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income-tax Officer Vs. Institute of Cost and Works - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Kolkata
Decided On
Judge
Reported in(1984)10ITD129(Kol.)
Appellantincome-tax Officer
Respondentinstitute of Cost and Works
Excerpt:
.....cit v. general electric co. of india ltd. [1978] 112 itr 246 (cal.).the learned counsel for the assessee urged that the cases relied on by the learned departmental representative were distinguishable on facts.he urged that the decision of the calcutta high court in the case of singho mica mining co. ltd. (supra) and that of the karnataka high court in the case of executors of the estate of late h.h. rajkuverba dowager maharani saheb of gondal (supra) was relating to the exercise of power of the commissioner under section 263 of the act to revise the order of the ito in not charging interest under section 215 or section 217. according to him, those cases were not concerned with rectification proceedings and, therefore, the principle laid down in those cases had no application to the.....
Judgment:
1. This appeal by the revenue is directed against the order of the Commissioner (Appeals) dated 16-3-1981 by which he cancelled the interest charged by the ITO under Section 217 of the Income-tax Act, 1961 ('the Act').

2. In the original assessment for the year under appeal, the ITO did not charge interest under Section 217. Subsequently, the ITO issued a notice under Section 154 of the Act in order to rectify a mistake which, according to him, was apparent from the record. In the said notice the ITO did not state that interest under Section 217 was sought to be charged. A perusal of the order passed by the ITO under Section 154 would show that the ITO wanted to rectify his order inasmuch as he had not included certain income from the branch offices in the original assessment. The ITO after allowing the assessee an opportunity of being heard, passed an order under Section 154 by which he added a sum of Rs. 18,080 being interest income from the branch offices to the originally assessed income. The ITO also charged interest under Section 217.

3. The assessee preferred an appeal before the Commissioner (Appeals) against charging of interest under Section 217 and contended that the order under Section 154 was not in accordance with law inasmuch as while issuing notice under Section 154 the ITO did not mention the point regarding interest to be charged under Section 217. It was further contended that the ITO never informed the assessee that by his order under Section 154 he was going to charge interest under Section 217. It was also submitted that the assessee had already been assessed to tax before the relevant previous year and that since no notice under Section 210 of the Act had been issued by the ITO, the assessee was not required to submit any estimate of advance tax and, thus, interest under Section 217 was not chargeable in the instant case. The Commissioner (Appeals), after going through the facts of the case as also considering the submissions made before him on behalf of the assessee, cancelled the interest charged by the ITO under Section 217.

4. Against the said order of the Commissioner (Appeals), the revenue has preferred the present appeal before the Tribunal and the learned departmental representative vehemently urged that the Commissioner (Appeals) was not justified in cancelling the interest charged by the ITO under Section 217 due to the default of non-filing of estimate of advance tax. He submitted that the assessee was under obligation to file the estimate under Section 212 of the Act and since the assessee failed to file that estimate, interest under Section 217 was chargeable. The learned departmental representative vehemently urged that the ITO committed an error in not charging interest under Section 217 while making the original assessment and that this mistake was a glaring mistake which could be rectified by invoking the provisions of Section 154. For this proposition he relied on the decision of the Calcutta High Court in the case of Singho Mica Mining Co. Ltd. v. CIT [1978] 111 ITR 231 and that of the Karnataka High Court in the case of CIT v. Executors of the Estate of Late H.H. Rajkuverba Dowager Maharani Saheb of Gondal [1978] 115 ITR 301.

