Full Judgment
2. The learned counsel for the assessee submitted that indentical issue had been before the Tribunal in assessee's own case for assessment year 1981-82 and he made available a copy of the said order in ITA No.1330/Del/85 dated 25-9-1987. He submitted at length that though the issue is covered against the Revenue as per said order he would not be satisfied unless he substantiates denovo the assessee's claim both on facts and in law. He submitted that the levy of interest Under Section 216 is not mandatory or automatic without applying his mind the ITO has arbitrarily in his handwriting written "charge interest Under Section 216", along with other Sections viz. 215 & 217. He cited Hindusthan Sanitary Ware & Industries Ltd. v. CIT [1978] 114 ITR 85 (Cal); CIT v.Nagri Mills Ltd. [1986] 29 Taxman 446 [1987] 166 ITR 292 (Guj.) and CIT v. Elgin Mills Co. Ltd. [1980] 123 ITR 712 (All.) and also drew our attention to a Board Circular according to which order regarding levy of interest Under Section 216 is to be speaking. He said in light of Tribunal's decision in assessee's own case and due to case laws cited by him assessee would easily succeed, but this will not satisfy him unless the factual aspects of the matter is also projected according to which no interest was leviable. He submitted therefore that the assessee as such was not obliged to file any estimate though it was filed on 15-12-1981 at Rs. twenty-nine lakhs, because latest assessment order for assessment year 1977-78 assessed the assessee at a loss of Rs. 2,25,230 and return for assessment year 1980-81 again was filed at loss of Rs. 16,56,106. According to him neither as per law nor on the basis of facts interest Under Section 216 could be charged. The learned D.R. relied on the order of the two lower authorities.
3. After taking into consideration the rival submissions and looking to the facts available on record we are unable to sustain the charge of interest Under Section 216. This is true that for assessment year 1982-83 the accounting year ended on 31-10-1981. The assessment for assessment year 1977-78 had been framed on 26-3-1980 computing a loss of Rs. 2,25,230 and on 30-6-1980 return for assessment year 1980-81 was filed, which was showing a loss of Rs. 16,56,106. When these two facts are perused on one hand and Section 216 along with 209 are perused carefully on the other hand it can easily be said that the assessee was not obliged to file the estimate of income which it had filed on 15-12-1981 in a sum of Rs. twenty-nine lakhs. Similar identical issue had been before the Tribunal in assessee's own case, wherein the charge of interest Under Section 216 came to be cancelled by the Tribunal vide its order dated 24th October 1986 in ITA No. 1330/Del/86. There as well the ITO had not dealt with the issue regarding charge of interest with any reasoning. He elected only to mention charge interest Under Section 216. Similar is the position here. Section 209-A clearly indicates on the particular facts of this case that the assessee is not liable to pay any advance tax. Because the assessee is an existing assessee and he is only liable to pay advance tax on the under mentioned basis (i) latest assessed income; (ii) latest total returned income, whichever is higher. In the present case latest income is Nil for assessment year 1977-78. Instead it is a loss of Rs. 2,25,230 which is determined. Then latest returned income for assessment year 1980-81 is again a loss of Rs. 16,56,106. Since the accounting year of the assessee ended on 31-10-1981, assessee on its own filed the estimate at Rs. twenty-nine lakhs only which simply goes to show the bona fide of the assessee. The IAC (Assessment) instead appreciating that action of the assessee, charged interest Under Section 216 without dealing with it at ail. We shall be failing in our duty in case we do not deal with the Circular of the Board in this respect. Under the heading "Whether ITO should go into mens rea before charging interest under this Section, the Board has circulated regarding charge of interest Under Section 216 as under: - The order under Section 216being appealable, should be a speaking order. Before charging interest under Section 216, the Income-tax Officer should, therefore, go into the mens rea of the assessee and reach a proper conclusion after hearing him on the circumstances under which he committed such default. It is only on such a finding that underestimation/wrongful deferment has been made by the assessee, that the Income-tax Officer can levy interest under Section 216. Since the finding rests on the Income-tax Officer's appreciation of the facts, the reasons supporting his conclusions should be recorded in the assessment order itself so that an appellate authority can judge whether the Income-tax Officer's finding is justified on the facts of the case.
Besides Their Lordships of Calcutta High Court in case of Hindusthan Sanitary Ware & Industries Ltd. (supra), where the ITO had not applied his mind to the facts and circumstances of the case, the Tribunal had restored back this matter for fresh consideration by the ITO. Their Lordships held that the Tribunal was not justified even in sending back the matter to the ITO for fresh decision instead of annulling the same.
Similar is the finding given by Gujarat High Court in case of Nagri Mills Ltd. (supra). Their Lordships in the said case observed as under: - A plain reading of Section 216 of the Income-tax Act, 1961, makes it clear that interest cannot be levied under that Section unless the Income-tax Officer finds that the assessee had underestimated the advance tax payable by him. Payment of interest is mandatory under the provisions of Sections 215 and 217 of the Income-tax Act, 1961.
On the other hand, the levy of interest under Section 216 is discretionary. The question of exercising discretion would arise only when the Income-tax Officer finds that the assessee had underestimated the advance tax payable by him.
Payment of interest is mandatory under the provisions of Sections 215 and 217 of the Income-tax Act, 1961. On the other hand, the levy of interest Under Section 216 is discretionary. The question of exercising discretion would arise only when the ITO finds that the assessee had under-estimated the advance tax payable by him.
3.1 Even Allahabad High Court in case of Elgin Mills Co. Ltd. (supra) has taken the same view and we are fortified in our finding by the said decision. The order of the CIT (Appeals) regarding charge of interest Under Section 216 is, therefore, reversed.