CHANDRAKANT DAMODARDAS Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THE petitioner herein has filed this special civil application under Art. 226 of the Constitution seeking a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ, direction and/or order quashing the decision of the ITO dt. 17th Dec., 1977 refusing to award interest on the amount which was claimed by the petitioner. He has also further prayed that writ of mandamus be issued asking the respondent to pay Rs. 9,050 being the interest at the rate of 12% from the 1st day of April, 1975 till the date of regular assessment as computed in Exh. C to the petition.

(2.) THE facts leading to this special civil application are few and simple. THE assessee is an individual and Samvat year is his year of accounts. We are concerned with asst. yr. 1975-76, the corresponding accounting year being Samvat year 2030. THE order of assessment in respect of the asst. yr. 1975-76 was passed on 3rd Oct., 1977, and it appears that before the end of the financial year in question that is, before 31st March, 1975, the petitioner had paid advance payments of tax. He had paid Rs. 27,445 on 19th June, 1974 and a further sum of Rs. 27,450 on 20th July, 1974 making an aggregate amount of Rs. 54,895. Tax assessed in the course of the assessment proceedings of 1975-76 came to much less and an amount of Rs. 30,015 was payable by the IT authorities by way of refund so far as payment of advance tax was concerned. However, at the time of passing the order of refund, the ITO stated; "No interest under s. 214 granted as advance tax instalments paid after due dates." THE petitioner wrote to the ITO on 16th Nov., 1977 stating that a sum of Rs. 9,005 by way of interest was also payable to the petitioner under s. 214 of the IT Act and requested the respondent to pay the same. By his letter dt. 17th Dec., 1977 a copy of which is Exhibit D to the petition, the respondent, the ITO, observed: "For qualifying for interest under s. 214 instalments should have been paid on the dates specified in the Act. In your case instalments of advance tax have not been paid within the statutory dates fixed by the Act. THErefore, payment cannot be considered as advance tax and interest under s. 214 cannot be granted. Your application has been filed." THE petitioner applied to the respondent to review the decision and in the course of the application for review he relied upon the decision of this High Court in CIT vs. Kohinoor Flour Mills (1975) 99 ITR 54 (Guj) : TC4R.1089. A copy of the letter asking for review was also sent to the IAC concerned requesting that necessary instructions be issued to the respondent. THE IAC confirmed the stand taken up by the ITO and when an application was made to the CIT, Gujarat-V, the same stand was taken up by that Officer also. THE Commissioner in his letter dt. 28th March, 1978 stated: "THE dates of instalments have been statutorily fixed under s. 211 and, therefore, interest is payable only if the instalments are paid before the last date of instalments." THEreafter the petitioner has approached this High Court and prayed for the reliefs stated above. In the petition the petitioner has also relied upon the decision of this High Court in Bharat Textile Works vs. ITO 1978 CTR (Guj) 435 : (1978) 114 ITR 28 (Guj) : TC4R.929. (3) On these facts a neat question of law arises as to whether under s. 214 interest which is contemplated can be denied to an assessee who has not paid the instalments of advance tax on the dates specified under s. 211 of the IT Act.

(3.) THERE is another angle from which the matter can be looked at. Interest is paid under normal circumstances as and by way of consideration for the use of the money which the person paying the interest had, though the money belonged to somebody else, namely, the person to whom interest is paid. The assessee's money was really required to be paid after the final assessment or the regular assessment order is passed but from the 1st of April following the end of the financial year in question up to the date of regular assessment, some time may elapse and the Government is enjoying the use of that money during that period and that is why the legislature in its wisdom has provided in s. 214 that interest at 12% shall be paid by the Government to the assessee for the excess of the aggregate sum of instalments of advance tax over the tax determined in the course of the regular assessment. Interest is not even payable on the entire amount of the aggregate of instalments but only on the excess of the advance tax over the regular tax assessed in regular assessment proceedings. In view of the language used in s. 214 particularly with reference to the 1st day of April and not with reference to the dates on which the instalments are actually paid by the assessee, it is clear that what the legislature intended to do is to provide that irrespective of the dates on which instalments of advance tax are paid, interest will be payable if the entire amount of advance tax which was paid up in the course of the financial year exceeds the amount of tax determined on regular assessment. If these two conditions are satisfied interest must be paid to the assessee. The further requirement which the Revenue wants us to read, namely, the third condition which it also wants us to read in s. 214, namely, that instalments of advance tax must have been paid on or before the due dates mentioned in s. 211 for the payment of instalments, cannot be read looking to the language of s. 214. Looking to the purpose and the scheme of s. 214 which we have analysed about it is obvious that the stand taken up by the Revenue is entirely untenable. The payability is one aspect and the dates on which the amounts of instalments are required to be paid is another aspect altogether. As we have indicated earlier failure to pay the instalments on due dates might involve an assessee in payment of penalty if the other conditions regarding payment of penalty are satisfied but the concept under s. 214 being totally unconnected with any concept of deprivation of interest in the case where penalty is incurred, the interest referred to in s. 214 must be paid if the two conditions are satisfied, namely, that all the instalments of advance tax are paid in the course of the financial year irrespective of the dates when they are paid, and, secondly, the aggregate sum of the instalments of advance tax paid in the course of the financial year exceeds the amount of tax determined on regular assessment. THERE is no third condition to be read in s. 214 as one of the conditions qualifying for the payment of interest in respect of excess from the 1st day of April following the end of the financial year in question up to the date of the regular assessment.