5. The learned counsel for the assessee, on the other hand, contended that the Commissioner (Appeals) was justified in cancelling the interest charged under Section 217 by the ITO by his order under Section 154. He took us through the provisions of Section 217(1) to point out that where an assessee fails to submit the estimate of advance tax under Section 212(3), Sub-section (2) of Section 217 provides that the provisions of Sub-sections (2), (3) and (4) of Section 215 of the Act shall apply to interest payable under the said section as they apply to interest payable under that section. He further pointed out that under Sub-section (4) of Section 215, the ITO is empowered to reduce or waive the interest payable in such circumstances, as may be prescribed. He also took us through the provisions of Rule 40 of the Income-tax Rules, 1962 ('the Rules') which provides the circumstances under which the interest payable under Sections 215 and 217 can be reduced or waived. He urged that Clause (5) of Rule 40 empowers the I AC to waive or reduce the interest under Section 217 in case he feels that the circumstances are such as justify such waiver. The learned counsel for the assessee, therefore, urged that charging of interest under Section 217 is not automatic or mandatory. The income-tax authorities have a discretion to reduce or waive the interest and, hence, in a case where discretion can be exercised either way cannot be a subject-matter of rectification proceedings. He also took us through the provisions of Section 154 for the proposition that the ITO can assume jurisdiction to initiate rectification proceedings under Section 154 when he is satisfied that there must be a self-evident mistake apparent from the record which does not require investigation into the facts or arguments. According to the learned counsel for the assessee, charging of interest or waiving or reducing of interest under Section 217 is a matter which requires investigation into the circumstances of the respective case of the assessee and to take a decision as to whether the case falls within any of the clauses of Rule 40. He, therefore, submitted that the ITO was wrong in invoking the provisions of Section 154 for charging interest under Section 217, more so, when there was no mention regarding charging of interest under Section 217 in the notice issued by the ITO under Section 154. He also urged that since the ITO had a discretion to charge or not to charge interest under Section 217, it could not be said that the ITO committed a glaring mistake in not charging the interest under Section 217 while making the original assessment. For the above proposition, he relied on the decision in the following cases :(Bom.), S.A.L.

Narayan Row v. Ishwarlal Bhagwandas [1965] 57 ITR 149 (SC), Mohammed Kunhi v. Addl. ITO [1967] 66 ITR 250 (Ker.) and CIT v. General Electric Co. of India Ltd. [1978] 112 ITR 246 (Cal.).

The learned counsel for the assessee urged that the cases relied on by the learned departmental representative were distinguishable on facts.

He urged that the decision of the Calcutta High Court in the case of Singho Mica Mining Co. Ltd. (supra) and that of the Karnataka High Court in the case of Executors of the Estate of Late H.H. Rajkuverba Dowager Maharani Saheb of Gondal (supra) was relating to the exercise of power of the Commissioner under Section 263 of the Act to revise the order of the ITO in not charging interest under Section 215 or Section 217. According to him, those cases were not concerned with rectification proceedings and, therefore, the principle laid down in those cases had no application to the facts of the present case.

The learned counsel for the assessee further urged that the assessee also was under no obligation to file an estimate under Section 212 for advance tax. He submitted that the assessee being the Institute of Cost and Works Accountants is a statutory body constituted under the provisions of the Cost and Works Accountants Act, 1959 and the institute's properties are held for charitable purposes within the meaning of Section 2(15) of the Act. The objects of the institute are of general public utility and it has also been granted registration by the Commissioner under Section 12A of the Act, accepting that the institute is one to which the provisions of Section 11 of the Act are applicable. The institute has also been notified under Clause (23A) of Section 10 of the Act by the Central Government. He urged that the case of the assessee from the beginning is that it is not liable to pay tax under the Act in respect of any part of its income and, therefore, the assessee was seeking exemption both in respect of the income falling under Clause (23A) of Section 10 and in respect of the rest of the income under Section 11. He urged that for the earlier assessment years, no return was filed by the institute nor any advance tax was paid in view of the legal provisions relating to exemption. He next urged that for the first time, the institute filed its return of income for the year under consideration and the ITO made assessment on the basis that the assessee could not claim any exemption under Section 11 as it was confined under Clause (23A) of Section 10. He submitted that by reason of lack of proper guidance the assessee did not pursue its claim for exemption under Section 11 by filing further appeal against the order of assessment made. But this fact alone is not sufficient for coming to the conclusion that the assessee was not entitled to the exemption under Section 11. According to him, the assessee is entitled to exemption both under Sections 10(23A) and 11. For that proposition, he relied on the order of the Tribunal in the case of Calcutta Medical Research Institute [IT Appeal No. 5466 (Cal.) of 1976-77] as also on the decision of the Calcutta High Court in the case of Birla Vidhya Vihar Trust v. CIT [1982] 136 ITR 445. Reliance was also placed on the decision of the Allahabad High Court in the case of Bar Council of U.P.v. CIT [1983] 143 ITR 584, based on the decision of the Supreme Court in the case of CIT v. Bar Council of Maharashtra [1981] 130 ITR 28. It was, therefore, submitted that when the assessee was entitled to exemption in respect of its income, there was no question of filing of estimate under Section 212 for payment of advance tax.

