Per Shri P. J. Goradia, Judicial Member - In this appeal filed by the assessee the following grounds are taken : 1. that your appellant is liable to interest under section 215 of the Income-tax Act, 1961 (the Act); 2. that the sum of Rs. 1,63,330 paid as advance tax on 11-1-1979 cannot be regarded as part of advance tax and that levying of interest under section 215 (by the learned ITO) was not a mistake apparent from record.
2. The facts briefly stated in the order of the Commissioner (Appeals) are as follows : 2.1 In the original assessment order the ITO charged interest under section 215 amounting to Rs. 18,584. The appellant applied under section 154 of the Act of interest but vide his letter dated 28-8-1981, the ITO declined to allow that relief. This appeal is directed against the ITOs refusal to delete the interest.
2.2 As per the facts and figures furnished by the appellant, the factual position is as follows : On these facts and figures, the appellants contention on merits is as follows : "The assessed tax is Rs. 6,33,347. 75 per cent of the assessed tax works out to Rs. 4,74,160. The assessee had paid advance tax of Rs. 4,89,900. Since the advance tax paid is more than 75 per cent of the assessed tax, interest under section 215 is not chargeable to the assessee." 3. On appeal, the Commissioner (Appeals) dismissed the appeal filed by the assessee. He observed that third instalments of the advance tax was paid after the date for payment of last instalment and that first two instalments aggregating to Rs. 2,26,660 can be considered as payments of advance tax before the date of the payments of last instalment.
Therefore, amount of Rs. 1,63,330 cannot be regarded as part of advance tax, thought it is certainly other tax paid before the close of the financial year. Therefore, the appellants liability to pay interest under section 215 has to be determined with reference to the advance tax paid, i.e., Rs. 2,26,660 and this amount falls short of 75 per cent of the tax levied on regular assessment, the assessee was liable to pay interest under section 215.
3.1 Consequent to the submissions of the assessee in the matter of quantification of the interest he observed that even last instalment paid on 11-1-1979 has to be regarded as tax paid and, hence, interest has to be quantified by taking into account the assessees whole amount of tax paid during the financial year 1978-79, i.e., Rs. 4,89,990.
Therefore, according to him, interest under section 215 should be computed on the difference between the tax payable on regular assessment, i.e., 6,33,347 less total tax paid in the financial year, i.e., Rs. 4,89,990 leaving a balance of Rs. 1,43,557 on which interest should have been calculated.
3.2 Having observed above, he held that actually levy of interest under section 215 is not appealable as such. Secondly, the appeal is directed against the ITOs refusal to accede to the assessees request of treating the levy as a mistake under section 154. He, therefore, rejected the appeal.
4. Before, us the learned counsel on behalf of the assessee fairly agreed that appeal against levy of interest under section 215 was not provided in the Act, but hastened in submitting that the facts in this case were altogether different and, therefore, they have to be appreciated first. After submitting the paper book, he drew our attention to page 5 of the ITOs order wherein tax calculations were made by the ITO. According to calculations made by the ITO, from the total tax payable as advance tax paid of Rs. 4,89,990 was deducted as advance tax paid (sic). After giving credit for payment under section 140A of the Act, of Rs. 1,07,244, aggregate payment of taxes was taken for Rs. 5,97,234. It was submitted that the ITO himself treated aggregate payments of taxes in three instalments as advance tax.
Besides, nothing was mentioned in the assessment order in respect of charging of interest under section 215, but according to the tax calculation form, a copy of which was submitted, it was submitted that interest was charged under section 215 to the extent of Rs. 18,584. It was because of this charge of the tax calculation form that application under section 154 was made to the ITO claiming that 75 per cent of assessed tax worked out to Rs. 4,75,160 and the assessee paid advance tax of Rs. 4,89,990 and, therefore, since the advance tax paid was more, interest under section 215 was not chargeable. In reply, the ITO rejected the application for rectification on the ground that the last instalment of advance tax paid on 11-1-1979 was beyond the due date, i.e., 15-12-1978 and, therefore, while calculating the interest, credit for that amount has not been given. According to section 59 of the Indian Contract Act, 1872, since the payments were made on the advance tax challans, the appropriation of the payment had to be made as per the direction and it was not open for the ITO to ignore the same.
