Gauhati H.C : Whether, on the facts and circumstances of the case, the Tribunal had any material to hold that the assessee has underestimated advance tax payable and thereby reduced the amount payable in instalments for the year relevant to the asst. yr. 1975-76 ?

High Court Of Gauhati

Steelsworth (P) Ltd. vs. Commissioner Of Income Tax

Section 216

Asst. Year 1975-76

D.N. Baruah, S.L. Saraf, A.K. Patnaik & B.N. Singh “Neelam”, JJ.

IT Ref. No. 12 of 1991

20th November, 1999

Counsel Appeared

R. Goenka & R.K. Joshi, for the Assessee : A.K. Saraf, for the Revenue

JUDGMENT

D.N. BARUAH, J. :

In this reference under s. 256(1) of the IT Act, 1961 (for short “the Act”), the following question has been referred by the Tribunal, Guwahati, for opinion of this Court : “Whether, on the facts and circumstances of the case, the Tribunal had any material to hold that the assessee has underestimated advance tax payable and thereby reduced the amount payable in instalments for the year relevant to the asst. yr. 1975-76 ?”

2. The AO completed assessment for the year 1975-76 and the AO passed order under s. 216 of the Act.According to him, the assessee filed an estimate of advance tax on 5th Sept., 1974, under s. 212(1) showing advance tax payable at Rs. 9,34,500. Thereafter, on 13th March, 1975, a revised estimate was filed under s. 212(2) indicating advance tax payable by the assessee at Rs. 23,20,500. The AO observed that the assessee reduced the amount payable in the earlier estimate and, therefore, the AO ordered for payment of interest under s. 216 by the assessee on the basis of the calculation given in the order itself. The interest was computed at Rs. 38,433. The assessee took up the matter before the CIT(A) and the CIT(A) held that the assessee was vigilant that his estimate of advance tax should be commensurate with the expectation of income and tax thereon. The CIT(A) after considering all the aspects of the matter came to the conclusion that the assessee could not be accused of deliberately underestimating his advance income and deliberately paying underestimate advance tax, therefore, the assessee could not be directed to pay interest under s. 216 of the Act.

The Revenue preferred an appeal before the Tribunal against the order passed by the CIT(A). The assessee did not file any cross appeal. The appeal was heard along with other appeals filed by the Revenue in respect of the assessment of other years. The Tribunal passed a consolidated order on 20th May, 1988. The Tribunal came to the conclusion that the assessee knew that the advance tax payable for the year was more than that payable during the earlier assessment year, inasmuch as, by the end of December, 1973, the sales had gone up to Rs. 1,47,79,902 whereas, the sale up to December, 1974, was only Rs. 1,58,99,329 and, therefore, there was a difference of about Rs. 10 lakhs for which no revised estimate was filed in December, 1974. Accordingly, the Tribunal did not agree with the conclusion arrived at by the CIT(A). It was of the opinion that the assessee had underestimated the advance tax payable and thereby reduced the amount payable in instalments. The order of the CIT(A) was, therefore, revised by restoring the order passed by the AO. Thereafter, the assessee filed a Miscellaneous Application (M.P. No. 5 (Fauhati) of 1988, dt. 22nd Aug., 1988) stating, inter alia that certain submissions of the assessee were not recorded in the judgment of the Tribunal which according to the assessee constituted an apparent mistake. The assessee, therefore, prayed for necessary orders. However, the Tribunal while disposing of the said miscellaneous application on 22nd Feb., 1989, observed that there was no mistake apparent from record and rejected the application. Though the assessee filed an application under s. 256(1) of the Act to refer three questions later on the assessee prayed for amendment and submitted revised questions. The Tribunal, however,

referred only one question as referred to above, for opinion of this Court. Heard Mr. R. Goenka, learned counsel appearing for the assessee, and Dr. A.K. Saraf, special counsel appearing for the Revenue.

