Full Judgment
2. Shri Sandeep Tandon, the departmental representative submitted that, the assessee a limited company and an existing assessee, filed its estimate of current income at Rs. 5 lakhs, in form No. 29 on 15-9-1981, the date on which the first instalment of advance tax was due and had determined the tax payable at Rs. 3,07,500. One-third of this amount, i.e., Rs. 1,02,500 was paid on the due date. The assessee revised this estimate ofits current income on 15-12-1981 at Rs. 10 lakhs in form No.29 and paid the second instalment ofadvance tax at Rs. 2,56,250 on the due date. The assessee finally submitted a revised estimate of its current income on 15-3-1982 at Rs. 32 lakhs in form No. 29 and paid the tax of Rs. 16,09,250 on the due date. The income of the assessee was finally assessed at Rs. 31,86,840.
Sh. Tandon submitted that, the assessee having submitted its estimate of its current income at Rs. 5 lakhs, revising it to Rs. 10 lakhs and finally at Rs. 32 lakhs, indicate clearly that, the intention was nothing more but to postpone the payment of the tax in the first two instalments and therefore, the provisions of Section 216 for the charge of the interest are clearly attracted. He pleaded that, the CIT(A) was clearly in error in coming to the conclusion that the second estimate was in order, because, even that estimate was very much lower than the final estimate and it is not the case of the assessee that, either the first or the second estimate was based on proper material and that the income went up in the last few months of the financial year, which led to the revision of the estimate at a higher figure. He therefore, submitted that, the CIT(A)'s order should be set aside because of the reason that it had wrongly allowed relief to the assessee, when it was not due to it.
3. Shri Shashi Bhushan Gupta filed a chart giving the particulars of the income assessed for the last four asst. years, together with the particulars of the estimate as made for the previous year relevant to the asst. year under appeal and also the basis of his reasoning as to how the conclusion of the CIT(A) was justified. Sh. Gupta carried us through this chart and subm itted that, the assessee as per Sections 209A(1)(a) and 209(1)(d) could have filed a statement of advance tax payable based on either the last assessed income which was asst. year 1978-79 orthe latest returned income which return being made at a higher income and in which tax under Section 140A has been paid and pay the tax in three equal instalments, in which event, the assessee could not be held to have reduced the payment of the first and/or the second instalment. He further submitted that, the assessee has been allowed the option or filing of a lower estimate of his current income, in case he felt that his current income would be lower than the last assessed income and pay the tax according to that estimate. He pleaded that, the income as was assessed for asst. year 1978-79 was Rs. 9.98 lakhs while the income returned for asst. year 1981-82 was only Rs. 5.85 lakhs. He pleaded that, the assessee at best could have been compelled to pay the first and the second instalment of advance tax based on the assessed income for asst. year 1978-79 as per provisions of Section 209A(1)(a) of the Act. The total tax on the assessed income for asst. year 1978-79 at the rates in force for the asst. year 1982-83 was Rs. 6,13,518 and one-third each, i.e., Rs. 2,04,506 would have been normally payable as first and second instalment of advance tax. He pleaded that, the CIT(A) had come to hold that, the second instalment was in order since, the assessee had revised its estimate based on the last assessed income and had paid the advance tax on that basis. He pleaded that, in the circumstances of the case, the assessee should not have been burdened with the interest more than what was upheld by the CIT(A).
4. We have considered the rival submissions very carefully. To appreciate the controversy it would be necessary to reproduce the relevant provisions of the Sections 216,209A and 209 of the Act and therefore, for the sake of facility, the sections are reproduced below: Where on making the regular assessment, the Income-tax officer finds that any assessee has - (a) under Section 209A or Section 212 under estimated the advance tax payable by him and thereby reduced the amount payable in either of the first two instalments; or he may direct that the assessee shall pay simple interest at twelve per cent per annum - (i) in the case referred to in Clause (a), for the period during which the payment was deficient, on the difference between the amount paid in each such instalment and the amount which should have been paid, having regard to the aggregate advance tax actually paid during the year; and Explanation : For the purposes of this section, any instalment due before the expiry of six months from the commencement of the previous year in respect of which it is to be paid shall be deemed to have become due fifteen days after the expiry of the said six months.