Besides, the opening words in sub-section (1) of the section 215 are "Where, in any financial year, an assessee has paid advance tax ....." and, therefore, what is required to be seen as per the scheme of the Act is the aggregate amount of advance tax paid before the end of the financial year. Otherwise, in the relevant section dates of payments of advance tax would have been mentioned in place of the words in any financial year. The ITO rightly followed the scheme of the Act while calculating the tax. Reliance was placed on the decision of the Allahabad High Court in the case of Omega Sports & Radio Works v. CIT [1982] 134 ITR 28 regarding bending of the High Court judgment and also on decision in 15 STC 338 regarding appropriation of payment. In fact, even first instalment was also late by one day. Reliance was again placed on the decisions of the Gujarat High Court in the cases of CIT v. Kohinoor Flour Mills [1975] 99 ITR 54 and Chandrakant Damodardas v.ITO [1980] 123 ITR 748. Attention was also brought to page 753, wherein, according to the learned counsel, concept of aggregate of taxes paid in financial year was clear. The Legislature had not used the phrase any financial year without any intention. It was further gracefully submitted that the controversy is there as could be seen in the decision of the Kerala High Court in Santha S. Shenoy v. Union of India [1982] 135 ITR 39 at page 45, second para. But then it was claimed that that order was passed without opportunity having been given to the assessee, interest was charged subsequently after the assessment order but in tax calculation form and, therefore, the order is a nullity by itself. Reliance was placed on the decision of the Supreme Court in the case of Dwarka Nath v. ITO [1965] 57 ITR 349.
Reliance was also placed on the decision of Siemens Engg. & Mfg. Co. of India Ltd. v. Union of India AIR 5. The learned departmental representative relied upon the orders of the authorities below and also the decision of the Tribunal in IT Appeal No. 1885 (Ahd.) of 1981 decided on 7-10-1982.
6. We have considered the submissions and the materials to which our attention was drawn. It is an undisputed fact that no appeal lies against the order levying interest under section 215. But here the case is that the assessee has come up in appeal against the order under section 154 refusing to rectify mistake in spite of the fact that aggregate amount of advance tax paid and so treated in the tax calculation in the assessment order itself was higher than 75 per cent of the assessed tax. The appeal in itself is an appeal against rectification of a mistake apparent from the record as held by us in our discussion following. Therefore, it cannot be said that appeal is against charging of interest under section 215. Under section 246(1) (f) of the Act it is mentioned that order under section 154 refusing to allow the claim made by the assessee can be appealed against. It reads as under : "(f) an order under section 154 or section 155 having the effect of enhancing the assessment or reducing a refunds or an order refusing to allow the claim made by the assessee under either of the said sections;" Under section 154, the ITO is empowered, nay, duty bound, to rectify of any mistake apparent from record. Section 154(1) (a) reads as under : "(a) the Income-tax Officer may amend any order of assessment or of refunds or any other order passed by him;" From the above it is clear that mistake apparent from the record in any other order passed by the ITO is also required to be rectified.
Charging of interest under section 215 would be equivalent to any other order passed by him. Therefore, what has to be seen is that whether there is any mistake apparent from the record so as to enable the ITO to pass an order under section 154. Applying this test in this case, what we have to consider is whether aggregate amount of advance tax, irrespective of the dates on which payments were made could be treated as advance tax paid for the purpose of section 215. And if it is held that the aggregate amount of any instalment paid during the financial year is to be treated as advance tax, then not treating any instalment as advance tax payment because of the late payment after final instalment became due would be mistake apparent from record.