Mr. Goenka submitted that there was nothing on record to show that the assessee underestimated the income and thereby reduced the advance tax payable by the assessee. Moreover, as per the calculation of advance tax, the assessee estimated the advance tax and paid the first instalment in time, i.e., in September, 1974. The assessee’s estimate of advance income at Rs. 15 lakhs was on the basis of the corresponding figure for the immediately preceding asst. yr. 1974-75. Therefore, when the first estimate was filed, the assessee could not be accused of either underestimating his advance income or the advance tax paid, therefore, the assessee was not liable to pay interest under s. 216 of the Act as charged by the AO. Mr. Goenka further submitted that as per s. 216 in order to charge interest for underestimation of advance tax payable by him the ITO must find out underestimation on regular assessment and such finding was a condition precedent. In the absence of such finding, the ITO was not competent to charge interest. Charging interest was not automatic and it was discretionary. While making such submission, Mr. Goenka tried to distinguish the scope and procedure of charging interest under ss. 215 and 216. Besides, the order of the AO did not indicate his finding for charging interest.

Dr. Saraf, on the other hand, supported the decision of the Tribunal and that of the AO. According to him, s. 216 of the Act did not contemplate that the order of charging interest should invariably indicate the finding of the AO. The fact and circumstances and materials on record would show that the assessee deliberately underestimated the income and thereby reduced the income-tax.

Before considering the rival contentions of learned counsel for the parties, it will be expedient for us to look to some of the relevant provisions of the Act. Sec. 207 of the Act envisages provisions for payment of advance tax. Under the said section advance tax shall be payable in advance in accordance with the provisions of ss. 208 to 219 in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year. Advance tax shall be payable by the assessee in the financial year in the manner indicated in s. 209. Advance tax on the current income, calculated in the manner prescribed under s. 209 shall be payable by all the assessees who are liable to pay the advance tax in three instalments during each financial year. The due date of payment has been specified under s. 211 of the Act. Under s. 216 where the ITO after making the regular assessment finds that the assessee has underestimated the advance tax payable by him and thereby reduced the amount payable in either of the first two instalments or wrongly deferred the payment of advance tax on a part of his income, he may direct that the assessee shall pay simple interest at 15 per cent per annum, in case where the assessee has underestimated the advance tax, for the period during which the payment was deficient.

8. Learned counsel for the assessee placed reliance on a decision in Addl. CIT vs. Vazir Sultan Tobacco Co. Ltd. (1980) 122 ITR 251 (AP) : TC 4R.816. In the said case the assessee, a public limited company was directed by the ITO to pay advance tax in four instalments. The assessee, however, went on filing a revised estimate from time to time and paid instalments of advance tax. Ultimately, the assessee filed the return showing increased amount of income. The ITO invoking the power under s. 216 charged the interest. The High Court held that if the estimate of advance tax payable by the assessee was not due to underestimation of income on the part of the assessee then only the provisions of s. 216 of the Act for payment of interest can be invoked. Sec. 216 is attracted and interest is payable by the assessee only if the advance tax happens to be underestimated deliberately. The High Court further held that if the estimate of advance tax payable by the assessee was not due to underestimation of income on the part of the assessee then only the provision of s. 216 for payment of interest can be invoked. Sec. 216 requires that the ITO must find at the time of regular assessment that the assessee has under sub-s. (1) or sub-s. (2) or sub-s. (3) or sub-s. (3A) of s. 212 underestimated the advance tax payable by him and thereby reduced the amount payable in either of the first two instalments.

9. In CIT vs. Elgin Mills Co. Ltd. (1980) 123 ITR 712 (All), the Allahabad High Court dealt with a similar point. In the said case, the Allahabad High Court held thus : “………in our opinion, the charging of interest under s. 216 is not automatic as contended by the counsel for the Revenue. It is discretionary and for the exercise of discretion the ITO is required to examine the matter from the view-point as the whether the estimate filed by the assessee

was in fact an underestimate. Of course, in so far as ss. 215 and 217 are concerned, the charging of interest thereunder is automatic.”

