Harayana Milk Foods Ltd. vs Inspecting Assistant ...
1989 Latest Caselaw 180 Del

ORDER

Per A. Kalyanasundharam, A.M. - The assessed a limited company has preferred this appeal against the levy of interest u/s 216 of the IT Act, 1961.

2. The brief facts of the case are that the assessed had filed the statement of its income for advance tax purposes in Form No. 28A on 13th September, 1983. The income shown in this statement was Rs. 8,12,240 which income represented the last assessed income. The first two Installments of advance tax were paid based on this income. On 15th March, 1984, the assessed company had filed From No. 29 estimating its income at Rs. 18,12,240 and had paid the last Installment of advance tax accordingly. The ITO on completion of the assessment levied the interest u/s 216 of Rs. 16,072 for the reason that the first two Installments of advance tax were lesser than the last Installment, though he did not call upon the assessed company to explain it. Aggrieved the assessed company preferred appeal to the CIT (A). The contention of the assessed was that as required by law it had filed the statement of its income in Form No. 28A and had paid the taxes accordingly and therefore no interest could be charged from the assessed. In support of its contention the assessed had placed reliance on Tribunals decision in Narottam Dass Ram Chand & Co. v. ITO [1984] Tax. 73(6A)-31 (Bom). The CIT (A) rejected the contention of the assessed and he recalculated the amount of interest to be charged at Rs. 14,066 as against Rs. 16,072 charged by the ITO. The assessed being aggrieved by this order of the CIT (A) dated 26th June, 1986 has come up in appeal before us.

3. The learned counsel Mr. Pradeep Dinodia appearing for the assessed contended that the assessed company had filed the Form No. 28A based on the last assessed income and this was so done in compliance with the provisions contained in secs. 209 and 209A. He submitted that till 31st May, 1978 the law required the ITO to issue notice of advance tax u/s 210 on the basis of which the assessed was required to pay the advance tax Installments. He added that the assessed could submit an estimate of lower income on receipt of the notice from the ITO and the assessed was required to file an estimate of higher income only when the current income exceeded the income on which advance tax was paid by a specified percentage and not otherwise. He then added that the law under-went changes effective from 1st June, 1978 and the assessed who were assessed were obligated to file the statement of income in Form 28A based on either the last assessed income or the last returned income in which there was payment of self-assessment tax whichever income was larger and pay the first two Installments on that income. The Act also provided for filing of a lower estimate of income initially. The Act provided for the estimation of higher income only when the current years income was more than the income as per Form 28A by 33 and 1/3rd per cent and this estimation was to be done on or before the last Installment of advance tax was due. He accordingly pleaded that the assessed in the instant case having complied with the law literally, interest could not be charged for the mere reason that the first two Installments of advance tax were lower than the last Installment of advance tax. He pleaded that the statement of income and estimate of income are two different and distinct categories recognised by the Act. He pleaded that sec. 216 would get attracted only when the assessed files and estimate by which he had reduced the first two Installments and not in a case like that of the assessed, where only a statement of income was filed. He finally contended that the interest could not be levied on the assessed at all and the same should be cancelled and relied on the Tribunals decision (supra)

4. The learned D. R. Mr. Adlakha contended that the case of the assessed has no merit and the authorities below had rightly rejected the claim.

5. We have given our very careful considerations to the rival submissions as well as the materials on record. The short point involved in this appeal is whether the statement of income and the estimate of income have the same meaning or have different connotations. To resolve this issue, we have to necessarily examine the provisions that are contained in secs. 209 and 209A and also the reasons which brought about the charge effective from 1st June, 1978.

5.1 The law as was in force till 31st May, 1978 provided two categories of assesseds. One, existing assesseds, those who have been assessed under the Act. Two, new assesseds those who have not been assessed under the Act. In regard to the existing assesseds sec. 210 of the Act had placed an obligation on the ITO to send the notice of advance tax payable. The Act provided certain options to the assessed. One, the assesseds could comply with this notice and pay the advance tax. Two, as per sec. 212(1) of the Act, he could file an estimate of lower income as soon as he receives the said notice and pay the advance tax accordingly. Third, as provided in sec. 212(3A) of the Act, he could pay the first two Installments as per the notice from the ITO and file an estimate of higher income on or before the last Installment of the advance tax pay the differential tax as the last Installment. The new assesseds were required to file their estimate of income only on or before the last date Installment of advance tax. The assesseds were allowed to revise the estimate of income for advance tax purposes at any time and pay the tax. The existing assesseds who were not served with the notice of advance tax u/s 210 did not pay any advance tax.

