COMMISSIONER OF INCOME TAX Vs. HARIHAR JETHALAL JARIWALLA

JUDGEMENT

(1.) BY this reference under S. 256(1) of the IT Act, 1961, the Tribunal has referred the following question of law to this Court for opinion at the instance of Revenue:

(2.) THIS reference pertains to the asst. year 1976 77, the relevant previous year being the year ended 31st March, 1976. For this assessment year, the assessee was assessed by the ITO by his order of assessment dt. 28th May, 1979, and the total income was computed at Rs. 8,31,250 and the tax payable was determined at Rs. 6,11,019. As the advance tax paid by the assessee was less than seventy five per cent of the assessed tax, simple interest at the rate of twelve per cent per annum from the 1st day of the assessment year upto the date of the assessment was levied by the ITO on the amount of Rs. 2,87,916 by which the advance tax of Rs. 3,23,103 paid by the assessee fell short of the assessed tax. The amount of interest so levied was Rs. 1,07,268. The assessee appealed against the order of assessment to the CIT(A). The appeal of the assessee was partly allowed. As a result thereof, the tax payable by the assessee was redetermined at Rs. 4,84,427. This resulted in the reduction of the difference between the assessed tax and the advance tax paid by the assessee. The ITO accordingly reduced the interest levied under S. 215 of the Act as contemplated by sub s. (3) of S. 215 of the Act. The assessee was aggrieved by the reduction of the interest as according to him, the liability to pay interest under S. 215 itself should have been redetermined with reference to the tax determined on the basis of the revised assessment and on such computation, he should have been held not to be liable to pay interest under S. 215(1) of the Act as the advance tax paid by the assessee was not less than seventy five per cent of the tax assessed pursuant to the revised order of assessment passed in pursuance of the appellate order. The assessee, therefore, appealed to the CIT(A). The CIT(A) rejected the appeal of the assessee as he was of the opinion that interest under S. 215(1) can be reduced under sub s. (3) of S. 215 in proportion to the reduction in the shortfall but it cannot be recomputed with reference to the reduced income. The assessee appealed to the Tribunal. The Tribunal accepted the contention of the assessee and held that having regard to the scheme of the Act and the context in which it appeared in S. 215, the expression "regular assessment" would include an order passed by the ITO pursuant to the direction of appellate authority. The Tribunal, relied upon the decision of the Calcutta High Court in Chloride India Ltd. vs. CIT (1977) 106 ITR 38 (Cal) : TC 4R.471, and observed that interest under S. 215(1) cannot be maintained when the advance tax paid by the assessee is not less than seventy five per cent of the tax assessed determined pursuant to the order of appellate or revisional authority and, accordingly, held that the advance tax paid by the assessee being not less than seventy five per cent of the tax finally determined as payable pursuant to the order of the appellate authority, no interest under S. 215 was payable by the assessee. Hence this reference at the instance of the Revenue.

(3.) IT is clear from sub s. (1) of S. 215 of the Act that the liability to pay interest arises if, in any financial year, the advance tax paid by the assessee falls short of seventy five per cent of the assessed tax. In that event, interest is payable on the deficient amount from the first day of April of the next financial year upto the date of regular assessment. "Assessed tax" has been defined in sub s. (5) to mean the tax determined on the basis of the "regular assessment". Thus, both for the purpose of determining the liability of the assessee to pay interest under this section and also the date upto which interest is to be charged, the material assessment is the "regular assessment".