Judgment:
Y.V. Anjaneyulu, J.
1. This reference arises under section 256(1) of the Income-tax Act, 1961 ('the Act' for short). It relates to the income-tax assessment year 1973-74. At the instance of the Commissioner of Income-tax, the Tribunal referred the following two questions of law for the consideration of this court :
'1. Whether, on the facts and in the circumstance of the case, the Appellate Tribunal is correct in law in holding that excess interest allowed under section 214 cannot be withdrawn by invoking the provisions of section 154 of the Income-tax Act, 1961
2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that the later binding decision of the Andhra Pradesh High Court does not give rise to a mistake apparent from the record in the order already passed ?'
2. For the assessment year 1973-74, the assessee paid advance tax of of Rs. 11,380 which included a sum of Rs. 3,794 paid on March 27, 1973. While completing the original assessment, the Income-tax Officer treated the payment of Rs. 3,794 as advance tax payment and allowed interest under section 214 of the Act. Subsequently, the Income-tax Officer held the view that the sum of Rs. 3,794 paid on March 27, 1973, cannot be considered to be advance tax payment inasmuch as it was paid after the due date prescribed, namely, March 15, 1973. The Income-tax Officer, therefore, issued a notice under section 154 of the Act requiring the assessee to show cause why the interest allowed under section 214 in respect of the payment of Rs. 3,794 on March 27, 1973, should not be withdrawn by rectifying the assessment. The assessee objected to the jurisdiction of the Income-tax Officer to make any such rectification. Rejecting the assessee's objection, the Officer passed an order under section 154 of the Act on August 30, 1977, withdrawing the interest allowed under section 214 in the original assessment.
3. The assessee filed an appeal before the Appellate Assistant Commissioner of Income-tax against the aforesaid order. The Appellate Assistant Commissioner allowed the appeal holding that interest was properly allowed. Promptly, the Income-tax officer filed an appeal before the Income-tax Appellate Tribunal questioning the correctness of the Appellate Assistant Commissioner's view. The Tribunal held that the Income-tax Officer cannot, on the facts and in the circumstances, exercise jurisdiction under section 154 of the Act. In that view, the appeal filed by the Income-tax Officer was dismissed. Aggrieved by the order of the Tribunal, the Revenue applied for and obtained the present reference under section 256(1) of the Act.
4. We are inclined to uphold the order of the Tribunal. The main argument of learned standing counsel for the Income-tax Department is that this court in Kangundi Industrial Words (P.) Ltd. v. ITO : [1980]121ITR339(AP) , held that any payment made by an assessee subsequent to the due date of installment cannot be held to be an advance tax payment and, consequently, the assessee would not be entitled to claim interest under section 214 of the Act. Learned standing counsel points out that the aforesaid decision constitutes a binding authority so far as the State of Andhra Pradesh is concerned and, consequently, the Income-tax Officer would be justified in rectifying the assessment under section 154 of the Act. According to learned standing counsel, it is immaterial that other High Courts held a different view in the matter. We have to point out that the decision of this court in Kangundi Industrial Works (P.) Ltd.'s case : [1980]121ITR339(AP) , was rendered on March 6, 1979, whereas the jurisdiction to rectify the alleged mistake under section 154 was invoked in the present case on August 30, 1977. It must, therefore, be said that the proceedings initiated by the Income-tax Officer for rectification of an which came much later. Indeed, a perusal of the order passed by the Income-tax Officer on August 30, 1977, does not even indicate any reason why the Income-tax Officer thought that the interest should be withdrawn. All that the order says is that :
'Interest under section 214 was excess allowed.'
5. It is brought to out notice that at the relevant time, there is a judgment of the Gujarat High Court in Bharat Textile Works v. ITO : [1978]114ITR28(Guj) taking a view contrary to the one taken by this court in March, 1979.
6. It would, therefore, appear that on the date when the Income-tax Officer exercised the jurisdiction under section 154, the matter was not free from argument or debate. It cannot be said that a patent and self-evident mistake occurred when the Income-tax Officer completed the assessment treating the payment as an advance tax payment and granting interest under section 214 of the Act. It is settled law that the Income-tax Officer cannot exercise jurisdiction under section 154 to rectify matters which are capable of debate and argument. In the circumstances, we are of the view that the power was erroneously exercised by the Income-tax Officer under section 154.
7. Learned counsel for the respondent, Sri M. J. Swamy, mentioned that while the decision of this court in Kangundi Industrial Works (P.) Ltd. v. ITO : [1980]121ITR339(AP) , supported the view that interest cannot be allowed, there are two decisions of the Madhya Pradesh High Court in CIT v. Jagannath Narayan Kutumbik Trust : [1983]144ITR526(MP) and CIT Parmanand Bhai Patel : [1983]144ITR871(MP) , taking a contrary view. It is not necessary for us to examine the impact of the judgment of the Madhya Pradesh High Court as, in our opinion, the proceedings initiated on August 30, 1977, were not based on any judgment of this court which was binding in the State of Andhra Pradesh. We accordingly answer the two questions referred in the affirmative, that is to say, in favour of the assessee and against the Revenue. No costs.