Law: Income Tax Act, 1961

Section: 216

Income-tax----Advance tax---Underestimation of---Interest---Mere underestimation is not sufficient to charge interest ---Authorities to see whether underestimation is made deliberately to reduce burden of tax---Indian Income Tax Act, 1961, S.216. The Assessing Officer charged interest under section 216 of the Income Tax Act, 1961, for underestimation of advance tax by the assessee¬ company. The Commissioner of Income-tax (Appeals) cancelled the interest charged and this was upheld by the Tribunal. On a reference: Held, affirming the order of the Tribunal, that underestimation of advance tax may be caused for various reasons and mere underestimation was not sufficient to burden the assessee with interest under section 216 of the Act. It was the duty of the Assessing Officer 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. CIT v. Elgin Mills Co. Ltd. (1980) 123 ITR 712 (All.); CIT v. Namdang Tea Co. India Ltd. (1993) 202 ITR 414 (Gauhati) and Oudh Sugar Mills Ltd. v. CIT (1994) 210 ITR 692 (Bom.) ref. JUDGMENT D.N. BARUAH, J.---At the instance of the Revenue, the following question has been referred under section 256(1) of the Income Tax Act, 1961, for opinion of this Court: "Whether, on the facts and in the circumstances of the case, and in proper appreciation of the law enumerated in section 216 of the Income Tax Act, 1961, the Tribunal has erred in sustaining the Commissioner of Income-tax (Appeals) decision cancelling the interest charged under section 216 of the Income Tax Act, 1961, when advance tax was underestimated by reason of the underestimation of the assessees current income as compared to the final income actually ascertained at the end of the year?" The assessee is a company incorporated under the Companies Act, 1956. It owns a tea estate. As per the assessment made by the assessing authority, the assessee was to pay the first and the second instalment of tax at the rate of Rs.45,158, but the assessee furnished the statement of advance tax showing advance tax payable to be nil. For the second instalment also it furnished advance…

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