ORDER
Per Shri I. S. Nigam, Accountant Member – This is an appeal filed by the assessee against the order of the AAC, T-Range, Bombay.
2. The assessee is an individual and the appeal relates to the assessment year 1978-79. The assessment for this year was completed by the ITO under section 143(3) of the Income-tax Act, 1961 (the Act), and in the notice of demand accompanying the assessment order, the assessee was intimated that the assessee was also charged interest under section 139(8) of the Act for not filing an advance tax estimate. The assessee, therefore, moved a petition for rectification under section 154 of the Act for cancelling the interest charged under section 139(8) and section 217. The ITO, however, by order under section 154 rejected the assessees application under section 154. The AAC in appeal, agreed with the ITO on the issue and refused to interfere. The assessee has, therefore, come up in the present appeal before us.
3. The assessees learned counsel Shri Mapara cited before us two rulings of the Honble High Courts, one of the Honble Calcutta High Court of in the case of Manohar Gidwany v. CIT [1983] 139 ITR 498 and another of the Honble Karnataka High Court in the case of CIT v. Executors of the Estate of late H. H. Rajkuverba Dowagar Maharani Saheb of Gondal [1978] 115 ITR 301 in support of the contention that unless the order of assessment itself incorporates as order for the payment of interest, the assessee cannot be asked by means of a simple demand notice to pay penal interest both under section 139(8) and under section 217. We were also taken through the assessment order to point out that there was no direction in the assessment order for charge of interest under section 139(8) or under section 217. Coming to the merits, Shri Mapara pointed out that advance tax of Rs. 27,630 paid on 29-3-1978 was wrongly not taken into account by the ITO while calculating interest under section 139(8), and if this was done there would have been no interest payable under section 139(8) or else the interest would have been a very nominal amount. He further submitted that the assessee was not served with the order of the ITO demanding advance tax and besides since the assessee was already hitherto assessed there was no liability on the assessee to file a voluntary estimate of advance tax as required by sub-section (3) of section 212 of the Act. He, therefore, submitted that under section 217 as it existed for this assessment year 1978-79, prior to its amendment by the Finance Act, 1978 with effect from 1-6-1978, there was no question of any charge of interest under section 217 and, hence, the charge of interest under section 217 was a mistake apparent from the record. Thus, according to Shri Mapara whichever way the matter was looked into, the charge of interest both under section 139(8) and under section 217 should be cancelled. Alternatively, it was urged that the interest under section 139(8) should be reduced to the nominal amount after taking into account the advance tax payment of Rs. 27,630 on 29-3-1978.
4. On the other hand, the learned departmental representative Shri Joy, submitted that even according to the ruling of the Honble Karnataka High Court in the case of Executors of the Estate of late H. H. Rajkuverba Dowagar Maharani Saheb of Gondal (supra), an order under section 217 does not form part of an order of assessment and has to be passed only after the regular assessment is made and this by itself means that if there is no direction in the assessment order for charging of interest under section 139(8) or under section 217 such an direction can be given after the passing of the assessment order and at the time of the issue of the notice of demand based on calculations of tax in pursuance of the assessment order. Our attention was also invited to the ruling of the Honble Andhra Pradesh High Court in the case of Kangundi Industrial Works (P.) Ltd. v. ITO [1980] 121 ITR 339 and of the Honble Kerala High Court in the case of A. Sethumadhavan v. CIT [1980] 122 ITR 587 wherein their Lordships laid down that an advance tax payment after the specified dates cannot be said to be an advance tax payment entitling the assessee to interest under section 214 and on the same parity of reasoning it automatically follows that if advance tax is not paid by the due dates, the amount paid cannot be treated as advance tax even for the calculation of interest under section 139(8) or under section 217. He therefore, submitted that there was no mistake apparent from the record in the assessment order and the assessees application under section 154 was rightly rejected by the revenue authorities.
5. We have carefully considered the rival submissions. At the outset it will be necessary to point out that we are not dealing with the merits of the charge of interest under section 139(8) or the charge of interest under section 217, but with the limited issue whether there was any mistake apparent from the record in the charge of interest under section 139(8) and/or section 217. In view of the case laws cited both by the assessees learned counsel Shri Mapara as well as the learned departmental representative Shri Joy, two views are possible on the issue of whether if there is no direction in the assessment order for change of interest, interest can still be charged under section 139(8) and/or section 217 at the time of issue of demand notice. Similarly, there is a conflict of judicial pronouncements on the issue of whether where the payment purported to be advance tax was made after the last date of advance tax instalment, the amount could still be treated as advance payment of tax. The Honble Supreme Court in the case of T. S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50 has laid down that where a mistake has to be arrived at by a long-drawn process of reasoning on an issue on which there may conceivably be two options, such a mistake cannot be said to be apparent from the record which may be rectified by order under section 154. Viewed in this context, the charge of interest under section 139(8) on the ground that the payment purported to be advance tax after the last date of advance tax payment was not taken into account be said to be a mistake apparent from the record. It might perhaps not be out of place mention here that this will also apply to the charge of interest under section 217. Similarly, in view of the two conceivable views on whether where there is no direction in the assessment order for charge of interest, interest can still be charged under section 139(8) and/or section 217, there can said to be no mistake apparent from the record if interest under section 139(8) or section 217 was charged, at the time of the issue of the demand notice based on calculations of tax in pursuance of the assessment order. However, considering that the assessment year under appeal before us is the assessment year 1978-79, which will be governed by section 217 as it existed prior to its amendment by the Finance, Act 1978, with effect from 1-6-1978 the assessee is liable to interest under section 217 only if the assessee was under an obligation to file a voluntary estimate of advance tax as required by sub-section (3) of section 212 but had not submitted such an estimate. Even though a claim was made before us that the assessee was a regular assessee and was, therefore, not under an obligation to file a voluntary estimate of advance tax as required by sub-section (3) of section 212 as it then existed, there is no finding to this effect either in the order under section 154 or in the order of the AAC under appeal before us. Even from the material which has been filed before us it is not possible to find out whether at the time the estimate under sub-section (3) of section 212 as it then existed was due, the assessee was already assessed or was not hitherto assessed to tax. If the assessee was already assessed to tax at the time the voluntary advance tax estimate as required by sub-section (3) of section 212 as it then existed was due, the charge of interest under section 217 would obviously be a mistake apparent from the record. The result is that so far as the charge of interest under section 139(8) is concerned, there can said to be no mistake apparent from the record on this issue and, therefore, the orders of the revenue authorities on this point do not call for any interference. On the issue of charge of interest under section 217, we direct the ITO to verify the assessees claim that at the time the voluntary estimate of advance tax under sub-section (3) of section 212 as it then existed was due, the assessee was already assessed and if that is so, cancel the interest under section 217.
6. The appeal is partly allowed.