Every person shall, in each financial year, on or before the date on which the first instalment, or..., of advance tax is due in his case under Sub-section
(1) of Section 211, if his current income is likely to exceed the amount specified in Sub-section
(2) of Section 208, send to the Income-tax Officer- (a) where he has been previously assessed by way of regular assessment under this Act, a statement of advance tax payable by him computed in the manner laid down in Clause (a) or, as the case may be, Clause (i) of Clause (d) of Sub-section
(1) of Section 209, or (I) in a case falling under Clause (a) as accords with the statement in equal instalment on the due dates applicable in his case under Section 211 The amount of advance tax payable by an assessee in the financial year shall, subject to the provisions of Sub-sections
(2) and (3), be computed as follows:- (i) the total income of the latest previous year being a year later than the previous year referred to inclause (a) on thebasis of which tax been paid by the assessee under Section 140A exceeds the total income referred to in Clause (a); (I) in a case falling under Sub-clause (i), by the total income on the basis of which tax has been paid under Section 140A. Where an assessee who is required to send a statement under Clause (a) of Sub-section
(1) estimates on or before the date on which the first instalment of advance tax is due in his case under Sub-section
(1) of Section 211 that, by reason of his current income being likely to be less than the income on which the amount of advance tax computed in the manner laid down in Section 209 on the current income would be less than the advance tax payable by him under Sub-section (1), he may send to the Income-tax officer, in lieu of such statement, an estimate of- (ii) the advance tax payable by him on the current income calculated in the manner laid down in Section 209, and shall pay such amount of advance tax as accords with his estimate in equal instalment on the dates applicable in his case under Section 211.
5. The reading of the above provisions indicate that, Section 216 would get attracted whenever any assessee estimates his current income instead of sending the statement of income based on either the last assessed income or the latest return with higher income and where tax under Section 140A has been paid. This is so obvious for the reason that, in cases of the assessee having opted to file the statement of the income based on the last assessed or the latest return as the case may be, then he would have complied with the provisions as existing in Sections 209 A and 209 and therefore, for such compliance there could not be any levy of interest. This would not change for the mere reason that the assessee files a higher estimate on the date when the third instalment becomes due and pays the tax on that basis which tax indicates that, the first two instalments are lower, because, such higher estimate has been filed to comply with the provisions of Section 212 which require filing of an estimate in the event of the current year's income exceeding the statement by a particular percentage, viz., 33 and one-third per cent.
6. As per Section 209 A(1), the assessee could opt for filing the statement of his current income based on the last assessed income and pay the advance tax on that basis starting from the first date of payment of advance tax. Section 209(1)(d) directs the assessee to check up with the income as returned for the latest previous year, which year is later to the one assessed and in case, the income so returned is higher and the tax under Section 140A had been paid, then the income as returned would get substituted for the purposes of the statement of income in place of the last assessed income. In case, such returned income is lower, then, such returned income has to be disregarded but the statement of income m ust be based on the last assessed income only.
7. The Legislature considering the possibility of the hardship that might be caused to an assessee because of the fact that, he being compelled to pay higher tax merely for the reason that his last assessed income being higher than the latest returned income, though his current year's income is expected by him to be lower, provided by way of a measure of relief Section 209(2), for filing of an estimate of lower income on or before the date on which the first instalment of advance tax is due and on that basis pay the advance tax. As a safeguard against the misuse of this relief provisiosi, i.e., assessee's estimating a lower income initially and paying less amount of advance tax in the first or the second instalment, have provided for the charging of the interest whenever the assessee chooses to file any estimate, which estimate is found to be lower resulting in reduction in the first and the second instalment of the advance tax and this has been so stated in Section 216.
The assessee has been given the option of filing of lower estimate of his current year's income in place of the statement of income based on either the last assessed income or the latest returned income and once the assessee exercises this option of filing the lower estimate of his current income, he has clearly by-passed the provisions contained in Section 209A(1)(a) and Section 209(1)(d)(i) and there is no way of retracing his steps back to either of these two sections. This is so obvious from the clear wording of the Section 209 A(2) which permits an assessee to file his estimate in lieu of the statement of income.
8. In the instant case, the assessee's last assessed income was Rs. 9.98 lakhs on which the tax payable worked out to Rs. 6.14 lakhs. The income that was returned for the latest previous year, viz.,asst.year 1981-82 was Rs. 5.85 lakhs. The assessee estimated his current income at Rs. 5 lakhs on 15-9-1981, the date on which the first instalment of advance tax was due and paid one-third of the tax on that date which amount was Rs. 1,02,500. The assessee however made an upward revision on 15-12-1981, i.e., on the date when the second instalment of advance tax due and on this basis, the income estimated was Rs. 10 lakhs and the second instalment of advance tax paid was Rs. 2,56,250. The assessee again made an upward revision on 15-3-1982 at Rs. 32 lakhs and paid the differential tax on that date at Rs. 16,09,250. The income came to be assessed at Rs. 31.87 lakhs.