10. This Court in CIT vs. Namdang Tea Co. India. Ltd. (1994) 116 CTR (Gau) 420 : (1993) 202 ITR 414 (Gau) : TC 4PS.46 held that s. 216 of the Act does not make it mandatory for the AO to charge interest in all cases of underestimation of advance tax. The scheme of the provision is quite different from the scheme in s. 215 of the Act where the liability for interest is mandatory. However, under s. 216 it is within the discretion of the assessing authority to charge interest. The AO may charge interest if the under estimation of advance tax was of such a nature and under such circumstances that it has to be regarded as devoid of bona fides. This Court in the said decision further observed thus : “We will assume for the purpose of the present discussion that there was an underestimation in determining the advance tax payable. Sec. 216 does not makes it mandatory for the AO to charge interest in all cases of underestimation. The scheme of the provision is quite different from the scheme in s.

215 where the liability for interest is mandatory. Under s. 216, it is within the discretion of the assessing authority to charge or not to charge interest. He may charge interest if the underestimation was of such a nature and under such circumstances that it has to be regarded as devoid of bona fides. The AO, in the instant case, did not apply his mind to this aspect; he appears to have charged interest is discretionary. He appears to have though that he was bound to charge interest. He has committed a serious error of law.”

11. From the decisions cited above, it will appear that the scope of charging interest under s. 216 is quite different from that of s. 215. Under s. 216 it is the discretion of the AO to charge interest if it is found that the assessee underestimated the income, unlike in s. 215 where the AO is bound to charge interest. Under s. 216 it is the duty of the AO to find out whether underestimation of the income for payment of tax was deliberate or not. If it is not deliberate then charging of interest cannot be said to be just and proper.

12. In the instant case, for the year 1975-76 as on 5th Sept., 1974, the sales effected came to a sum of Rs. 93,82,000 and odd, therefore, the assessee knew that the advance tax payable for the asst. yr. 1975-76 was more than what was paid during the earlier asst. yr. 1974-75. It is also seen that by the end of December, 1973, the sale was Rs. 1,47,79,902 whereas the sale up to December, 1974, was Rs. 1,58,000. There was a difference of about Rs. 10 lakhs, for which no revised estimate was filed in December, 1974, by the assessee. It was the duty of the assessee when it came to its notice or knowledge that the sale had gone up in December, 1974, by about Rs. 10 lakhs to submit a revised estimate to that effect. It cannot be said that the assessee did not know the increase of sale by the end of December, 1974. However, the assessee remained silent without taking any step for filing a revised estimate. Therefore, we are of the opinion that the assessee underestimated the advance tax deliberately with full knowledge that the sale had gone up to the extent of Rs. 10 lakhs. From the facts stated above, the conclusion can be arrived at that the assessee had underestimated advance tax payable thereby reducing the amount payable in instalments for the asst. yr. 1975-76. Accordingly, the question is answered in the affirmative, i.e., in favour of the Revenue and against the assessee. A copy of this judgment under the signature of the Registrar and seal of the High Court shall be transmitted to the Tribunal.

In the facts and circumstances of the case there shall be no order as to costs.

SARAF. J. :

I have gone through the judgment delivered by my brother Baruah, J. Since I respectfully disagree with the same, I give my decision as follows :

2. In the instant case for the year 1975-76 as on 5th Sept., 1974, the sale effected was for a total sum of Rs. 93,82,692 compared to Rs. 78,00,579 for the period ended in August, 1973. The assessee estimated on 5th Sept., 1974, his total income at Rs. 15 lakhs on which the taxable amount payable was Rs. 9,34,500. The above amount of tax of Rs. 9,34,500 was divided into three instalments and the first instalment was paid in time in September, 1974. As such the assessee filed instalment was paid in time in September, 1974. As such the assessee field the correct estimate till September, 1974, and the assessee could not be accused of concealing his income by either underestimating his income or the advance tax payable. At the end of December, 1973, the sale was at Rs. 1,47,79,902, whereas sale up to December, 1974, was at Rs. 1,58,99,329. There was a difference of about Rs. 10 lakhs. No revised estimate was filed in December, 1974, for the asst. yr. 1975-76. Then came the month of March, 1975, and the assessee estimated his sale up to Rs. 2.80 crore as against Rs. 2,29,55,000 for the corresponding period of the last year. The assessee revised his estimate of income at Rs. 37 lakhs and on which advance tax came to Rs. 23,29,500 and since the assessee had paid Rs. 9,34,500 the assessee paid the balance advance tax of Rs. 13,86,000. On the above facts it could not be stated that the assessee has deliberately underestimated its advance income or was paying underestimated advance tax. Sec. 216 of the IT Act, 1961, reads as follows : “216. Where, on making the regular assessment, the ITO finds that any assessee has— (a) under s. 209A or s.212 underestimated the advance tax payable by him and thereby reduced the amount payable in either of the first two instalments; or (b) under s. 213 wrongly deferred the payment of advance tax on a part of his income; he may direct that the assessee shall pay simple interest at fifteen per cent, per annum— (i) in the case referred to in cl. (a), for the period during which the payment was deficient, on the difference between the amount paid in each such instalment and the amount tax actually paid during the year; and (ii) in the case referred to in cl. (b), for the period during which the payment of advance tax was so deferred.”

