COMMISSIONER OF INCOME-TAX VS M.S.J. (ENGG. AND CO.), 1994 PTD-ALLAHABAD-HIGH-COURT-INDIA 645 (1993)

(a) Income-tax---

----Rectification of mistakes---Advance tax---Revised estimate of advance tax filed on 15th March, 1972---Question whether estimate had to be filed on or before 14th March not free from doubt---Failure to levy interest under section 217(1-A), Indian Income Tax Act, 1961---Not a mistake apparent from record---Interest cannot be levied in rectification proceedings---Indian Income Tax Act, 1961, Ss. 154, 212, 217.

The application of the provisions of section 154 of the Indian Income Tax Act, 1961, is permissible only when there is no scope for a debate.

In the present case the Assessing Officer was of the view that, under section 212(3-A) of the Act, an estimate should have been filed by the assessee before March 15, 1972, that is, on or before March 14, 1972, and that having been filed after March 14, 1972, on March 15, 1972, when the last instalment of advance tax became due, interest under section 217(1-A) was clearly chargeable. As the same was not charged at the time of regular assessment made under section 143(3), he was of the view that a mistake apparent from the record in not charging interest under section 217(1-A) had arisen and, therefore, he issued a notice under section 154 and charged the interest. The Appellate Assistant Commissioner set aside the order on the ground that since rule 40 of the Income-tax Rules, 1962, conferred discretion on the Income-tax Officer to reduce or waive interest chargeable under section 217(1-A), the Income-tax Officer would be deemed to have waived the interest when no interest was charged in the regular assessment. The Tribunal upheld the order of the Appellate Assistant Commissioner. On a reference:

Held, that the word "before" appearing in subsection (3-A) of section 212 of the Act can be interpreted to mean that the assessee was entitled to file the estimate up to March 15, 1972. Such a view being equally plausible, forcible arid arguable as opposed to the view taken by the Income Tax Officer that the estimate was required to be filed by the assessee on or before March 14, 1972, the Income Tax Officer was not right in taking recourse to the provisions of section. 154 of the Act.

(b) Income-tax---

----Advance tax---Delay in filing estimate---Failure of I.T.O. to levy interest-- Waiver of interest cannot be inferred---Indian Income Tax Act, 1961, S. 217-- Income Tax Rules, 1962, R. 40.

Simply because discretion is vested in the Income Tax Officer by virtue of Rule 40 of the Indian Income Tax Rules, 1962, it will not be correct to draw the one and only inference that the interest was waived and, therefore, that was not charged in the regular assessment.

Premchand Nathmal Kothari v. Kisanlal Bachharaj Vyas AIR. 1976 Bom. 82 ref.

Rakesh Ranjan Agrawal for the Commissioner.

H.S. Nigam for the Assessee.

JUDGMENT

OM PRAKASH, J.---The Income-tax Appellate Tribunal (Delhi Bench `A'), has referred the following questions under section 256(2) of the Income Tax Act, 1961 (briefly, "the Act"), for the opinion of this Court:

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that -the Income Tax Officer had exercised his discretion in not, charging interest under section 217(1-A) in the original assessment?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that interest under section 217(1-A) of the Income Tax Act, 1961, could not be charged by taking recourse to section 154?

The relevant assessment year is 1972-73. The assessee, a partnership firm, carried on the business of manufacture and sale of earth digging equipment and it also derived income from Government contracts. During the financial year 1971-72, relevant to the assessment year 1972-73, the assessee was required to pay advance tax of Rs.3,830 under section 210 of the Act, which was computed on the basis of income of Rs.55,640 for the assessment year 1970-71. On regular assessment, the total income of the assessee and the tax chargeable for the assessment year 1972-73 were determined at Rs.3,69,270 and Rs.85,498, respectively. The assessee paid instalments of advance tax which had become due on September 15, and December 15, as demanded under section 210 of the Act. Since the current income of the assessee was greater than the income on which the advance tax was demanded by the Income Tax Officer, it was obligatory on the part of the assessee to submit its estimate of advance tax under section 212(3-A) at any time before the date on which the last instalment of advance tax became due which the assessee filed on March 15, 1972. The Assessing Officer was of the view that, under section 212(3-A) of the Act, the estimate should have been filed by the assessee before March 15, 1972, that is, on or before March 14, 1972, and that having been tiled after March 14, 1972, on March 15, 1972, when the last instalment of advance tax became due, interest under section 217(1-A) was clearly chargeable. As the same was not charged at the time of regular assessment made under section 143(3), he was of the view that a mistake apparent from the record in not charging interest under section 217(1-A) had arisen and, therefore, he issued a notice under section 154 of the Act calling upon the assessee to show cause why the interest under section 217(1-A) be not charged, non-chairing of which in the regular assessment being a mistake apparent from the record.

