COMMISSIONER OF INCOME TAX1 Vs. RAYALASEEMA MILLS LIMITED

JUDGEMENT

(1.) The Division Bench of this court, which dealt with this reference case under section 256(1) of the Income-tax Act, 1961 (for short "the Act"), at the instance of the Revenue, not agreeing with the judgment of this court in Addl. CIT v. Vazir Sultan Tobacco Co. Ltd. [1980] 122 ITR 251, referred this case to the Full Bench.

(2.) The respondent-company is the assessee. In the previous year ending with 31/12/1979, relevant to the assessment year 1980-81, the assessee paid advance tax of Rs. 23,65,000 in three instalments; the first instalment of Rs. 1,00,000 was paid on 16/06/1979; the second instalment of Rs. 11,32,500 was paid on 14/09/1979, and the third instalment of an equal amount was paid on 15/12/1979. Before the Income-tax Officer, the assessee represented that in view of the brought forward losses the assessee estimated its income at Rs. 5,00,000 for the assessment year 1980-81 and accordingly paid the advance tax instalment of Rs. 1,00,000. However, having noticed the marked difference between the cost of materials and the price of finished products in that year the assessee realised that substantial income was likely, so it estimated the income at Rs. 40,00,000 and filed a revised return on 13/09/1979. Along with the returns for the said assessment year, declaring the income of Rs. 30,06,487 the assessee claimed brought forward losses of Rs. 1,28,095; for the assessment year 1979-80 there was an unadjusted brought forward loss of Rs. 60,045 which was to be adjusted against the income for the assessment year 1980-81. On the ground of underestimation of advance tax at the time of payment of the first instalment of tax the Income-tax Officer charged interest of Rs. 33,972 under section 216 of the Act. On appeal the Commissioner of Income-tax (Appeals) held that the assessee's conduct appeared to be straightforward and it could not be accused of deliberately underestimating the advance tax payable for the first instalment and following the judgment of our High Court in Addl. CIT v. Vazir Sultan Tobacco Co. Ltd. [1980] 122 ITR 251 allowed the appeal, setting aside the levy of interest under appeal, by his order dated 4/08/1983. Against that order the Revenue filed an appeal before the Income-tax Appellate Tribunal, which was heard along with the appeal filed by the assessee on a different point. By a common order dated 26/06/1984, the Tribunal confirmed the order of the Commissioner of Income-tax (Appeals) and dismissed the appeal of the Revenue. The Tribunal referred the following question to this court as arising from the said order, at the instance of the Revenue :

(3.) Mr. S.R. Ashok, learned standing counsel for the Income-tax Department, submits that though the point is covered by the judgment of the Division Bench of this court in Vazir Sultan Tobacco Co. Ltd. case [1980] 122 ITR 251, the Calcutta and the Bombay High Courts have taken a different view. He contends that section 216 deals with underestimation of income and that the question of animus of the assessee is not relevant; if as a fact there is an underestimation of income that will attract the provisions of section 216 of the Act.