In case the assessee had contained itself with the filing of the statement of current income based on the last assessed income of asst.
year 1978-79 because the returned income for asst. year 1981-82 being lower and paid the first two instalment of advance tax and had filed the upward revision of its income as it had done, the provisions of interest under Section 216 would not have been attracted at all.
However, the assessee had chosen to estimate the income feeling that its current year's income would be lower than the income based on the last assessed income of asst. year 1978-79 and having paid the advance tax on the date when the first instalment of advance tax was due, which tax is found lower, Section 216 is clearly attracted. The revenue and the assessee are not aggrieved to this extent. The objection of the revenue is in holding the second instalment of advance tax as proper.
In support of the conclusion drawn by the CIT(A), the assessee had advanced the argument that, the assessee having revised its income on the date when the second instalment of advance tax was due and this estimate being made at Rs. 10 lakhs, which amount is slightly more than the income as was assessed for asst. year 1978-79, there was no loss of revenue and in fact had the assessee chosen to file the statement of income based on last assessed income and paid the first two instalments on that basis, the tax paid would have been lower though slightly, it would be unjust to charge interest when the assessee had made good the short-payment of first instalment of advance tax.
This argument of the assessee though may appeal to the senses, but when viewed from the provisions of the Section 209 A(2), clearly belies the claim of the assessee. The fallacy in the argument lies on the fact that, the assessee is making efforts to retrace his steps which have earlier bypassed the provisions of Sections 209A(1)(a) and 209(1)(d).
As observed earlier, the assessee has opted to file a lower estimate of advance tax and had reduced his first instalment of advance tax.
Realizing the folly committed by it, the assessee adopted the procedure of revising its current income to a figure which is near about the same as was last assessed, so that it might appear that, this was so done to rectify the mistake doneby it in filing a lower es:imate on the date on which the first instalment of advance tax was due.
The Section 209 A(3) permits the filing of a higher estimate when the assessee hid filed a statement of income based on the last assessed income or the latest return. Section 209A(4) allows an assessee to file an estimate of higher income in case his current year's income is likely to exceed the statement of income or the lower estimate by more than 33 and one-third per cent. The second estimate filed no doubt exceeded the first estimate by more than 33 and one-third per cent and similarly, the third and final estimates far exceeded the second estimate by more than 33 and one-third per cent.
The comparison of the advance taxes paid on the first and second instalments has to be made with the third and last instalment, to see if there is any shortfall in the payment of taxes because the third and final instalment of advance tax is expected to be near about the figure of actual tax liability of any assessee and this is always the starting point. As observed earlier, the last estimate of income was at Rs. 32 lakhs and on this income the total tax liability was Rs. 19.68 lakhs and one-third of this amount would be Rs. 6.56 lakhs and normally the assessee should have paid at least this amount as its first and the second instalments of advance tax. Giving the allowance of just about one-third difference in the income and the same proportion on tax payable, the tax that should have been paid would have been in the range of little over Rs. 4.58 lakhs each as first two instalments. The assessee had paid Rs. 1,02,500 and Rs. 2,56,250 as the first and the second instalments, which instalments are lower than what should have been otherwise paid by the assessee. It is for circumstances such as the one before us, that, the Legislature has clearly provided for the charge of interest because, the assessee had utilized the funds which funds rightfully belonged to the State. The interest charged by the Assessing Officer on the basis of the first and the second instalments of advance tax having been reduced, was proper in the circumstances of the case and accordingly, we set-aside the order of the CIT(A) and restore that of the Assessing Officer.
9. The assessee had placed reliance on Travancore Tea Estates Co. Ltd. v. CIT [1985] 153 ITR 444, wherein the Kerala High Court had examined the words "having regard to the aggregate advance tax actually paid during the year" and the word "may" and came to hold that, the Income-tax Officer has the discretion to levy or not to levy the interest and it was accordingly argued that, at the time when the second instalment was to be paid, the position was corrected to the extent as was called for by filing of the statement of income based on the last assessed income of asst. year 1978-79.
We have to observe that, in the aforementioned case, the issue related to the examination of the very levy of the interest under Section 216, for the asst. year 1972-73, while in the case before us the issue is related to the calculation of the interest under Section 216 as the assessee had already been found attracted to the provisions of levy of the interest by the CIT(A), against which conclusion, the assessee has no grievance. Rather even before the CIT(A) the question was limited to the manner of calculation of the interest and not the levy itself. The present appeal is by the revenue and is against the mode and method of calculating the interest only and therefore, it would be too late in the day for the assessee to agitate on the question of the levy, especially when it is only a respondent and not the appellant.
Therefore, Travancore Tea Estates Co. Ltd,' s case (supra) would have no application to the case before us.