3. The provisions of the said section postulate that the ITO while making a regular assessment must come to a finding that the assessee has deliberately underestimated his income and deliberately paid lesser advance income- tax. The applicability of the provision of payment of interest in s. 216 unlike ss. 215 and 217 is not automatically attracted. The ITO in the course of making an assessment must consider whether the assessee has deliberately failed to make proper estimation of its income or advance tax payable thereon. The ITO should exercise his discretion and consciously come to a finding whether the assessee should be directed to pay interest on the advance tax payable after affording an opportunity to the assessee. While making a regular assessment, the ITO has not made any finding as to the underestimation of the advance tax payable by the assessee. From the records it appears that an order was passed by the ITO under s. 216 of the IT Act, 1961 routinely and mechanically stating that interest under s. 216 is found payable by the assessee as if the same is automatically payable. In this connection, I like to draw attention to the Circular issued by the CBDT No. F. NO. 400/58/78-ITCC, dt. 29th Feb., 1980, “915. Whether the ITO should go into means rea before charging interest under the section. The order under s. 216 being appealable, should be a speaking order. Before charging interest under s. 216, the ITO 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 ITO can levy interest under s. 216. Since the finding rests on the ITO’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 ITO’s finding is justified on the facts of the case.”

4. Further, I refer to two decisions, one of the Gauhati High Court and the other of the Calcutta High Court. In CIT vs. Namdang Tea Co. India Ltd. (1994) 116 CTR (Gau) 420 : (1993) 202 ITR 414 (Gau) : TC 4O6.46, it is observed as follows: “Sec. 216 does not make it mandatory for the AO to charge interest in all cases of underestimation. The scheme of the provisions is quite different from the scheme in s. 215 where the liability for interest is mandatory. Under s. 216, it is within the discretion of the assessing authority to charge or not to charge interest. He may charge interest if the underestimation was of such a nature and under such circumstances that it has to be regarded as devoid of bona fides. The AO, in the instant case, did not apply his mind to this aspect; he appears to have charged interest without being conscious of the fact that the power to charge interest is discretionary. He appears to have though that he was bound to charge interest. He has committed a serious error of law.”

5. The Calcutta High Court in CIT vs. Wiliard India Ltd. (1993) 202 ITR 423 (Cal) : TC 4PS.46, has interpreted the provisions as under : “Interest under s. 216 is chargeable when an assessee files a wrong estimate of advance tax. A speaking order should be passed while charging interest under s. 216 of the IT Act, 1961.” “The question whether there was any justification for the estimate whether it was in fact an understatement has to be examined by the ITO objectively with reference to the time and the materials available when the estimate was filed by the assessee. The mind of the ITO cannot be ascertained unless he has come to a finding that there has been an underestimate of advance tax……..”. “A non-speaking order under s. 216 is invalid and is liable to be quashed.”

6. The decision referred to above make it abundantly clear that under s. 216 the applicability of payment of interest is not mandatory or automatic. Under s. 216, the ITO on consideration of materials and after giving an

opportunity to the assessee of hearing is to hold that the assessee deliberately avoided making a proper estimation of its income and advance tax payable thereon. In the instant case, we find that the ITO has not exercised his discretion judicially nor has applied his mind and has failed to disclose any material to hold that the assessee had consciously underestimated his income and advance tax payable thereon during the course of making assessment. As such the said order under s. 216 was not in compliance with the provisions of s. 216. In the premises, the question referred is answered in the negative and in favour of the assessee against the Revenue.

