JUDGMENT
M.M. Kumar, J.
1. The short question which arises for determination in the instant petition is whether interest Under Section 214 of the IT Act, 1961 (for brevity, ‘the Act’), could be denied to the assessee-corporation who had failed to pay the instalment of advance tax in accordance with the date specified Under Section 211 of the Act.
2. In order to put the aforementioned question in its proper perspective, few facts would be necessary. The assessee-corporation was assessed to the income-tax by the ITO, Companies Circle, District-I, Patiala, who raised a demand of tax vide his notice dt. 20th May, 1976, issued Under Section 156 of the Act in pursuance of order made by him Under Section 210(1) of the Act requiring the assessee-corporation to pay to the credit of the Central Government a sum of Rs. 27,68,546 by way of advance tax in three equal instalments. The dates for payment of instalments were also given being 15th June, 1976, 15th Sept., 1976 and 15th Dec, 1976, which were as per the requirement of Section 211 of the Act. The tax related to the assessment year of 1977-78 relevant to the financial year 1976-77. In other words, the accounting period of the assessee-corporation commenced from 1st July, 1975 to 30th June, 1976. It is claimed that the income of the assessee-corporation for the financial year was likely to be much less than the income on which it had been required to pay advance tax by the order of the ITO issued Under Section 210(1) of the Act. The assessee-corporation estimated its income at a figure of Rs. 5 lakhs and accordingly submitted an estimate of its current income to the ITO Under Section 212(1) of the Act on 8th June, 1976. On the basis of the calculations by the assessee-corporation, a total sum of Rs. 2,88,750 (Rs. 2,75,000 as tax and Rs. 13,750 by way of 5 per cent surcharge) became payable by assessee-corporation as advance tax during the financial year of 1976-77 in three equal instalments on the dates already specified. The assessee-corporation paid three equal instalments on 14th June, 1976, 18th Sept., 1976 and 14th Dec, 1976. It is thus obvious that second instalment was paid after the date specified in Section 210(1) of the Act.
3. The assessee-corporation filed its return of income-tax Under Section 139(1) of the Act on 29th June, 1977, declaring a loss of Rs. 6,38,480 for the assessment year in question. Subsequently, a revised return dt. 10th Sept., 1979, was also filed by the corporation on 11th Sept., 1979, before the assessment could be framed declaring therein a loss of Rs. 12,07,404 for the asst. yr. 1977-78. A request was made to the Inspecting Asstt. Commissioner of Income-tax (Asst.) (for brevity, ‘the assessing authority’) for refund of the entire amount of tax of Rs. 2,75,000 which was paid as advance tax after making provisional assessment Under Section 141A of the Act. The assessee-corporation received a pay order for an amount of Rs. 2,75,000 by way of refund of advance tax which it had paid during the financial year 1976-77 for the assessment year of 1977-78. On 10th Sept., 1980, the assessing authority framed regular assessment Under Section 143(3) of the Act which determined, the business loss at Rs. 9,77,475 and depreciation allowable to the assessee-corporation was determined at Rs. 1,70,478. As a result of framing of regular assessment, the entire amount of advance tax of Rs. 2,75,000 paid by the assessee-corporation became refundable to it with interest Under Section 214 of the Act. As the refund was only of the principal amount of Rs. 2,75,000, the corporation applied to the assessing authority for allowing interest on the amount of Rs. 2,75,000 from 1st April, 1977 to 23rd Oct., 1979, @ 12 per cent per annum Under Section 214 of the Act. The assessing authority vide its order dt. 23rd Jan., 1981, allowed interest on the first and third instalments of advance tax as both the instalments were paid before the date specified in Section 210(1) of the Act but did not pay any interest in respect of the second instalment paid on 18th Sept., 1976, as is evident from its order Annex. P-l.
4. Against the order passed by the assessing authority, the assessee- corporation filed a revision petition Under Section 264 of the Act before the CIT, Patiala (respondent No. 2), and the order passed by the assessing authority was confirmed vide order dt. 8th Oct., 1987, and the revision petition filed by the assessee-corporation was dismissed. The orders passed by the CIT as well as by the assessing authority are the subject-matter of challenge in the instant petition.
