The imposition of penal interest u/s 18A(6). - Income Tax - 435/CBDT

INSTRUCTION NO. 435/CBDT Dated: May 29, 1972 Section(s) Referred: 215 , 18A(6) of 1922 Act Statute: Income - Tax Act, 1961 Attention is invited to Board's letter C. No. 12(1)IT/49 dated 31st January, 1949 (printed at page 326 in Volume II of I.T. Circulars from 1st April, 1922 to 31st March 1955) wherein it was clarified that if the rates of Income-tax in the Finance Act of the year in which the regular assessment was made were lower than the rates in the preceding year, the imposition of penal interest u/s 18A(6) with reference to higher amount calculated at the rates prescribed by the Finance Act in the year in which advance tax was paid would be justified in view of words "so far as it is not due to variation in the rates of tax made by the Finance Act enacted for the year" occurring in Section 18A(6) of the I.T. Act, 1922. 2. The Board have been advised that the above view is not correct. The correct position is that while computing the interest u/s 18A(6)/215 of the I.T. Act, 1922/1961 the lower of the two rates prescribed by the relevant Finance Acts as applicable to regular assessment or the advance tax as the case may be, has to be taken into account. In view of this, Board's letter C. No. 12(1)IT/49 dated 31st January, 1949 may please be treated as cancelled. 3. Cases completed before the date of issue of these instructions need not be re-opended. These instructions may please be brought to the notice of all officers working in your charge.