JUDGMENT

A.K. PATNAIK, J. :

In this reference under s. 256(1) of the IT Act, 1961 (for short, “the Act”), the following question has been referred by the Tribunal for opinion of this Court : “Whether, in the facts and circumstances of the case, the Tribunal had any material to hold that the assessee has underestimated the advance tax payable and thereby reduced to amount payable in instalments for the year relevant to the asst. yr. 1975-76 ?”

2. The reference was heard earlier by a Division Bench of this Court. But the two judges by their separate judgments dt. 3rd Dec., 1996, differed in their opinions on the aforesaid question. While D.N. Baruah J. answered the question in the affirmative, i.e., in favour of the Revenue and against the assessee, and held that the assessee had underestimated the advance tax payable and had thereby reduced the amount payable in instalments for the asst. yr. 1975-76, S.L. Saraf J. answered the question in the negative and in favour of the assessee, and held that the ITO had not exercised his discretion judicially nor had applied his mind and had failed to disclose any material to hold that the assessee had consciously underestimated its income and the advance tax payable thereon during the course of making assessment. In view of the difference of opinion between the two brother judges, the Chief Justice initially referred the matter to one of us. But pursuant to order dt. 14th Aug., 1997, passed by one of us, the Chief Justice has now referred the matter to the present Division Bench. We are now required to decide the point of law in accordance with s. 259(2) of the Act.

The facts as disclosed in the statement of the case drawn up by the Tribunal, Guwahati Bench, and the annexures thereto briefly are that for the asst. yr. 1975-76, the AO passed an order on 24th Jan., 1981, under s. 216 of the Act. In the said order, it was stated that the assesseecompany filed an estimate of advance tax under s. 212(2) of the Act on 5th Sept., 1974, showing advance tax payable at Rs. 9,34,500 and thereafter filed a revised estimate under s. 212(2) of the Act on 13th March, 1975, showing advance tax payable at Rs. 23,20,500 only. The AO, therefore, recorded a finding that the assessee had reduced the amount payable in the earlier estimate and having regard to the facts and circumstances of the case levied interest of Rs. 38,433 at 12 per cent per annum under s. 216 of the Act on 1/3rd of the difference between the amount that was shown as payable as per the estimate filed on 5th September, 1974, and the amount that was show as payable as per the revised estimate filed on 13th March, 1975. The assessee preferred an appeal against the said order of the AO before the CIT(A) who held in his order dt. 21st Sept., 1983, that the assessee could not be accused of deliberately underestimating its advance tax and deliberately paying underestimated advance tax, and in such a situation interest under s. 216 of the Act was not attracted and accordingly cancelled the order of the AO levying interest of Rs. 38,433. The IT Department then carried an appeal to the Tribunal, Guwahati Bench against the order of the CIT(A) and the said Tribunal held that the assessee had underestimated the advance tax payable and thereby reduced the amount payable in instalments for the year relevant to the asst. yr. 1975-76 and accordingly reversed the order of the CIT(A) and restored the order of the AO. On an application then being filed by the assessee under s. 256(1) of the Act, the Tribunal has referred the aforesaid question of law to this Court for opinion.