The assessee filed a reply contending that there was no mistake apparent from the record and that, therefore, the impugned notice under section 154 could not have been issued. The Income-tax Officer rejected the contention of the assessee. He, therefore, worked out the interest chargeable under section 217(1-A) at Rs.8,295 and charged the same by his order passed under section 154.

The assessee then filed an appeal before the Appellate Assistant Commissioner who accepted the appeal and reversed the order of the Income tax Officer. In his opinion, non-charging of interest under section 217(1-A) was not a mistake apparent from the record rectifiable under section 154. He was of the view that rule 40 of the Income Tax Rules, 1962 ("the Rules", for brevity sake), gives unfettered discretion to the Income Tax Officer to reduce or waive the interest under section 217 and the Income Tax Officer would be deemed to have waived the interest in the exercise of his discretion. In short, the view taken by him was that the assessing authority did not charge interest under section 217(1-A) on account of the discretion conferred on him by rule 40 of the Rules and that failure to charge interest was not a mistake apparent from the record within the meaning of section 154.

The Revenue then preferred an appeal to the Appellate Tribunal which upheld the decision of the Appellate Assistant Commissioner.

First, we take up question No.2, i.e., whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that interest under section 217(1-A) of the Act could not be charged by taking recourse to section 154, for consideration. The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal both held that since rule 40 of the Rules conferred unfettered discretion on the Income Tax Officer to reduce or waive the interest chargeable under section 217(1-A), the Income-tax Officer would be deemed to have waived the interest when no interest was charged in the regular assessment. In our opinion, the approach of the Appellate Assistant Commissioner and the Appellate Tribunal is not quite sound and correct. Our approach to the aforementioned question is different. The question for consideration is as to what is the correct interpretation of the expression "at any time before the date", occurring in subsection (3-A) of section 212 in the relevant assessment year. The said expression has been substituted by the expression "on or before the date" by the Finance Act,. 1979 (Act No.21 of 1979), with effect from April 1, 1979. Does the pre-amended expression enjoin upon the assessee to file the estimate before March 15, 1972, when the last instalment of advance tax became due or will there be sufficient compliance with subsection (3-A) of section 212 if the estimate is filed on the date when the last instalment falls due? It is undisputed that the last instalment became due on March 15, 1972, and the estimate of advance tax was filed by the assessee on that very date. According to the Income-tax Officer, the pre- amended expression enjoined upon the assessee to file the estimate on or before March 14, 1972, that is, before March 15, 1972, and the estimate having been filed after March 14, 1972, on March 15, 1972, the assessee exposed itself to the risk of being visited by penal interest under section 217(1-A).. In our opinion, if the expression "at any time before the date" occurring in subsection (3-A) of section 212 can be interpreted only in one way and no other, that the estimate was required to be filed by the assessee on or before March 14f 1972, and not on March 15, 1972, when the last instalment of advance tax became due, then only it could be said that there was a mistake within the meaning of section 154 in not charging interest under section 217(1-A), but, if that expression can be interpreted to mean that no interest was chargeable, if the estimate was filed on March 15, 1972, then the matter being debatable, there was no scope to invoke section 154. This section can be invoked only if the matter is absolutely free from doubt and beyond the scope of any debate. If it is held that the expression "at any time before the date" can also be interpreted to mean that there will be sufficient compliance, if the estimate is filed on March 15, 1972, when the last instalment became due anti if such a view is equally plausible, then the Income-tax Officer could not be said to be vested with jurisdiction to invoke section 154. The application of the provisions of section 154 is permissible only when there is no scope for debate. In Premchand Nathmal Kothari v. Kisanlal Bachharaj Vyas AIR 1976 Bom 82, the Bombay High Court, interpreting the word "before" contextually and purposively, held that the expression "before the first day of April, 1970" occurring in section 3 of the Maharashtra (Vidarbha Region) Agricultural. Debtors' Relief Act, 1969 (briefly, "the Act of 1969"), meant that the said expression could not be interpreted to mean "on or before March 31, 1970". To appreciate that authority, we may briefly state the facts thereof. An application was filed under section 3 of the Act 1969 by the creditor against his debtors on April 1, 1979. That application was opposed by the debtors in their written statement contending that the said application was barred by limitation as that was not filed before April 1, 1.970. A question arose what was the true interpretation of the expression "before the first day of April, 1970" occurring in section 3(1) of the Act of 1969. The question was whether section 3(1) required any debtor or creditor to make an application on or before March 31, 1970, and whether an application made by either party even on April 1, 1970, would be within the limitation. The Bombay High Court took the view that the word "before" occurring in section 3(1) of the Act of 1969 would mean that an application could be filed on or before the first day of April, 1970, that is, up to April 1, 1970. In short, the Bombay High Court held that the .word "before" occurring in section 3(1) of the Act of 1969 was used in the sense of the word "up to". If the word "before" occurring in subsection (3-A) of section 212 is taken to mean "up to", then it cannot be said that the assessee before us acted in violation of subsection (3-A) of section 212 by filing the estimate on March 15, 1972. We do not say that the view taken by the Bombay High Court in Premchand Nathmal Kothari, AIR 1976 Bom 82, is absolutely correct. Also, we do not say that the word "before" occurring in subsection (3-A) of section 212 means "up to" and is always equivalent to that word, but what we say is that the view taken by the Bombay High Court in Premchand Nathmal' s case, AIR 1976 Bom 82, is equally plausible and it may be argued with force and seriousness that the word "before" appearing in subsection (3-A) of section 212 of the Act can be interpreted to mean that the assessee was entitled to file the estimate up to March 15, 1972. Such. a view being equally plausible, forcible and arguable as opposed to the view taken by the Income Tax Officer that the estimate was required to be filed by the assessee on or before March 14, 1972, we are of the considered view that the Income Tax Officer was not right in taking recourse to the provisions of section 154.

