The judgment of the court was delivered by
GOPALAN NAMBIYAR C.J. - The following question of law has been referred for our determination by the Income-tax Appellate Tribunal, Cochin Bench, namely :
'Whether, on that facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that there was a mistake apparent from the records in levying interest under section 139(8) and under section 217(1A) and cancelling those levies ?'
The assessee is a private limited company. The assessment year with which we are concerned is 1972-73. The assessee filed an estimate for the purpose of payment of advance tax under section 212(3A) of the Income-tax Act, 1961, showing that the estimated income will be Rs.2,88,000 and enclosing a cheque for Rs. 1,10,000 on March 10, 1972, as advance tax on the estimated income. The cheque was not cashed by the Income-tax Officer within time. The Officer demanded a fresh cheque from the assessee, which was sent up on June 27, 1972, and duly encashed. The assessment was completed on November 30, 1972, fixing the income at Rs. 3,36,515. Penal interest was levied on the assessee under section 217(1A) for Rs. 6,544 and interest was also levied under section 139(8) to the tune of Rs. 3,069 for not submitting the return in time. On appeal by the assessee the interest on both the counts was reduced.
The assessee wrote to the Income-tax Officer stating that it had made an estimate and had enclosed a cheque for Rs. 1,10,000 and pointed out that there could be no question of levying penal interest under section 215 or under section 217(1A). Objection was also raised to the levy of interest under section 139. On the basis of this letter the Income-tax Officer passed an order of rectification under section 154 of the Act accepting the assessees plea and deleting the amounts charged by way of interest under section 215, but, holding that, as the tax, as per the estimate, was not paid in time, the levy of interest under sections 217(1A) and 139(8) were justified and proper. The assessee appealed to the Appellate Assistant Commissioner, but the appeal proved unsuccessful. On further appeal to the Appellate Tribunal, the Tribunal took the view that the assessee had filed an estimate, which was received by the Income-tax Officer on March 10,1972, and, therefore, there cannot be a levy of interest under section 217(1A) of the Act. Regarding the levy of interest under section 139, the Tribunal was of the view that, by a circular issued by the Central Board of Direct Taxes, the assessee had been given an option of paying the advance tax either by cash or by cheque, and that he had opted for the latter. The Tribunal, therefore, held that the assessee had discharged his burden of proving the payment of tax; that it was for the Income-tax Officer to get the cheque encashed; and having failed to do so, the assessee cannot be penalised by levying interest. In this view, the Tribunal allowed the appeal. It referred the question of law under section 256(1) of the Act.
Section 139(8) of the Act reads :
'139. (8) (a) Where the return under sub-section (1) or sub-section (2) or sub-section (4) for an assessment year is furnished after the specified date, or is not furnished, then whether or not the Income-tax Officer has extended the date for furnishing the return under sub-section (1) or sub-section (2), the assessee shall be liable to pay simple interest at twelve per cent, per annum, reckoned from the day immediately following the specified date to the date of the furnishing of the return or, where no return has been furnished, the date of completion of the assessment under section 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source :
Provided that the Income-tax Officer may, in such cases and under such circumstances as may be prescribed, reduce or waive the interest payable by any assessee under this sub-section.
Explanation 1. - For the purposes of this sub-section specified date, in relation to a return for an assessment year, means, -
(a) in the case of every assessee whose total income, or the total income of any person in respect of which he is assessable under this Act, includes any income from business or profession, the date of the expiry of four months from the end of the previous year or where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year, or the June 31, of the assessment year, whichever is later;
(b) in the case of every other assessee, the June 30, of the assessment year.
Explanation 2. - For the purposes of this sub-section, where the assessee is a registered firm or an unregistered firm which has been assessed under clause (b) of section 183, the tax payable on the total income shall be the amount of tax which would have been payable if the firm had been assessed as an unregistered firm.
(b) Where as a result of an order under section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 264, the amount of tax on which interest was payable under this sub-section has been reduced, the interest shall be reduced accordingly, and the excess interest paid, if any, shall be refunded.'
