COMMISSIONER OF INCOME TAX vs. KISMAT PVT. LTD.

ITR/20/1987HC GujaratGJHC24011753198727 August 2001Author: HONOURABLE MR. JUSTICE MOHIT S. SHAH,HONOURABLE MR. JUSTICE D.A.MEHTA3 pages

AI SummaryRemanded

What did the High Court hold?

The High Court held that the Tribunal had erred in law by deleting the interest imposed under Section 216 of the Income Tax Act. The Court noted that the Tribunal's decision was based on the ratio of the Vazirsultan Tobacco Company Ltd. case, which stated that for Section 216 to apply, the Income Tax Officer must find that the assessee had under-estimated advance tax payable, reducing the amount payable in the first two instalments. However, the Court highlighted that the Full Bench of the Andhra Pradesh High Court in CIT vs. Rayalaseema Mills Ltd. had clarified that if the underestimation of advance tax is due to underestimation of income or any other reasons, Section 216 would be attracted. Therefore, the Tribunal's reasoning that underestimation of income alone did not attract Section 216 was incorrect. The question referred to the Court was answered in the negative, in favour of the Revenue and against the assessee. The Court directed the Tribunal to adjust its decision under Section 260(1) of the Act after hearing both sides on merits.

What were the facts?

The Income Tax Officer levied interest of Rs. 14,697 under Section 216 of the Income Tax Act, 1961, for underestimating income in the first two instalments of advance tax for the assessment year 1980-81 (accounting year 1979). This was confirmed by the Commissioner of Income Tax (Appeals). The Income Tax Appellate Tribunal, however, deleted the interest, relying on a Division Bench decision of the Andhra Pradesh High Court in ACIT vs. Vazirsultan Tobacco Company Ltd. The Revenue appealed this decision. The assessee, Kismat Pvt. Ltd., was served notice but did not appear before the High Court.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal erred in law by deleting the interest imposed under Section 216 of the Income Tax Act, 1961. The Revenue contended that the Tribunal's decision was incorrect as the Division Bench decision of the Andhra Pradesh High Court, relied upon by the Tribunal, had been overruled by a Full Bench of the same High Court in CIT vs. Rayalaseema Mills Ltd. The Revenue argued that the Full Bench held that if underestimation of advance tax is due to underestimation of income or any other reason, Section 216 would be attracted. The assessee did not present any arguments.

Which sections of the Income-tax Act were involved?

Section 216, Section 260(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 20 of 1987

For Approval and Signature:

Hon'ble MR.JUSTICE M.S.SHAH and Hon'ble MR.JUSTICE D.A.MEHTA ============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

Whether it is to be circulated to the Civil Judge? : NO -------------------

The order continues below.

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