Mr. R. Goenka, learned counsel for the assessee, submitted that a reading of s. 216(a) of the Act would show that levy of interest is not automatic and that the AO has been vested with the discretion to direct payment of interest only if he finds that the assessee has underestimated the advance tax payable by him and thereby reduced the amount payable in either of the first two instalments. Mr. Goenka cited to decision of this Court in CIT vs. Namdang Tea Co. India Ltd. (1994) 116 CTR (Gau) 420 : (1993) 202 ITR 414 (Gau) : TC PS.46/43R.559, in which a Division Bench of this Court has held that s. 216 of the Act doe snot make it mandatory for the AO to charge interest in all cases of underestimation of advance tax and the AO may charge interest if the underestimation of advance tax was of such a nature and under such circumstances that it has to be regarded as devoid of bona fides. He also relied on the decision of this Court in CIT vs. Lankashi Tea & Seed Estate (P) Ltd. (1997) 142 CR (Gau) 133 : (1996) 222 ITR 133 (Gau) TC 7RS.4.412, in which it has been held that underestimation of advance tax may be caused for various reasons and mere underestimation was not sufficient to burden the assessee with interest under s. 216 of the Act and it was the duty of the AO or for that matter the appellate authorities to look into the facts of the case and see whether underestimation was made deliberately just to reduce the burden of tax. Mr. Goenka Vehemently contended that in the instant case, sales of the assessee during the year 1973-74 upto August, 1973, was Rs. 78,00,579 and during the year 1974-75 up to August, 1974, was Rs. 93,82,000 and the differences of sale up to August, 1974, was Rs. 15,82,000. Since the assessee had for the asst. yr. 1974-75 corresponding to the previous year 1973-74 returned an income of Rs. 12,83,459, the assessee estimated the income for the asst. yr. 1975-76 corresponding to previous year 1974-75 at Rs. 15,00,000 in its estimate filed on 5th Sept., 1974, for the purpose of advance tax. Hence, there was no underestimation of income of the assessee in its estimate filed on 5th Sept., 1974, and in any case there was no deliberate underestimation by the assessee in the said estimate filed on 5th Sept., 1974. Mr. Goenka further submitted that up to December, 1973, the sales of the assessee were Rs. 1,47,79,902 whereas the sales of the assessee up to December, 1974, were Rs. 1,58,00,000 and odd and there was a difference of about Rs. 10,00,000. The difference in the sale figures between the years 1973-74 and 1974-75 had gone down from Rs. 15,00,000 and odd up to August, 1974, to Rs. 10,00,000 and odd up to December, 1974, and it is for this reason that the assessee did not file any revised estimate of its income for the purpose of income-tax in December, 1974. But during the period up to March, 1975, the sales figure of the assessee shot up to Rs. 2,80,00,000 compared to Rs. 2,29,55,000 up to March, 1974, and it is for this reasons that the assessee filed a revised estimate of income of Rs. 23,20,500 on 13th March, 1975, and paid advance tax accordingly. According to Mr. Goenka, the increase in the estimate of income was on account of the increase in the sales during the period after December, 1974, to March, 1975, and that there was no deliberate underestimation of its income when the assessee filed its estimate on 5th Sept., 1974. The order of the Tribunal that the assessee deliberately underestimated its income in its estimate filed on 5th Sept., 1974, is, thus without any material.

Dr. A.K. Saraf, learned special counsel for the IT Department, on the other hand, contended that the assessee had prayed before the Tribunal for referring three questions and the third question of the said three questions was whether the order of the Tribunal was not perverse due to non-consideration of relevant material and misdirection in law in the facts and circumstances of the case. But the Tribunal refused to refer the said question and instead only referred the question as to whether in the facts and circumstances of the case, the Tribunal had any material to hold that the assessee has underestimated the advance tax payable and thereby reduced the amount payable in instalments for the year relevant to asst. yr. 1975-76. According to Dr. Saraf, therefore, this Court cannot go into the question as to whether the order of the Tribunal was perverse. He further argued that the question as to whether the order of the Tribunal was perverse or not cannot also be read into the question referred to this Court by the Tribunal. In support of the aforesaid submissions. Dr. Saraf relied on the decision of the Supreme Court in A. Gasper vs. CIT (1991) 192 ITR 382 (SC) wherein the Supreme Court has held that where the reference of a question was declined by the Tribunal, the said question cannot be read into one of the other questions referred.

Dr. Saraf also relied on the decisions of the Supreme Court in Hoghly Trust (Pvt.) Ltd. vs. CIT (1969) 73 ITR 685 (SC) : TC 45R.493 and in Aluminium Corporation of India Ltd. vs. CIT (1972) 86 ITR 11 (SC) TC 16R.529/TC 54R.339 in support of his argument that the High Court can only pronounce its opinion on a question referred to it and cannot sit as an appellate Court from the decision of the Tribunal. He finally contended that the question referred by the Tribunal to this Court is a question of fact and hence the order of the Tribunal cannot be interfered with by this Court.

