Law:

Section:

Section 217 of the Income-tax Act, 1961, read with rule 40(5) of the Income-tax Rules, 1962 - Advance tax - Interest payable by assessee where no estimate made - Assessment years 1977-78 and 1978-79 - For relevant assessment years, assessee, a limited company, had not filed estimates of advance tax payable by it under section 212(3) - Consequently, ITO charged interest under section 217 from assessee - Assessee applied for reduction or waiver of interest under rule 40(5) - Assessee's explanation for not filing estimates of advance tax was that it held bona fide belief that it had no obligation to file such estimates as (i) considerable losses suffered in earlier assessment years 1973-74 to 1976-77, if allowed to be carried forward, would have wiped out entire income for assessment year 1977-78 and substantially reduced income for assessment year 1978-79, and (ii) there was no reason for it to expect that it would earn income in relevant assessment years having regard to fact that in earlier years it had suffered losses - Whether interest charged under section 217 was justified - Held, yes Section 273A of the Income-tax Act, 1961, read with rule 117A(v) pf the Income-tax Rules, 1962 - Penalty - Waiver/reduction of - Assessment years 1977-78 and 1978-79 - Assessee's explanation for late filing of returns was that its books of account and documents relating to assessment year 1977-78 were seized by department and in absence of finalisation of accounts for assessment year 1977-78 it was not possible for it to finalise its accounts for assessment year 1978-79 - Whether levy of interest for assessment years in question deserved to be waived - Held, yes FACTS For the assessment years 1977-78 and 1978-79, the assessee, a limited company, filed the returns belatedly. It had also not filed estimates of advance tax payable by it under section 212(3). Consequently, the ITO charged interest under sections 139(8) and 217 from the assessee. The assessee applied to the ITO under rules 117A(v) and 40(5) for waiver or reduction of interest charged under sections 139(8) and 217. The assessee's claim was based on the grounds (i) that for the assessment years 1973-74 to 1976-77, it…

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