5. Mr. Sanjay Bansal, learned counsel for the assessee-corporation, has raised two-fold submissions before me. Firstly, the learned counsel has argued that it is now well-settled by a catena of judgments including a Division Bench judgment of this Court in the case of CIT vs. Roadmastei Industries of India (P) Ltd. (1992) 193 ITR 639 (P&H) that irrespective of the dates on which the instalments of advance tax are paid, interest would be payable to the assessee on the excess advance tax paid. According to the learned counsel, the Division Bench of this Court in the case of Roadmaster Industries of India (supra) has laid down only two conditions that (a) the entire amount of advance tax has been paid, and (b) it is paid before the end of the financial year. There is no further condition that the instalments of advance tax must be paid in accordance with the dates mentioned in s 211(1) of the Act. Therefore, the learned counsel has argued that the assessing authority or the revisional authority could not have denied payment of interest to the assessee- corporation merely because second instalment was paid on 18th Sept., 1976, which otherwise was required to be paid by 15th Sept., 1976. The second submission of the learned counsel is that the petitioner is also entitled to payment of interest on interest because it has been deprived of the use of the amount during all this period. The learned counsel has referred to a Division Bench judgment of the Gujarat High Court in the case of D.J. Works vs. Dy. CIT (1992) 195 ITR 227 (Guj) which has been upheld by the Supreme Court in the case of CIT vs. Narendra Doshi (2002) 254 ITR 606 (SC).
6. Mr. P.S. Patwalia, learned counsel for the respondents, has opposed the submissions made by the learned counsel for the petitioner by arguing that there is no lack of bona fide on the part of the Department in withholding the payment of interest on the second instalment of the petitioner. According to the learned counsel, the bona fide has been furnished by Section 210(1) of the Act as well as by the fact that there was conflict of opinions between various High Courts which could be clarified within these jurisdictions: only in Roadmaster Industries case (supra) by a Division Bench, of this Court. The learned counsel has also argued that there is no case for payment of interest on interest on the basis of the judgment in D.J. Works case (supra). According to the learned counsel, a finding of fact is required to be recorded by some authority with regard to lack of bona fide on the part of the respondent and only then interest on interest could be awarded as was the case in D.J. Works, (supra). The learned counsel has further pointed out that there is no provision for making’ payment of interest on interest in the Act.
7. After hearing the learned counsel for the parties and perusing the Division Bench judgment of this Court, I am of the considered view, that there was no justification for the respondent-Department to deny; the payment of interest on the second instalment to the assessee-corporation. The view taken by the Division Bench categorically held that the legislature intended to provide that the dates given in Section 210(1) of the Act were, not mandatory, as long as two conditions were satisfied, namely, that the entire amount of advance tax was paid up and it was paid up before the end of the financial year. Therefore, there is no controversy on the first question raised by the learned counsel for the: petitioner that interest on the second instalment @ 12 per cent is payable from 1st April, 1977 to 23rd Oct., 1979.
8. I find considerable force even in the second submission made by the learned counsel for the petitioner that the amount of interest has been withheld by the respondent-Department for a long period and the petitioner was illegally deprived of the use of aforementioned amount. I do not find any condition in the judgment of the Gujarat High Court in the case of D.J. Works (supra) as affirmed by the Supreme Court in Narendra Doshi’s case (supra) that a complete lack of bona fide has to be first proved to award interest. The general principle which appears to have prompted the imposition of payment of interest on interest is that the petitioner has been unlawfully deprived of the use of amount which has been illegally withheld by the respondents.
9. In view of the above, this petition succeeds. Orders, Annexs. P-l and P-3 passed by the assessing authority and the CIT (respondent No. 2), respectively, are set aside insofar as the payment of interest on the second instalment has been denied to the petitioner. The respondents are directed to assess interest on the amount of second instalment @ 12 per cent from 1st April, 1977 to 23rd Oct., 1979. The Department is further directed to assess the interest on interest @ 12 per cent from 24th Oct., 1979, till the date of payment. The needful shall be done within a period of three months from the date of receipt of copy of this order.