The question cannot to this Court for opinion is whether in the facts and circumstances of the case, the Tribunal had any material to hold that the assessee has underestimated the advance tax payable and thereby reduced the amount payable in instalments for the year relevant to the asst. yr.1975-76. It is settled position of law that the question as to whether there was any material at all for a particular finding by a Court or a Tribunal is a question of law and it is for this reason that the Tribunal had referred the aforesaid question of law to this Court for opinion. We are therefore, not impressed by the argument of Dr. Saraf that the question referred to this Court by the Tribunal is not a question of law.

The third question amongst the three questions in respect of which the assessee prayed for reference before the Tribunal was to the following effect : “In the facts and circumstances of the case whether the order of the Tribunal is not perverse due to non-consideration of relevant material and misdirection in law ?”

In the aforesaid question, therefore, the order of the Tribunal was sought to be challenged by the assessee on the ground that it was perverse due to non-consideration of relevant material and misdirection in law. But the Tribunal refused to refer the aforesaid question on the ground that the said question was not statable question of law which required reference and the said question could not UbpetsoaAiudgutost,h1a9v7e3 arisen oUputtooAfutghuesto, 1rd97e4r of the TDirffiebruenncael. Thus, the 78,00,000 93,82,000 15,82,000 challenge to the order of the Tribunal by the assessee was perversity due to non-consideration of relevant material Upto the December, 1973 Up to December, 1974 and misdirection in law. This challenge of the assessee is entirely different from the challenge on the ground that there was no material before the Tribunal to hold that the assessee has underestimated advance tax payable and thereby reduced the amount payable in instalments for the year relevant to the asst. yr. 1975-76. Since the Tribunal has refused to refer the aforesaid third question, we cannot examine the question as to whether the order of the Tribunal was perverse due to non-consideration of relevant material and misdirection in law. But, we are to examine in the present reference as to whether the Tribunal had any material to hold that the assessee has underestimated advance tax payable and thereby reduced the amount payable in instalments for the year relevant to the asst. yr. 1975-76. This is because, this question is different from the third question which has not been referred to us and this is against because this very question has been referred to us by the Tribunal under s. 256(1) of the Act.

8. For answering the question as to whether the Tribunal had any material to hold that the assessee has underestimated advance tax payable and thereby reduced the amount payable in instalments for the year relevant to the asst. yr. 1975-76, it is necessary to quote the relevant portion of the order of the Tribunal in which materials for the aforesaid finding have been discussed : “In the instant case before us, it is seen that the assessee had filed the first estimate on 5th Sept., 1974, under s. 212(1) which was based on the sale as noted by the CIT(A) of the corresponding period ended August, 1973. As mentioned earlier, the sale up to the end of August, 1973, was at Rs. 78,00,000 and odd, whereas the sale up to August, 1974, has gone up to Rs. 93,82,000 and odd. It was the finding of the CIT(A) that the basis for the assessee’s estimation of Rs. 15,00,000 was the corresponding figure for the immediately preceding asst. yr. 1974-75 for which period the sale was at Rs. 78,00,000 and odd. Thus, it can be seen that as on 5th Sept., 1974, the assessee had the figures of Rs. 93,82,000 and odd being the sale effected up to March, 1974, relevant to the asst. yr. 1975-76 with which we are concerned. Thus, it could be said that the assessee knew that advance tax payable for the year was more than during the earlier asst. yr. 1974-75. That apart, the CIT(A) noted that by the end of December, 1973, the sale had gone up to Rs. 1,47,79,902, whereas the sale up to December, 1974, had gone up to Rs. 1,58,00,000 and odd and there was a difference of about Rs.10,00,000 for which no revised estimate was filed in December, 1974, relevant to the asst. yr. 1975-76.

