1. The short question in this revenue's appeal is that the Commissioner (Appeals), whose order dated 5-1-1983, passed in appeal No.Commissioner (Appeals)-XI/E/IT/1982-83, for the assessment year 1979-80 is brought in appeal, wrongly directed the ITO to allow interest under Section 214 of the Income-tax Act, 1961 ('the Act') in respect of excess payment of advance tax which had been made after the close of the financial year 1978-79.
2. To understand the question some facts must necessarily be stated.
The respondent-assessee made an application to the Commissioner on 13-3-1979 requesting extension of time of 30 days for filing the estimate of income and for payment of shortfall of advance tax under the proviso to Section 212(3A) of the Act. The requisite permission was granted by the Commissioner vide his letter dated 16-3-1979.
Thereafter, the respondent paid the balance tax of Rs. 2,02,016 on 27-4-1979. However, after framing the assessment, not only the ITO did not adjust the above paid amount as advance tax but also charged interest under Section 139(8) of the Act though the assessment had finally resulted in working out a refund.
3. The Commissioner (Appeals) in appeal, in view of the Commissioner having granted permission under Section 212(3A) on 16-3-1979, directed the ITO to treat the payment of Rs. 2,02,016 as advance tax for adjustment purposes and cancel the levy of interest under Section 139(8). The Commissioner (Appeals) also accepted the contention that the respondent was entitled to interest under Section 214 in respect of excess payment.
4. Before proceeding further, we would like to observe that wrong projection from the revenue's ground of appeal is that the Commissioner (Appeals) directed the ITO to allow interest under Section 214 in respect of the entire payment of Rs. 2,02,016, which is not correct.
5. For the revenue, Shri K.K. Tuli, the senior departmental representative, very effectively submitted that relaxation and concessions emanating from the provisions of Section 212(3A), under which payment even made beyond the close of the financial year is to be treated as advance tax, only takes a taxpayer out of the ambit of non-chargeability of interest under Section 139(8) and the penal consequences of not paying advance tax within the financial year. He argued that the provisions of Section 214 stand entirely on their own footing and to be entitled to interest, advance tax must be shown to have been paid during the financial year itself. He very strongly urged that Section 212(3A) in no manner has the effect of diluting the mandatory constraint and conditions of Section 214.
6. For the respondent, Shri V.H. Patil pleaded that Section 214 should be read in conjunction with Section 212(3A) and not separately.
7. After giving our thoughtful moments to the question, we are inclined to agree with the arguments of Shri Tuli. We find no indication in the scheme of advance payment of tax under Sections 207 to 209 in Chapter XVII of the Act for enlarging the concession of Section 212(3A) to Section 214 of the Act. The condition precedent for being entitled to interest as laid down under Section 214 is mandatory that the payment of advance tax must be in the financial year. No other view is considered possible from the plain reading of the section, which we like to notice 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 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.
8. Therefore, the Commissioner (Appeals)'s decision directing the ITO to allow interest under Section 214 in respect of refund is held to be erroneous and contrary to the provisions of Section 214.