1. By this appeal the assessee has challenged the order of the learned Commissioner (Appeals) upholding the charging of interest from the assessee-company for non-payment of advance tax in terms of Section 215 of the Income-tax Act, 1961 ('the Act'). The assessee's grievance is that the ITO had charged interest from the company under Section 217(1A) of the Act for the alleged failure of the assessee-company to file estimate of advance tax in terms of Sub-section (3A) of Section 212 of the Act. On verification it has been found by the learned Commissioner (Appeals) that the assessee had, in fact, filed the said estimate and, therefore, interest in terms of Sub-section (1A) of Section 217 could not be charged from the assessee and yet instead of quashing the said interest, he has sustained it on the ground that interest was chargeable from the assessee under Section 215 for paying tax less than 75 per cent of the assessed tax on the basis of its own estimate of advance tax and for this purpose he has invoked the powers vested in the ITO under Section 215. According to the assessee's learned counsel, the power to charge interest vested in the ITO and the learned Commissioner (Appeals) could not direct the charging of interest under Section 215, when the ITO had himself directed charging of interest under Section 217(1A).
2. On behalf of the revenue, the order of the learned Commissioner (Appeals) was stoutly supported and it was pointed out that the power to charge interest did vest in the ITO and he had also, in fact, charged interest from the assessee for non-payment of advance tax according to its estimate and, therefore, the mere mistake of the ITO to mention the section wrongly cannot negate his inherent power, rather it is the duty of the ITO to charge interest when it is found on regular assessment that the tax paid by way of advance tax by the assessee as per its own estimate was less than 75 per cent of the tax.
The Commissioner (Appeals) could always in such a situation correlate the power of the ITO to the correct section and a mere mention of a wrong section would not make the order of the ITO without jurisdiction.
It is also pointed out by the learned departmental representative that it was the duty cast on the appellate authorities to correct the mistake done by the ITO and they could not merely rest content by pointing out that the order of the ITO was not based on correct section. Reference is made in this connection to the decision of the Hon'ble Supreme Court in the case of Kapurchand Shrimal v. CIT [1981] 131 ITR 451. Reference is also made to the decision of their Lordships of the Supreme Court in the case of L, Hazari Mal Kuthiala v. ITO [1961] 41 ITR 12, wherein their Lordships have held, inter alia, that 'the exercise of a power would be referable to a jurisdiction which conferred validity upon it and not to a jurisdiction under which it would be nugatory'. According to the learned departmental representative, the learned Commissioner (Appeals) was, in view of the above ratio, justified in correlating the powe r of the ITO to the jurisdiction which would confer validity upon it and, therefore, when he changed the section from 217(1A) to Section 215, he did but the right thing and we should not, therefore, interfere with his order.
3. In rejoinder, the assessee's learned counsel drew our attention to the notice under Section 154 of the Act issued by the ITO wherein he had indicated his intention of charging interest from the assessee under Section 215 but later on, he did not exercise that power. The aforesaid notice clearly went to show that the ITO did not at all have in his mind the invoking of his power under Section 215, he was all the time trying to invoke the provisions of Section 217(1A) and the discretion of the ITO could not, therefore, be exercised by the Commissioner (Appeals) in appellate proceedings and, as such, the Commissioner (Appeals) had wrongly changed the heading under which the interest was to be charged from Section 217(1A) to Section 215.
4. We have given careful consideration to the facts of the case and to the rival submissions. Section 217(1A) provides as follows: 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 1st day of April 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." Sub-section (2) of Section 217 makes the provisions of Sub-sections (2), (3) and (4) of Section 215 apply to interest payable under Section 217 as they apply to interest payable under Section 215. Section 215(1) provides as follows: Where, in any financial year, an assessee has paid advance tax under Section 212 on the basis of his own estimate, and the advance tax so paid is less than seventy-five per cent of the assessed tax, simple interest at the rate of twelve per cent annum from the 1st day of April next following the said financial year up to the date of the regular assessment shall be payable by the assessee upon the amount by which the advance tax so paid falls short of the assessed tax." Sub-section (2) of Section 215 may also be noted at this stage. It reads as follows: Where before the date of completion of a regular assessment, tax is paid by the assessee under Section 140A or otherwise,-- (i) interest shall be calculated in accordance with the foregoing provision up to the date on which the tax is so paid; and (ii) thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax as so paid (in so far as it relates to income subject to advance tax) falls short of assessed tax.