We are, therefore, constrained to hold that question No.2 has to be answered in the affirmative that, on the facts and in the circumstances of the case, the Income Tax Officer was not right in charging interest under section 217(1-A) of the Act by taking recourse to section 154.

As already pointed out, the view taken by the Appellate Assistant --Commissioner and the Appellate Tribunal that the Income Tai: Officer will be

deemed to have waived the interest in exercise of his discretionary power conferred upon him by rule 40 of the Rules is not sustainable. Simply because discretion is vested in the Income Tax Officer by virtue of rule 40 of the Rules, it will not be correct to draw the one and the only inference that the interest was waived and, therefore, that was not charged in the regular assessment. If the view taken by the Appellate Assistant Commissioner and the Appellate Tribunal is upheld, then the application of section 154 will be wholly ruled out and that could not be applied even in cases where the facts and circumstances of the case warrant it. If the Income Tax Officer states all necessary facts in his order passed under section 154 excluding the possibility of waiver altogether or showing that no waiver was granted by him and if those facts are found to be correct, then there will be a mistake apparent from record, inasmuch as, in that case, the failure of the Income Tax Officer in exercising his statutory power for charging interest would-amount to a mistake apparent from the record under section 154. In the case in hand, the order passed by the Income Tax Officer under section 154 does not state any facts, much less the necessary facts on the question whether or not he ever adverted to the issue of waiver. From such omission, no inference can necessarily be drawn that the interest was waived by him and that was why it was not charged under section 217(1-A). Since the order passed by the Income Tax Officer under section 154 is bereft of relevant and necessary facts, it cannot be clearly predicated of the action of the Income Tax Officer that it constituted violation of a statutory duty or obligation.

For the above reasons, we hold that, on the facts and in the circumstances of the case, no action could have been taken by the Income Tax Officer under section 154. The approach of the Appellate Assistant Commissioner and the Appellate Tribunal is not correct in the matter, but somehow both the authorities stumbled at a correct conclusion that, on the facts and in the circumstances of the case, no interest can be charged under section 154.

In the result, we answer question No: 1 in the negative, that is, in favour of the Revenue and against the assessee and question No. 2 in the affirmative that is, in favour of the assessee and against the Revenue.

A copy of the judgment shall be sent to the Appellate Tribunal to enable it to pass an order conformably to such judgment to dispose of the case under section 260(1) of the Act.

M.B.A./139/T.FReference answered.