calendar year. In respect of the assessment year 1977-78, the assessee was served with a notice of demand under section 210 of the Act during the financial year 1976-77, asking for payment of advance tax amounting to Rs. 7,59,290.

The company filed an estimate in terms of Sub-section (1) of Section 212 of the Act on 14-6-1976 declaring 'nil' income of nil tax.

Accordingly, the assessee paid no tax in respect of the aforesaid financial year corresponding to the assessment year 1977-78.

3. When the assessment was completed, the ITO found the assessed tax to be Rs. 12,49,561 (Rs. 13,12,690Rs. 63,129 being tax deducted at source). Inasmuch as the 75 per cent of the aforesaid assessed tax was more than the tax paid by the assessee, the ITO charged interest from the assessee in terms of Sub-section (1) of Section 215, amounting to Rs. 45,852.

4. The assessee challenged the leviability of the aforesaid interest by pointing out that it did not know till 15-12-1976, if it would have the profit which was ultimately returned by it, that the entire profit accrued and arose to the assessee on account of the decision of the Government of India to grant subsidy to the producers of fertilizers and that the quantum of the subsidy could not be known till 15-12-1976 and, therefore, the assessee had no option in the matter but to go by the figures as per its accounts, as on 15-12-1976 and, in the circumstances, the assessee could not revise its earlier estimate of advance tax showing 'nil' tax payable by it. In view of this, the assessee should not be asked to pay the interest as it could not anticipate the income earned by it during the accounting period for the reasons stated above. The above view of the assessee was, however, not accepted by the ITO. Accordingly, the ITO charged interest from the assessee as above.

5. The assessee appealed against the aforesaid order to the learned Commissioner (Appeals) and pointed out to him that, in similar circum- stances, their Lordships of the Gujarat High Court had held in the case of CIT v. Bharat Machinery & Hardware Mart [1982] 136 ITR 875 that interest should not be charged from the assessee in terms of Sub-section (1 A) of Section 217 of the Act. The learned Commissioner (Appeals) did not accept the assessee's above submissions. He pointed out, inter alia, that "Section 215 simply states that if in a financial year an asscssee had paid advance tax on the basis of his own estimate and if the advance tax so paid is less than 75 per cent of the assessed tax, then simple interest at the rate of 12 per cent per annum shall be charged from the first day of April next following the next financial year. There is nothing in the section to suggest that interest should be charged if the short payment on the part of the assessee is without any reasonable cause, or if there is deliberate under payment of advance tax".

6. The learned Commissioner (Appeals) also examined the facts of the case of Bharat Machinery & Hardware Mart (supra) and held that the facts of the said case were altogether different from the facts of the present case. According to him, therefore, the ratio of the said decision would not be applicable to the present case. Accordingly, he sustained the order of the ITO.7. The aforesaid order of the learned Commissioner (Appeals) is assailed by the assessee by mainly relying on the same submissions as were made by him before the learned Commissioner (Appeals). On behalf of the revenue, the order of the learned Commissioner (Appeals) is relied upon.

8. We have carefully gone through the orders of the authorities below and the submissions made by the assessee. We have also gone through the decisions of the Hon'ble Gujarat High Court relied upon by the assessee. Inasmuch as the entire controversy centres round the interpretation of Sub-section (1) of Section 215, the same may be extracted here, so far as it is relevant for our purpose, for appreciating to the arguments of the rival sides : Where, in any financial year, an assessee has paid . . . Section 212 on the basis of his own estimate . . ., and the advance tax so paid is less than seventy-five per cent of the assessed tax, simple interest at the rate of twelve per cent per annum from the 1st day of April next following the said financial year up to the date of the regular assessment shall be payable by the assessee upon the amount by which the advance tax so paid falls short of the assessed tax.