5.2 The Legislature wanted to remove this anomaly of existing assesseds not paying any advance tax while new assesseds were paying their advance tax. They were aware of the growing number of assesseds, the problem related thereto of timely sending of notices to all of them. They accordingly brought out the change in the advance tax provisions by which they evolved a procedure for existing assesseds to pay their advance tax dues without waiting for the notice from the ITO. While introducing the changes in sections 209 and 209A in the Finance Bill, 1978, the explanation provided was -

"If we taxpayers who may not be familiar with the income-tax load are called upon to pay advance tax voluntarily, it is only appropriate that taxpayers who are being regularly assessed to income-tax should also unsatisfactory because in cases where an advance tax on a voluntary basis. The existing legal position is also unsatisfactory because in cases were an advance tax notice is not served to a tax-payer who is being regularly assessed to income-tax, he will have no liability to pay any advance tax. The issue of advance tax notices in a large number of cases early in the financial year also involves considerable labour and time."

Accordingly sec. 209A was added to the statute and this was effective from 1st June, 1978 and was made applicable only to be existing assessed.

5.3 The provisions as were brought in placed the following obligations on the existing assessed. Firstly, the assessed was to file a statement of his current income based either on the last assessed income or the last returned income in which he had paid self-assessment tax whichever income was higher. In drawing up the statement adjustments were allowed to be made in respect of income from capital gains, winnings from lottery etc. The said statement was required to be filed on or before the first Installment of advance tax was due. The advance tax Installments were to be paid based on this statement of income. Second, he was allowed the option of filing an estimate of lower income of the current year instead of filing the statement of income and pay the advance tax on that basis. Third, he is expected to file an estimate of higher income in case the current years income exceeded the income as per the statement of income by a specified percent and this was required to be filed on or before the last Installment of advance tax was due and pay the differential tax as the last Installment of advance tax. The third option is pari materia with the same as are contained in sec. 212(3A) of the Act.

5.4 When we compare the provisions before and after 1st June, 1978 we notice the following :

Before 1-6-1978. - In situation one, the assessed could not be said to have reduced the Installments of advance tax for he had only complied with the notice from the ITO. In situation two, if it is found that first two Installments are lower than the last Installment then it could be said that there was an effort on the part of the assessed to reduce the first two Installments of advance tax. In situation three, the assessed cannot be held to have reduced the first two Installments of advance tax because, he had paid higher amount as the last Installment. The reason is that the assessed has complied with the notice of the ITO and he had filed the estimate of the higher income only for the reason that the current years income was more than the income as per the notice u/s 210 by the specified percentage this was so required to be done by him on or before the last Installment of advance tax only.

After 1-6-1978. - The situation one is identical to the one as was existing before 1-6-1978 for the reason that it is only a substitute to the notice from the ITO u/s 210. Therefore when the taxes are paid on the basis of this statement it tantamounts to paying of taxes as demanded of him ITO by virtue of notice u/s 210. The question of comparing the first two Installments of advance tax with the last Installment of advance tax does not arise at all. In situation two it does attract the requisites of comparison to be made of first two Installments of advance for the taxes were paid on the basis of an estimate. In situation three the estimate of higher income on or before the last Installment of advance tax is required to be made only when the difference between the current years income and the income as stated in the statement of income exceeds the specified percentage.

5.5 Thus it is clear that the requirement of law prior to and after 1-6-1978 would be satisfied if the assessed had paid the first two Installments of advance tax as demanded of him by the ITO or as per the statement of income as filed and in both the situations the assessed could not be said to have reduced the first two Installments of advance tax, the reason being that in the former situation, he had paid the advance tax as demanded of him, while in the latter, he had paid the tax as allowed by law. This is the intention of the Legislature as otherwise there is no purpose of introducing two different categories for payment of advance tax, viz., statement of income and the estimate of income.

5.6 We shall now examine the provision contained in sec. 216 in the light of the observation made above. The sec. 216 reads as under :

Where on making the regular assessment the Assessing Officer finds that any assessed has -

(a) u/s 209A or 212 under-estimated the advance tax payable by him and thereby reduced the amount payable in either of the first two Installments; or

(b) u/s 213 wrongly deferred payment of advance tax on a part of his income;

he may direct that the assessed shall pay simple 15% p. a.

The reading of the above clearly indicates that this section would get attracted only when the assessed files an estimate and pays the advance tax based on that estimate. We have mentioned in para 5.3 above that sec. 209A provides the option of filing of a lower estimate of income in place of filing of the statement of income and a similar provision exists u/s 212(1) which is applicable when a notice u/s 210 is served on the assessed. In a situation like the one mentioned above alone this section would become operative and in no other.

5.7 We are therefore of the view that in the instant case, the assessed having paid the first two Installments of advance tax based on the statement of income which is as per the initial option allowed to the assessed, it has only complied with the law. Secondly, this statement being not the same as an estimate of income for it does not involve any estimation but only adoption of either the last assessed income or the last returned income. Thirdly, if as a consequence the first two Installments fell short of the last Installment it does not lead to the inference that the advance tax payable was reduced in either of the first two Installments. Lastly, since the Act intends to cover only cases where an estimate of lower income was filed even prior to the payment of either of the first two Installments and not those where statements of income are filed, the very initiation of proceedings under section 216 is bad in law and on facts of the case. We accordingly quash the order of charging of interest.

In the result the appeals is allowed.