Full Judgment
2. The assessee is a limited company. It paid advance tax by cheques drawn on the local banks at the counter opened in the Aayakar Bhavan for this purpose. The dates on which the cheques were tendered at the counter, the dates of the encashment of the cheques and the amount in respect of the three instalments were as follows : The IAC while completing the assessment did not allow interest on the excess advance tax paid. The assessee-company, therefore, moved an application for rectification of the assessment requesting the IAC to allow interest on the excess advance tax paid. The IAC, however, by order under Section 154 of the Income-tax Act, 1961 ('the Act') held that since the advance tax instalments were paid on dates subsequent to the due dates for payment of advance tax instalments, the interest under Section 214 of the Act is not payable on the excess advance tax paid. He, therefore, rejected the application of the assessee-company by order under Section 154 dated 24-11-1982.
3. On appeal, the Commissioner (Appeals) held that since the date of payment is the date of presentation of cheques when the payment is accepted by cheque and the cheques for each of the three instalments drawn on local banks were presented before the due dates of the instalments, the assessee was entitled to the interest under Section 214 on the excess advance tax paid. The Commissioner (Appeals), therefore, came to the conclusion that the action of the IAC in not allowing interest under Section 214 on excess advance tax paid was a mistake apparent from the record which ought to have been rectified.
The revenue is aggrieved and has, therefore, come up in the present appeal before us.
4. The learned departmental representative, Shri Tej Prakash, relying on the rulings of the Hon'ble Andhra Pradesh High Court in the case of Kangundi Industrial Works (P.) Ltd. v. ITO [1980] 121 ITR 339 and the Hon'ble Kerala High Court in the case of A. Sethumadhavan v. CIT [1980] 122 ITR 587 submitted to us that where the advance tax paid by the assessee was after the due dates fixed for instalments, the assessee is not entitled to interest under Section 214 on the excess advance tax paid. In these circumstances, according to Shri Tej Prakash, if interest on excess advance tax was not allowed by the IAC this was not a mistake, what to say of a mistake apparent from the record which may be rectified by order under Section 154. Shri Tej Prakash, therefore, vehemently argued before us that the order of the Commissioner (Appeals) was erroneous and should be reversed.
5. On the other hand, the assessee's learned counsel Shri Pardiwalla submitted to us that the payment for each of the three instalments was made before the due dates, by cheques drawn on local bank and the payment was tendered at the counters opened by the Income-tax Department itself in the Aayakar Bhavan. In these circumstances, according to Shri Pardiwalla, the IAC should have, in accordance with the Board's Circular F. No. 12/80/64-IT(B) dated 1-6-1965, sent the cheques to the Reserve Bank immediately or on the same day or the next working day and if this was done, the payment by the assessee was within the date fixed for the payment of the advance tax instalment. He also referred to the ruling of the Hon'ble Bombay High Court in the case of CIT v. Traub (India) (P.) Ltd. [1979] 118 ITR 525 wherein their Lordships laid down that if there was a delay in payment of advance tax after the date fixed for the payment of the advance tax instalment by a few days only but the payment was made within the financial year and the assessee was held to be entitled to interest under Section 214 on the excess advance tax paid, no question of law arises for reference to the Hon'ble High Court. He, therefore, submitted that the direction of the Commissioner (Appeals) that the assessee-company should be allowed interest under Section 214 on the excess advance tax paid as a mistake apparent from the record was perfectly justified and there is no merit in the appeal filed by the revenue.
6. We have carefully considered the rival submissions. At the outset it would be necessary to point out that the Board by F. No.12/80/64-IT(B), dated 1-6-1965 had issued a circular, the relevant extract from which is as follows : According to Rule 79(1)(a) of the Central Treasury Rules, a treasury is authorised to accept only cheques drawn on local banks in payment of Government dues and the provision contained in Rule 80 of these Rules that the payment will be deemed to have been made on the date of the presentation of the cheques will apply to only cheques drawn on local banks. Since the payment in this case was not in accordance with the Treasury Rules, the cheque having been drawn on an outstation bank, the effective date of payment was the date on which the cheque was encashed. In the above case, the treasury actually credited the amount to the Government account on 15-4-1958. The assessee was, therefore, not entitled to any interest under Section 18A(5)/214 of the Income-tax Act, 1922/1961.
The Income-tax Officer should, at the time of receiving cheques in payment of tax make it clear to the assessee that the date of payment of the cheque will be taken as the date of its presentation by the Income-tax Officer to the treasury or the Reserve Bank in the case of cheques on local banks and the date of encashment in the case of outstation banks. If an assessee is not agreeable to the above conditions, he should be asked to pay the tax or present the cheque direct to the Treasury/State Bank.
The Income-tax Officer should be directed to see that the cheques received from the assessee are presented to the Treasury or the Reserve Bank immediately or on the same day or the next working day.
It cannot be disputed in view of the rulings of the Hon'ble Supreme Court in the cases of Navnit Lal C. Javeri v. K.K. Sen, AAC [1965] 56 ITR 198 and Ellerman Lines Ltd. v. CIT [1971] 82 ITR 913 that the circulars issued by the Board are binding on the authorities employed in the execution of the Act. Viewed in this context, it is not under dispute that the Income-tax Department had accepted the payment on account of advance tax by cheques drawn on local banks a few days before the actual date of the payment of the instalment and the ITO/IAC, in accordance with the instructions of the Board, were supposed to send the cheques to the Reserve Bank or the State Bank, as the case may be, immediately or on the same day or on the next working day for encashment in which event the date of presentation of the cheques to the State Bank or the Reserve Bank was the date of payment and not the date on which the cheque was actually encashed. In spite of a specific query by the Bench, the learned departmental representative, Shri Tej Prakash, has not been able to give us the date on which the cheques were actually presented to the Reserve Bank for encashment. We would, however, not be unjustified in making the presumption that the ITO or the IAC, as the case may be, did his duty as directed by the Board in its circular and if this is done all the three payments under consideration here were made on or before the due date of the payment of the advance tax instalment. In these circumstances, there can be no element of doubt that on the basis of the Board's circular itself which was binding on the income-tax authorities, the assessee was entitled to interest under Section 214 on the excess advance tax paid. The non-payment of interest under Section 214 on the excess payment of advance tax was, therefore, a mistake apparent from the record and the Commissioner (Appeals) rightly directed that the assessee-company should have been allowed the interest under Section 214 on the excess payment of advance tax and the assessment should have been modified to rectify this mistake apparent from the record. On this issue, therefore, the order of the Commissioner (Appeals) appears to be justified and is upheld.