From the bare perusal of the aforesaid Sub-section (1) of Section 215, it appears that for the purpose of charging interest under it, the ITO has first of all to find out whether the assessee filed an estimate of advance tax under Section 212, and if so, did he make the payment of advance tax on its basis? If so, he has to find out as to what was the assessed tax and then ascertain whether the tax paid by the assessee in accordance with his own estimate, was less than 75 per cent of the assessed tax. If so, interest has to be charged from the assessee on the difference. The section does not refer anywhere to the motive of the assessee in filing the estimate under Section 212 at a given figure nor there is any obligation under Sub -section (1) of Section 212, under which the assessee had filed his estimate of advance tax, that the assessee must file such an estimate. Sub-section (1) of Section 212 is optional and leaves it to the discretion of the assessee to file an estimate under that sub-section or not. In this respect, the provisions of Sub-section (3A) of Section 212, are basically different from those of Sub-section (1) of Section 212. Under Sub-section (3 A) of Section 212, it is not optional on the part of the assessee to file the estimate of advance tax in the circumstances stated therein. The filing of the estimate of advance tax under Sub-section (3A) of Section 212 is obligatory on the part of the assessee and if it does not comply with its obligations, certain consequences have been provided by the statute for such non-compliance. One of such sanctions has been provided for by Sub-section (1 A) of Section 217, which, so far as is relevant for our purpose, reads as follows : Where, on making the regular assessment, the Income-tax Officer finds that . . any such person as is referred to in Sub-section (3A) of Section 212 has not sent the estimate referred to therein, simple interest at the rate of twelve per cent per annum from the 1st day of April next following the financial year in which the advance tax was payable in accordance with the said . . .up to the date of the regular assessment shall be payable by the assessee upon the amount by which the advance tax paid by him falls short of the assessed tax as defined in Sub-section (5) of Section 215.

As can be seen from the language of the aforesaid sub-section, interest is chargeable under it for the failure of the assessee to send the estimate referred to in Sub-section (3A) of Section 212. In this sense, the aforesaid Sub-section (1 A) is penal in nature and provides one of the sanctions to ensure compliance with the provisions of Sub-section (3A) of Section 212. The other sanction has been provided for by clause (c) of Sub-section (1) of Section 273 of the Act. Section 215, in contrast, is not a sanction against the not filing of the estimate of advance tax. As noted earlier, filing of an estimate under Sub-section (1) of Section 212 is purely optional and, therefore, there could naturally be no penal consequence for not opting for the filing of an estimate of advance tax under the aforesaid sub-section. The assessee may, however, file an estimate of advance tax showing his liability at a much less figure than ultimately assessed.

Sub-section (1A) of Section 215 provides for such a situation and it is stipulated by it that, if the advance tax paid by the assessee in terms of his own estimate is less than the 75 per cent of the assessed tax, interest shall be payable by the assessee at the rate of 12 per cent on the dimerence. It is, thus, an interest payable by the assessee for using funds which should otherwise have been paid to the exchequer and which belonged to the exchequer.

9. The above being the position in law of the relative provisions of Sub-section (1) of Section 215, in contrast to that' of Sub-section (1A) of Section 217, the learned Commissioner (Appeals) was, in our opinion, justified in holding that for the purpose of charging interest under Section 215, one did not have to go into the question of reasonableness or otherwise of the estimate filed by the assessee under Sub-section (1) of Section 212. If the assessee had filed an estimate of advance tax and had, on its basis, paid less tax than ultimately found due from him, he should pay to the Government interest for having kept back the amount of tax, which otherwise was payable to the Government. The charging of interest in these circumstances was, in our opinion, entirely justified on the facts of the present case. Whatever be, the anticipation or the basis of calculation of the assessee, he did file an estimate of advance tax under Sub-section (1) of Section 212, saying that it had to pay no tax by way of advance tax.

Ultimately, the assessed tax was found to be much higher. This being so, on the difference between the 75 per cent of the assessed tax and the tax paid by the assessee (which in the present case happened to be nil) interest was clearly chargeable under Sub-section (1) of Section 215 and, the ITO in our opinion, rightly charged it.

10. The decision of the Hon'ble Gujarat High Court, relied upon by the assessee, is in respect of Sub-section (1A) of Section 217. We have, already seen that the aforesaid sub-section provides the sanction to ensure that the assessee carries out the obligation cast upon him by Sub-section (3A) of Section 212. Interest is chargeable from the assessee, not because the tax paid by him is less than what was ultimately due from him, but because the assessee did not file the estimate of advance tax in terms of Sub-section (3A) of Section 212, which was mandatory on his part. Under Sub-section (1) of Section 215, we do not deal with such mandatory situation. We are, on the contrary, dealing with a situation arising from the exercise of an option by the assessee in a given manner. The assessee may not exercise that option; if so, no interest shall be chargeable from it even if ultimately the tax found due from it is much more than what was demanded of it under Section 210. There being a basic difference between the natures of the situations sought to be met by Sub-section (1) of Section 215 and that by Sub-section (1A) of Section 217, the case law relevant to the provisions of Sub-section (1A) of Section 217 will not, in our opinion, cover the situation created under Sub-section (1) of Section 215. The assessee's contention was, therefore, in our opinion, rightly rejected by the learned Commissioner (Appeals). Accordingly, we uphold the order of the Commissioner (Appeals) and reject the assessee's appeal.


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