Punjab & Haryana H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the interest under s. 215 was not chargeable in this case ?

Sections 215, 147, 148

Asst. Year 1972-73

Counsel Appeared

Ashok Bhan with Ajay Mittal, for the Petitioner : D.K. Monga with Rajiv Mehra & Rajiv Bhalla, for the Respondent

GOKAL CHAND MITAL, J.:

The Atlas Cycle Industries is the assessee and the matter relates to the asst. yr. 1972-73. Since the calendar year was the accounting year, it ended on 31st Dec., 1971. On 21st May, 1971 notice was issued by the ITO under s. 210 of the IT Act, 1961 (for short “the Act”), for payment of advance tax of Rs. 31,29,358. The assessee paid the amount as follows: Date of deposit Amount deposited . Rs. Up to 15th Dec., 1971 Rs. 19,30,000 was paid and Rs. 6,01,750 was paid thereafter in March, 1972. In this manner, till 14th March, 1972 Rs. 25,31,750 was paid as advance tax, against the demand of Rs. 31,29,358. Since the accounting year ended on 31st Dec., 1971, and less than 75% of the advance tax was paid by then on the balance, interest was charged by the ITO under s. 215 of the Act.

2. The assessee challenged the imposition of interest but on appeal the CIT(A) deleted the levy of interest, and the Department failed before the Tribunal. On the aforesaid facts, at the instance of the Department, the Tribunal has referred the following question for the opinion of this Court:

“Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the interest under s. 215 was not chargeable in this case ?”

3. For the assessment year in question, the original assessment was made on 31st Jan., 1973 at Rs. 51,88,420 which was amended to Rs. 50,59,780. On 29th March, 1977 the ITO issued notice for reassessment under s. 148 of the Act and mentioned therein that the benefits under s. 80G and 40(c) (sic) of the Act were granted in excess. In the reassessment proceedings, the ITO did not find merit in the two grounds mentioned in the notice for reassessment but made an addition of Rs. 16,451 on some other grounds. The order of reassessment was challenged by the assessee in appeal and the Tribunal came to the conclusion that the reassessment could not be sustained as the two items mentioned in the notice for reassessment were found to be erroneous and since the very ground for initiating reassessment proceedings disappeared, no reassessment order could be passed. On this matter, the Department has got the following question referred for the opinion of this Court: “Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in cancelling the reassessment made by the ITO ?” Since the two references related to the same assessee and for the same assessment year, one common statement of the case with both the questions mentioned therein has been sent to this Court. We propose to deal with each question separately. Adverting to the question relating to interest, on a reading of the chart tabulated above regarding payment of advance tax, we find that till the end of the accounting year, i.e., up to 31st Dec., 1971, against the demand of Rs. 31,29,358, Rs. 19,30,000 was paid which is less than 75% of the advance tax, and, therefore, it is clear that the assessee committed default in payment of advance tax. If 75% of the advance tax had been paid up to 31st Dec., 1971, interest would not have been leviable but this is not the case here.

The assessee paid Rs. 6,01,750 more towards advance tax in March, 1972. Payment of interest on the said amount is being disputed. On behalf of the assessee, it is not disputed that on the difference between the total amount paid, that is, Rs. 25,31,750, and the demand of advance tax of Rs. 31,29,358, the liability of interest is not the subject- matter of dispute in this reference and would be dealt with or has been dealt with separately. Therefore, the only question for our determination is whether on the amount of Rs. 6,01,750, which was paid after the expiry of the accounting year, in March, 1972, that is, before the end of financial year, the interest is leviable.

For this matter, we have to consider s. 215(1) of the Act, which provides that if default is committed by an assessee in payment of advance tax, simple interest at the rate of 15% per annum is payable on the short deposit with effect from the 1st day of April next following the said financial year up to the date of the regular assessment. That means the Department wants to levy interest on the amount of Rs. 6,01,750 w.e.f. 1st April, 1972, till the date of the regular assessment, but once the aforesaid amount is paid before 1st April, 1972, how can interest thereon be calculated w.e.f. 1st April, 1972, till the date of the regular assessment. If the amount had not been paid before 1st April, 1972, and had been paid some time thereafter before the regular assessment, interest could have been charged with effect from 1st April, till the date of payment. See in this behalf s. 215(2)(i). The words “or otherwise” in sub-s. (2) signifies that in whatever manner tax is paid, it shall be taken note of in calculating the interest. In spite of default having been committed by the assessee in not paying the due advance tax within time, yet by virtue of the provisions of s. 215 r/w sub-s. (2)(i) of the Act, which provides for charging interest with effect from 1st April next following till payment, no interest is payable on the amount of Rs. 6 lakhs odd, as mentioned above, as the payment of that amount was made in March, 1972.

In view of the above, we answer the question, in the negative, in favour of the Revenue, but at the same time say that on the amount of Rs. 6 lakhs odd paid in March, 1972, no interest is payable but on the balance unpaid amount of advance tax interest would be payable as per s. 215 of the Act. Adverting to the question referred regarding the reassessment proceedings, we are of the view that the Tribunal was right in cancelling the reassessment as both the grounds on which reassessment notice was issued were not found to exist, and the moment such is the position, the ITO does not get the jurisdiction to make a reassessment. This view of ours finds support from the Supreme Court decisions in CIT vs. A. Raman & Co. (1968) 67 ITR 11 (SC) and Bankipur Club Ltd. vs. CIT 1972 CTR (SC) 245 : (1971) 82 ITR 831 (SC). Similar view has been taken by the Rajasthan High Court in Addl. CIT vs. Ganeshilal Lal Chand (1984) 43 CTR (Raj) 120 : (1985) 154 ITR 274 (Raj). On behalf of the Revenue, CIT vs. Ahmedabad Manufacturing and Calico Printing Co. Ltd. 1976 CTR (Guj) 214 : (1977) 106 ITR 159 (Guj), a decision of the Gujarat High Court was cited. On a consideration of the matter, we are of the view that in view of the aforesaid Supreme Court decisions, the view taken by the Rajasthan High Court is correct and the view taken by the Gujarat High Court is not correct. Accordingly, we dissent from the view taken by the Gujarat High Court and in view of the decisions of the Supreme Court and Rajasthan High Court, we hold that the ITO did not have the jurisdiction to proceed with the reassessment, the moment he found the two grounds mentioned in the reassessment notice incorrect or non-existent. Accordingly, we answer the referred question in favour of the assessee, in the affirmative, that the Tribunal was right in cancelling the reassessment.

Both the references stand disposed of in the aforesaid terms with no order as to costs.

[Citation : 180 ITR 319]