Law:

Section:

Section 216 of the Income-tax Act, 1961 - Advance tax - Interest payable by assessee in case of underestimate - In relevant assessment year assessee estimated its tax liability at Rs. 1,15,500 and paid two instalments of advance tax of Rs. 38,500 each - Before making payment of final instalment assessee filed revised estimate of its tax liability showing advance tax payable at Rs. 1,58,770 - ITO worked out net tax liability at only Rs. 85,233 and completed assessment - Whether Commissioner was justified in holding that assessee had deliberately underestimated its income in its first estimate and, thus, section 216 was attracted - Held, no Facts On the basis of the preceding year's income of the assessee, the ITO served a notice for the payment of advance tax of Rs. 2,03,863. However, the assessee filed an estimate under section 212, estimating its income-tax liability at Rs. 1,15,500 and, accordingly, paid two advance tax instalments of Rs. 38,500 each in September and December. Before making the payment of the last instalment, the assessee filed a revised estimate of its income-tax liability calculating advance tax payable by it at Rs. 1,58,770 and after adjusting the two instalments already paid, it paid the balance amount of advance tax. Later, the ITO worked out the net amount of income-tax payable by the assessee at Rs. 85,233 and completed the assessment. The amount of advance tax paid over and above Rs. 85,233 was determined as refundable. The Commissioner, however, observed that the assessee in its first estimate had deliberately underestimated the advance tax payable by it in the first two instalments and as such section 216(a) was applicable. Not charging interest under section 216(b)( i) by the ITO at the time of regular assessment was treated as an inaction on the part of the ITO and consequently, the Commissioner started proceedings under section 263. The assessee's appeal to the Tribunal was, however, accepted. On reference: Held A plain reading of section 216 makes it clear that it is on making the regular assessment that the ITO is to find whether an assessee had underestimated the advance tax payable by it and thereby reduced the amount payable…

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