(Appeal from the judgment and order of the Madras High Court in Tax Cases Nos.669 of 1975 and 59 of 1976, dated March 4, 1980).

Income-tax------

----Advance tax---Interest---Failure to file estimate---Nil return filed for assessment year 1965-66---Return accepted and "nil" demand notice issued-- ITO unable to make assessment for assessment year 1966-67 before dates on which estimates of advance tax for assessment years 1967-68 and 1968-69 were due ---Assessee not under obligation to file estimate of advance tax for years 1967-68 and 1968-69 as it had been previously assessed at nil assessment for assessment year 1965-66---Assessee previously assessed and not "new assessee"---Levy of penal interest for not filing estimate of advance tax not valid--- Application for rectification of assessment maintainable---Indian Income Tax Act, 1961, Ss. 154, 212(3) & 217.

For the assessment year 1965-66, the assessee filed a nil return. The return was accepted and the file was closed. The office also issued the assessment form and a demand notice under section 156 of the Income Tax Act, 1961, mentioning the amount demanded as "nil". The Income-tax Officer could not make the assessment for the year 1966-67 before the dates on which estimates of advance tax for the years 1967-68 and 1968-69 were due. For the assessment years 1967-68 and 1968-69, the Income-tax Officer found that the assessee was liable to furnish an estimate of advance tax and since he failed to do so, he levied interest under section 217 of the Act for these two years. On a reference, the High Court held that the assessee was not under an obligation to submit an estimate under section 212(3) of the Act for the years 1967-68 and 1968-69 as he had been previously assessed (by the said nil assessment) for the year 1965-66, that the assessee, who had been previously assessed, had been taken erroneously to be a "new assessee", that penal interest had been charged on the basis that he had not submitted an estimate under section 212(3), that it was a patent mistake since the assessee was not obliged to submit an estimate under section 212(3) of the Act and that the application for rectification of the assessment order was maintainable under section 154 of the Act. On appeal to the Supreme Court:

Held, dismissing the appeal, that there was no error in the decision of the High Court.

CIT v. N.D. Georgopoules (1980) 125 ITR 630 affirmed.

Esthuri Aswathiah v. ITO (1961) 41 ITR 539 (SC) ref.

B.K. Prasad, C. Radhakrishnan and B.S. Ahuja, Advocates for Appellant.

Mrs. Janaki Ramachandran, Advocate for Respondent.

ORDER

The Revenue has appealed against the judgment of the Madras High Court rendered in T.C. Nos.669 of 1975 and 59 of 1976, dated March 4, 1980. The judgment is reported in (1980) 125 ITR 630---CIT v. N.D. Georgopoules.

Stated briefly, for the assessment year 1965-66, the assessee filed a nil return. The return was accepted. The file was closed. The office also issued the assessment form and a demand notice under section 156 of -the Act mentioning the amount demanded as "nil". The Income-tax Officer could not make the assessment for the year 1966-67, before the dates on which estimates of advance tax for the years 1967-68 and 1968-69 were due. For the assessment years 1967-68 and 1968-69, the Income-tax Officer took the view that the assessee was liable to furnish an estimate of advance tax for these two years and he failed to do so. He charged interest under section 217 of the Income Tax Act for these two years.

The assessee contended that for the years 1967-68 and 1968-69, the assessee 'was not under an obligation to furnish an "estimate" under section 212(3) of the Income Tax Act, since there was a regular assessment for the year 1965-66. The assesses also contended that the charge of interest was not proper. This plea was negatived by the Income-tax Officer and also by the Appellate Assistant Commissioner.

In the second appeal the Appellate Tribunal held that the assessee had been assessed by a regular assessment for the years 1965-66 and so the assessee was under no obligation to furnish an estimate under section 212(3) and, therefore, the charge of penal interest was not proper. The mistake in levying penal interest should be rectified under section 154 of the Act. At the instance of the Revenue two questions of law were referred to the High Court. The High Court held that the assessee was not under an obligation to submit and estimate under section 212(3) of the Act, for the years 1967-68 and 1968-69 as it had been previously assessed (by the said "nil" assessment) for the year 1965-66. In that regard, the High Court relied upon the Constitution Bench decision of this Court in Esthuri Aswathiah v. ITO (1961) 41 ITR 539. The High Court further held, that the assessee who had been previously assessed, had been taken erroneously to be a "new assessee", and penal interest had been charged on the basis, that it had not submitted an estimate under section 212(3). It was a patent mistake since the assessee was not obliged to submit an estimate under section 212(3) of the Income-tax Act. The application for rectification of the assessment order was maintainable under section 154 of the Act.

We see no error in the decision of the High Court and the appeals are accordingly dismissed.

M.B.A./1853/FCAppeals dismissed.