Assessed tax has been defined by Sub-section (5) of Section 215 and means 'the tax determined on the basis of the regular assessment (reduced by the amount of tax deductible in accordance with the provisions of Sections 192 to 194, Section 194A, Section 194C, Section 194D and Section 195) so far as such tax relates to income subject to advance tax and so far as it is not due to variations in the rates of tax made by the Finance Act enacted for the year for which the regular assessment is made'.
5. From a comparative study of the provisions of Sub-section (1A) of Section 217 and Sub-section (1) of Section 215, it would be clear that, whereas Sub-section (1A) of Section 217 deals with the default of not filing the estimate of advance tax in terms of Sub-section (3A) of Section 212, Sub-section (1) of Section 215 deals with the situation where even though the estimate has been filed but tax paid in terms of the said estimate is found to be less than 75 per cent of the assessed tax. In either of the eventualities the computation of interest would be done in the same manner and the quantum of interest would also be similar because the working of interest under Sub-section (1A) of Section 217 has been made subject to the provisions of Sub-section (2) to Sub-section (5) of Section 215. In the present case, the ITO had, without doubt, charged interest from the assessee-company in terms of Sub-section (1A) of Section 217. On appeal, however, the learned Commissioner (Appeals) held that interest was payable by the assessee not for not filing the estimate of advance tax, but for not paying tax in accordance with his estimate and inasmuch as the advance tax paid was less than 75 per cent of the assessed tax, interest was chargeable under Section 215(1) and as, in his opinion, the ITO had proper jurisdiction to charge interest in terms of Section 215(1), he could corelate the jurisdiction of the ITO to the proper section, rather than to the wrong section, which the ITO had mentioned in the impugned assessment order.
6. The aforesaid reasoning of the learned Commissioner (Appeals) appears to us to be based on the erroneous presumption that interest under Section 215 can be charged from an assessee for non-payment of tax according to its estimate. A careful reading of Sub-section (1) of Section 215 would go to show that interest is chargeable under Section 215 not for nonpayment of tax according to the estimate filed by the assessee, but due to the tax paid by the assessee on the basis of his estimate being less than 75 per cent of the assessed tax. The fundamental condition for invoking the provisions of Sub-section (1) of Section 215, thus, is that payment should have been made by the assessee in terms of his estimate filed under Section 212. If tax so paid being in accordance with his estimate is nontheless less than 75 per cent of the assessed tax, the liability to pay interest under Section 215 arises in terms of the aforesaid section. But, when the default committed is for non-payment of tax in accordance with the estimate filed by the assessee, the remedy for it lies not in charging interest under Section 215 or under Sub-section (1A) of Section 217 but in proceeding against the assessee for recovery of tax by treating the assessee as a defaulter in terms of Section 218 of the Act. Sub-section (2) of Section 218 (as it stood at the relevant time) reads as follows: "If any assessee has sent under Sub-section (1) or Sub-section (2) or Sub-section (3) or Sub-section (3A) of Section 212 an estimate or a revised estimate of the advance tax payable by him, but does not pay any instalment in accordance therewith on the date or dates specified in Section 211, he shall be deemed to be an assessee in default in respect of such instalment or instalments:" The learned Commissioner (Appeals) has apparently omitted to take note of the above provision. The situation with which the ITO was faced in the present case at the time of making regular assessment was not that of the assessee not having filed the estimate of advance tax under Sub-section (3A) of Section 212 nor was it one where an assessee might have paid tax in accordance with the estimate filed by him but such tax was less than 75 per cent of the assessed tax but with the one which is directly contemplated by Sub-section (2) of Section 218, namely, where the assessee had filed an estimate of advance tax under Sub-section (3A) of Section 212, but had not paid tax, accordingly, to the said estimate. The ITO had no power to charge interest under Section 215 in the above circumstances and, as such, the learned Commissioner (Appeals) could not correlate the power of the ITO to charge interest for the alleged default in the present case to Section 215. His order being erroneous in law cannot be supported by us and, accordingly, we reverse it and delete the interest charged from the assessee.