Bombay H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that since penalty proceedings under s. 273(a) have been dropped by the ITO, s. 216 which provides for the levy of interest in cases of underestimate is clearly not applicable and, therefore, the levy of interest under s. 216 is a mistake apparent from the record and needs cancellation under s. 154 of the Act, event though a specific appeal lies against the levy of interest under s. 216 under s. 246 of the Act?

Counsel Appeared

V. Balasubramanian with J.P. Davadhar & K.C. Sidhwa, for the Applicant : N.A. Dalvi i/b Milla & Mulla, for the Respondent

T.D. SUGLA, J.:

The question of law raised in this reference at the instance of the Department reads thus:

“Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that since penalty proceedings under s. 273(a) have been dropped by the ITO, s. 216 which provides for the levy of interest in cases of underestimate is clearly not applicable and, therefore, the levy of interest under s. 216 is a mistake apparent from the record and needs cancellation under s. 154 of the Act, event though a specific appeal lies against the levy of interest under s. 216 under s. 246 of the Act?”

The assessee is a company. The proceedings relate to its asst. yr. 1968-69. The assessment was completed under s. 143 on 20th March, 1969 in which interest under s. 216 was directed to be charged. Proceedings under the penal provisions of s. 273(a) were also initiated which were subsequently dropped.

The assessee did not file an appeal against charging of interest under s. 216. However, when penalty proceedings under s. 273(a) were dropped by the ITO, it filed an application for rectification under s. 154 of the Act on 20th Feb., 1971. The application was rejected by ITO. The appeal was dismissed by the AAC. Before the Tribunal, it was inter alia urged for the first time that penalty proceedings having been dropped, it was obvious that interest under s. 216 could not have been charged. In other words, the submission was that if the finding that the assessee had furnished a statement of advance tax payable by him which he knew or had reason to believe to be untrue could not be upheld and this was so in this case as the penalty proceedings were dropped, it could not be held that the assessee had underestimated the advance tax payable by him within the meaning of s. 216. The Tribunal accepted this submission of the assessee and held that the ITO should have rectified the assessment and deleted the interest charged under s. 216 in an application filed by the assessee before him under s. 154 of the IT Act, 1961.

Dr. Balasubramanian, the learned counsel for the Department, submitted that the provisions of s. 273(a) and s. 216 were materially different. In any event, it will have to be argued whether the word “underestimated” used in s. 216 meant the same thing as a statement which the assessee knew or had reason to believe to be untrue within the meaning of s. 273(a). The argument, thus, was that unless charging of interest under s. 216 must automatically fail with the dropping of the penalty proceedings under s. 273(a), the case would not fall within the ambit of s. 154.

Shri Dalvi, the learned counsel for the assessee, on the other hand, relied on the Gujarat High Court decision in the case of CIT vs. Nagri Mills Ltd. (1986) 57 CTR (Guj) 304 : (1987) 166 ITR 292 (Guj) TC4R.846, where an application filed by the Department under s. 256(2) was dismissed. The Tribunal had, he pointed out, taken the view that the word “underestimated” in s. 216 meant underestimate of advance tax payable made knowingly. His submission, thus, was that there was no material difference between the provisions of s. 273(a) and the provisions of s. 216 and, therefore, the Tribunal was justified in the view taken by it.

It may be that it is is possible in a particular case to come to the conclusion that because penalty proceedings under s. 273(a) have been dropped, interest under s. 216 was not chargeable. However, it would require arguments to convince the Court or the Tribunal that it would be so. As pointed out by Dr. Balasubramanian, the provision in the two sections, to say the least, are not in pari materia. The phraseology used is different. It is, therefore, not possible to accept Shri Dalvi’s submission that the charging of interest in the facts of the case amounted to an obvious and glaring mistake so that it could be rectified in the proceedings under s. 154.

In the above view of the matter, we answer the question in the negative and in favour of the Revenue. No order as to costs.

[Citation :181 ITR 460]