6.1 As is rightly brought out before us that the ITO himself has treated the aggregate amount of advance tax paid in three instalments as advance tax, we are unable to know why different stand is taken for the purpose of calculating tax under section 215. The ITO while rejecting the application of the assessee under section 154 has merely stated that last instalment paid on 11-1-1979 was beyond the due date, i.e., 15-12-1978, and, therefore, the said payment is not considered as advance tax while actually calculating the interest. However, the ITO still maintained that credit for advance tax paid beyond the due date had already been given. His reply to the assessee dated 28-8-1981 is reproduced below : "With reference to the above, I have to state that interest under section 215 of the Income-tax Act is correctly charged. The last instalments of advance tax amounting to Rs. 1,63,330 paid on 11-1-1979 beyond the due date (15-12-1978) on or before which it was required to be paid and, hence, the said payment is not considered as advance tax while actually calculating the interest, credit for advance tax paid beyond the due date also been given." 6.2 From the above it would be clear that the ITO wants to treat the same payment as advance tax payment for one set of circumstances, namely, giving credit for taxes but wants to give different treatment to the same advance tax payment for another set of circumstances, namely, while making calculation of interest leviable under section 215. Let us consider whether this type of exercise on the part of the ITO is correctly viewed from provisions of section 215. Section 215(1) reads as under : "Where, in any financial year, an assessee has paid advance tax under section 209A or section 212 on the basis of his own estimate (including revised 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 per 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 : "In this section and sections 217 and 273, assessed tax 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." These two sub-sections nowhere state that instalments paid after the due date will not be treated as advance tax payments. The learned counsel rightly submitted that, according to these sub-sections, what the Legislature intended was the concept of aggregate amount of taxes paid during the financial year preceding the assessment year. This is obvious as sub-sections (1) directs charging of interest only from 1st day of April next following the said financial year and this supports the view that payments made before 31st March of the financial year have to be considered as advance tax payment ignoring the dates on which the payments were made. This view would be forfeited by the fact that no cognizance is taken of different types of previous years followed by the different assessee. For example, in the case of the assessees following June ending, last date for filing the estimate or revised estimate under section 212 of the Act would be 15th December, while the assessees following financial year as the previous year the last date for filing the estimate would be 15th March. Therefore, the intention of the Legislature is not to discriminate between different types of assessees following different previous years so long as the payments are made before the commencement of the assessment year.
Besides, charging of interest under section 215 is only compensatory to recoup loss of interest on amount withheld by the assessee. This fact is evident from the fact that period for which interest is to be calculated is to run from 1st day of the assessment year (this is because payment made up to 31st March is to be treated as advance tax) up to the date of the payment made by way of self-assessment under section 140A. Wrongful acts contravening provision of section 215 are taken care of by penal section 273 of the Act. Looking at the scheme of the Act, necessary provisions for recovery and penalising late payment of taxes are contained in sections 220 and 221 of the Act. Besides, their Lordships of the Gujarat High Court in the case of Chandrakant Damodardas (supra) and the Kerala High Court in the case of Santha S.Shenoy (supra) have observed that for the purpose of granting interest under section 214 of the Act, all the instalments irrespective of the date of payment have to be regarded as advance tax payments. This view is again confirmed in Anup Engg. Ltd. v. ITO [1984] 145 ITR 105 (Guj.).
In our view, same analogy should be extended to the provisions of section 215 for the purpose of calculating interest and finding out 75 per cent of the amount of assessed tax and in the doing so all the instalments paid during the financial years should be considered as advance tax payments. We would also mention that controversy, if at all, is only of the Andhra Pradesh High Court in Kangundi Industrial Works (P.) Ltd. v. ITO [1980] 121 ITR 339. According to Kanga and Palkhivala, this view is erroneous. Regarding appeal against interest under section 139 of the Act also, the Delhi High Court has taken favourable view for the assessee - CIT v. Mahabir Parshad & Sons [1980] 125 ITR 165. The Allahabad High Court in CIT v. Sarju Prasad [1983] 15 Taxman 99 has upheld appeal under section 154 for deleting interest under section 217(1A) of the Act.
