TMI Blog1996 (6) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee's 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 fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). Hence, the present reference. We have heard Mr. Joshi, learned standing counsel, appearing for the Revenue, and Dr. Saraf, learned counsel appearing on behalf of the assessee. Mr. Joshi submits that interest has been levied rightly by the Assessing Officer under the provisions of section 216 of the Act when the advance tax payable was far below the income. Therefore, it was improper on the part of the Commissioner of Income-tax (Appeals) as well as the Income-tax Appellate Tribunal to set aside the order passed by the assessing authority. Dr. Saraf, on the other hand, submits that mere underestimation is not enough for the purpose of interest. There must be something to show that this underestimation was with a view to pay reduced ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t payable in either of the first two instalments, he may direct that the assessee shall pay simple interest at fifteen per cent. per annum. Therefore, mere underestimation may not always attract imposition of interest. It must be with a view to reduce the amount of tax payable. The provisions of sections 215 and 216 are different. Under section 215 charging of interest is mandatory, whereas under section 216 the charging of interest is discretionary. Interest is charged only when the Assessing Officer is satisfied that such underestimation was only with a view to reduce the tax. Thereby it also means that there must be deliberate action on the part of the assessee of underestimation. Therefore, it is the duty of the Assessing Officer to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecide whether there is any underestimation of advance tax for the purpose of levy of interest under section 216, one should not take into account any underestimation of current income by the assessee. The estimation of advance tax under section 212(3A) is dependent on the estimation of current income. Therefore, it is not possible, artificially, to sever the two. Undoubtedly, there may also be other reasons for underestimation of advance tax such as an error in calculation or taking into account certain deductions which may be erroneous and so on. But section 216 refers to underestimation of advance tax under sub-sections (1), (2), (3) and (3A) of section 212. It does not limit such underestimation of advance tax to underestimation for reas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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