From the brief narration of the facts of the present case before us, it is seen that the facts are distinguishable from those of the cases relied on by the CIT(A), in the impugned order. Of course, the CIT(A) has given a finding that the assessee cannot be accused of deliberately underestimating his advance income and deliberately underestimated advance tax. But on the facts noted by the CIT(A) in the impugned order, it is seen that by the time the first estimate was filed the sale has gone up to Rs. 93,82,692, whereas the assessee based his estimate for the asst. yr. 1974-75 as mentioned earlier. Having regard to the back ground of the case and the surrounding facts mentioned above, we do not agree with the conclusion arrived at by the CIT(A). In our opinion, the facts and circumstances of the case do not support the conclusion of the CIT(A). We are of the opinion that the assessee has underestimated the advance tax payable and thereby reduced the amount payable in instalments for the year relevant to the asst. yr. 1975-76. In this view of the matter, the order of the CIT(A) on the point is reversed and that of the AO is restored…….”

9. On a reading of the aforesaid extract from the order of the Tribunal, it is clear that the Tribunal’s finding that the assessee has underestimated advance tax payable and thereby reduced the amount payable in instalments for the year relevant to the asst. yr. 1975-76 was based only on the sales figures of the assessee during the year 1973- 74 relevant to the asst. yrs. 1974-75 and 197475 relevant to the asst. yr. 1975-76. The said sales figures of the assessee on which the Tribunal has relied on in its aforesaid order, are as follows : Sales figures of the assessee 1,47,79,902 1,58,00,000 10,20,098 Up to March, 1974 Up to March, 1975 2,29,55,000 2,80,00,000 50,45,000

The aforesaid sales figures on which reliance was placed by the Tribunal in its order show that the sales of the assessee during the year 1974-75 up to August, 1974, exceeded the sales of the assessee during the year 1973-74 up to August, 1973, only by Rs. 15,82,000 and odd. The assessee returned an income of Rs. 12,83,459 for the asst. yr. 1974-75. Since, the difference in the sales during the year 1973-74 up to August, 1973, and during the year 1974-75 upto August, 1974, was Rs. 15,82,000 and odd, the assessee filed the estimate of its income on 5th Sept., 1984, at Rs. 15,00,000 which was more than Rs. 2,00,000 than the returned income of Rs. 12,83,459 for the asst. yr. 1974-75. There was, therefore, no material whatsoever before the Tribunal to hold that the assessee had underestimated its income in the estimate filed on 5th Sept., 1974.

The aforesaid sales figures relied on by the Tribunal in its order further show that the sales of the assessee during the year 1974-75 up to December, 1974, had exceeded the corresponding sales of the assessee during the year

1973-74 up to December, 1973, by Rs. 10,20,098. Thus, the difference in the sales figures of the years 1973-74 and 1974-75 had fallen to Rs. 10,20,098 in December, 1974, from Rs. 15,82,000 in August, 1974. There was therefore, no need for the assessee to file a revised estimate in December, 1974. The finding of the Tribunal that the assessee had underestimated the advance tax payable and thereby reduced the amount payable in the second instalment falling due in December, 1974, is therefore, without any material.

The aforesaid sales figures of the assessee on which reliance has been placed by the Tribunal in its order would also show that the difference in the sales of the assessee for the year 1973-74 up to March, 1974, and for the year 1974-75 up to March, 1975, shot up to Rs. 50,45,000 due to increase in sale during January, 1975, to March, 1975, and in the circumstances, the assessee appears to have filed a revised estimate of its income of Rs. 23,20,500 on 13th March, 1975, and paid the advance tax accordingly.

For the reasons stated above we are of the view that the only materials on which the Tribunal has relied for coming to the conclusion that the assessee had underestimated the advance tax payable and thereby reduced the amount payable in instalments for the year relevant to the asst. yr. 197576 were the sales figures of the assessee during the year 1973-74 and 1974-75 and the said sales figures did not support the said finding of the Tribunal. We accordingly differ from the opinion expressed by D.N. Baruah J., and answer the question referred to this Court in the negative and in favour of the assessee and hold that in the facts and circumstances of the case, the Tribunal had no material to hold that the assessee has underestimated the advance tax payable and thereby reduced the amount payable in instalments for the year relevant to the asst. yr. 1975-76. The reference is answered accordingly.

 

[Citation : 241 ITR 695]

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