6.3 We are also in agreement with the submission made by the learned counsel that provisions of the Indian Contract Act, regarding appropriation of debt would also apply to the payments made on advance tax challans consequent to estimates filed. It cannot be the case of the revenue that provisions of the Indian Contract Act do not apply to the Income-tax Department. Besides, if the ITO did not wish to treat the advance tax so paid, though late, as advance tax payment and if he did not wish to appropriate the payment as directed, then he was duty bound to inform the assessee that though he has accepted the payment, he would treat the payment only as deposit and not as advance tax payment. There are proper procedures for accepting the payment, by way of deposit, as is done, when assessees at their own volition approach the department for making ad hoc payments towards the demands to be raised in future and it is practice of the department to accept such payments as deposits on which usually the department does not grant interest if part of the same results in refund later on.
7. Coming to the order of the Commissioner (Appeals), the ITO made a mistake in a calculation of the amount of tax under section 215 is also confirmed by him in para 5 of his order. He states that for the purpose of computation of interest, all taxes paid before the end of the financial year have to be treated as advance tax paid. According to him, position as on 1st April has to be seen. In so doing, interest should have been levied with reference to the shortfall of Rs. 1,43,557 (assessed tax less tax paid during financial year). Therefore, our view that the ITO committed mistake in calculating the amount of interest and, therefore, he should not have rejected the application filed by the assessee under section 154 is even strengthened by the finding of the Commissioner (Appeals).
7.1 Again the Commissioner (Appeals) was also of the opinion that if instalment is paid after due date of last instalment, then for the purpose of attracting levy of interest, i.e., for the purpose of calculating 75 per cent of the assessed tax, the so delayed instalment is to be considered.
7.2 We were at pains to find such specific provisions in the Act or even in the scheme of the Act. We would only state that such type of violence to the language of section 215 is unwarranted and has no basis. Suppose in this case the assessee were to decide the change of accounting year from Samvat year to March ending next following, then, according to the view of the Commissioner (Appeals), the last date of final instalment would be required to change from 15th December to 15th March of the relevant financial year. In such an even again the date on which the decision for change of accounting year is taken will have bearing on the issue. Such types of far-fetched exercises are not necessary except to complete the otherwise simple provision. We, therefore, reject this stand of the revenue.
8. Guidance is also sought by us from decision of the Andhra Pradesh High Court in CIT v. Andhra Pradesh State Road Transport Corpn. [1983] 15 Taxman 512. In this case the assessee made voluntary payments without notice under section 210 of the Act for the advance tax.
Subsequently, the ITO computed tax under section 210 taking wrong assessment. On regular assessment the ITO found that there was excess payment and granted interest refund under section 214. The Commissioner invoked section 263 of the Act and directed ITO to withdraw interest as it could not be said that the assessee made the payments pursuant to notice under section 210. The Tribunal held the Commissioners order as erroneous. The High Court agreeing with the Tribunal observed that : (i) the assessee made voluntary payment makes no difference in principle or in substance; (ii) neither the assessee nor the ITO had any doubt that the payment was made and recovered as advance tax; (iii) having regard to the nature of the payment as well as nature of demands, it was clear that the assessee made payment and treated by the revenue as made in due compliance with section 211 of the Act; (iv) the character of money did not mainly because once it was received and appropriated by the ITO as advance tax due and payable, section 214 was clearly attracted and interest became payable.
Drawing analogy from the above decision, we are of the opinion that provisions of sections 211 and 215 were substantially complied with, the payment were in the nature of advance tax instalments to be considered while considering provisions of section 215.
9. We hold that aggregate amount of instalments paid during the financial year should be taken as payment by way of advance tax irrespective of the dates on which they are paid and accordingly, hold that the assessee had paid more than 75 per cent of the assessee tax and, therefore, direct the ITO to allow the rectification of assessment and delete the interest wrongly charged under section 215.
10. Since we are deciding the appeal on merits, we are not dealing with the aspect of challenging the validity of the order levying interest under section 215.
11. In the result, the appeal is allowed. The assessee gets relief of Rs. 18,584.