6. We have beard the submissions of both the parties and considered the facts on record. Interest is payable under Section 217(1) where an assessee fails to submit the estimate of advance tax under Section 212.

Sub-section (2) of Section 217 provides that the provisions of Sub-sections (2), (3) and (4) of Section 215 shall apply to interest payable under this section as they apply to interest under that section. Then again, under Section 215(4), the ITO is empowered to reduce or waive the interest payable under such circumstances as may be prescribed. Rule 40 provides the circumstances under which the interest payable under Sections 215 and 217 can be reduced or waived. Rule 40(5) empowers the IAC to waive or reduce the interest charged under Section 217 in case he (the IAC) feels that reduction or waiver of interest is justified. It, therefore, follows that charging of interest under Section 217 is not automatic or mandatory. The income-tax authorities have a discretion to reduce or waive such interest. We are, therefore, of the opinon that when there is a question of discretion in charging interest, it cannot be said that non-charging of interest in the original assessment is a glaring mistake on the part of the ITO which can be rectified by invoking the provisions of Section 154, in view of the principle laid down in the following cases- Shantilal Rawji's case (supra), S.A.L. Narayan Row's case (supra) and Mohammed Kunhi's case (supra).

The Calcutta High Court in the case of General Electric Co. of India Ltd. (supra) has also held that in view of the scope for exercising the discretion by the ITO to reduce or waive interest under Section 18A(6) and 18A(7) of the Indian Income-tax Act, 1922, the omission to charge interest cannot be said to be a mistake apparent from the records which can be rectified. It may be mentioned that the Calcutta High Court while coming to the abovesaid conclusion followed the decision of the Supreme Court in S.A.L. Narayan Row's case (supra). That being the position, we are of the opinion that the ITO was not justified in charging interest under Section 217 by invoking the provisions of Section 154. The cases relied on by the learned departmental representative, as pointed out by the learned counsel for the assessee, are distinguishable on facts, inasmuch as in those cases, their Lordships were concerned with the power of the Commissioner to revise the assessment in which the ITO failed to charge interest under Section 7. We also find sufficient force in the submission of the learned counsel for the assessee that there was enough cause for non-filing of estimate under Section 212 inasmuch as the assessee was under the bona fide belief that income earned by it was eligible for exemption under Section 11. The ITO assessed the income of the assessee on the ground that the assessee-institute was notified under Clause (23A) of Section 10 and, therefore, it could not claim any exemption in respect of any portion of its income not covered by Clause (23A) of Section 10 even though the conditions for the applicability of the said Section were fulfilled. In our opinion, this view of the ITO was contrary to the view expressed by the Tribunal in the case of Calcutta Medical Research Institute (supra) in which one of us was a party. In this case, the Tribunal has categorically observed that there is nothing in Section 10 on the one band and Sections 11 and 12 of the Act on the other to suggest that they are mutually exclusive. In that order it has been made clear that both the sections operate concurrently and an assessee may come under both the sections and may claim exemption under both the sections. The Calcutta High Court in the case of Birla Vidhya Vihar Trust (supra) has also held that a trust can claim exemption both under Sections 10(22) and 11. The Allahabad High Court has also taken the same view in the case of Bar Council of U.P. (supra). The Allahabad High Court based its decision on the Supreme Court decision in the case of Bar Council of Maharashtra (supra).

8. It is also important to mention that the assessee-institute applied for exemption under Section 11 before the Commissioner and the assessee had been granted registration by the Commissioner under Section 12A accepting that the institute is one where the provisions of Section 11 are applicable. On a consideration of these facts and keeping in view the principle laid down in the aforementioned cases, we have no hesitation in holding that there was sufficient cause for non-filing of estimate under Section 212 by the assessee and, therefore, it was not a case in which interest under Section 217 was to be charged.


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