Section 212(3A) of the Act reads :
'212. (3A) In the case of any assessee who is required to pay advance tax by an order under section 210, if, by reason of the current income being likely to be greater than the income on which the advance tax payable by him under section 210 has been computed or for any other reason, the amount of advance tax computed in the manner laid down in section 209 on the current income (which shall be estimated by the assessee) exceeds the amount of advance tax demanded from him under section 210 by more than 33-1/3 per cent. of the latter amount, he shall, at any time before the date on which the last instalment of advance tax is due from him, send to the Income-tax Officer an estimate of -
(i) the current income, and
(ii) the advance tax payable by him on the current income calculated in the manner laid down in section 209,
and shall pay such amount of advance tax as accords with his estimate on such of the dates applicable in his case under section 211 as have not expired, by instalments which may be revised according to sub-section (2) :
Provided that in a case where the Commissioner is satisfied that, having regard to the nature of the business carried on by the assessee and the date of expiry of the previous year in respect of such business, it will be difficult for the assessee to furnish the estimate required to be furnished by him in accordance with the provisions of this sub-section before the date on which the last instalment of advance tax is due in his case, he may, if the assessee pays the advance tax demanded from him under section 210 before such date, extend the date for furnishing such estimate up to a period of thirty days immediately following the last date of the previous year in respect of that business, and where the date is so extended, the assessee shall pay, on or before the date as so extended, the amount by which the amount of advance tax already paid by him falls short of the advance tax payable in accordance with his estimate.'
Section 217(1) of the Act reads :
'217. (1A) 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 April 1, next following the financial year in which the advance tax was payable in accordance with the said sub-section 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. '
Confining attention to section 217(1A) it will be noticed that the penal interest provided for by the said sub-clause will be attracted only if the assessee concerned has not sent the estimate referred to in sub-section (3A) of section 212. The Tribunals view that, to the extent proved, the estimate had actually been sent, whatever may be the position in regard to the payment of advance tax, is plausible. But, taking a closer view of sub-section (1A) of section 217, we should give enough weight and significance to the expression estimate referred to therein, which would take us back to sub-section (3A) of section 212. Under that sub-section it is clear that the estimate consists of : (1) an estimate of the current income; and (2) an estimate of the advance tax, coupled with, (3) a payment of the advance tax. Therefore, counsel for the revenue contends-we think with at least equal, if not greater, plausibility-that the reasonable view to take as to the scope and amplitude of sub-section (1A) of section 217 would be to read all the three requirements into that sub-section, viz., the requirement of an estimate of income, of an estimate of advance tax, and of a payment of the advance tax; with the result that, if any one of these three is shown to be in default, the levy of penal interest would be attracted. The view is attractive, and we are inclined to think that, in order to secure the object and the purpose of the enactment, and to harmonise the different provisions, the view is worthy of acceptance. We do not, however, think it necessary to express our final and concluded view, as, in any event, we are of the opinion that the question of law referred for our opinion can be answered on the other proved facts and circumstances of the case.
Even assuming that, for failure to comply with any one of the three requirements stated to be involved in sub-section (3A) of section 212, the levy of interest under section 217(1A) would be attracted in the instant case, the only default that has been alleged against the assessee is that he did not pay the advance tax. This is on the ground that the payment was made not in cash but only by cheque. But, as we pointed out, there is the Circular No. 3 dated February 11, 1969, of the Central Board of Direct Taxes which forms annexure 'F' to the statement of the case which recalls the decision of the Board that payment tendered by crossed cheque will be accepted in the income-tax office. Clause (6) of the circular stated :
'For the removal of all doubts it is clarified that the date of tax payment will be the date on which the proceeds of the cheque are realised and credited to the Government account.'
Relying upon the above clause, counsel for the revenue stated that it is only on realisation of the proceeds that payment could be said to have been made. While it will ordinarily be so, where the non-realisation is on account of the neglect or default of the Income-tax Officer-as in this case-we do not think, the assessee can be visited with the levy of penal interest or other burdens under the provisions of the taxing statute. We are, therefore, of the view that, in this case, the assessee had discharged the burden of proving that there was payment of advance tax by cheque duly forwarded by them, and the non-realisation of the cheque was only owing to the default and neglect of the Income-tax Officer, for which the assessee is not to blame.
We answer the question in the affirmative, that is, in favour of the assessee and against the department. No costs.