BARODA ELECTRIC METERS LTD. vs. COMMISSIONER OF INCOME-TAX

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ITR/55/1989HC GujaratGJHC24012837198916 January 2003Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE A.L.DAVE3 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the Tribunal was right in law in holding that interest under Section 216 of the Income-tax Act was rightly charged. The Court found that the Income-tax Officer had provided copious reasons for levying interest under Section 216, specifically on the ground that the assessee had underestimated the advance tax payable and had not provided a satisfactory explanation for this underestimation. The ITO's order indicated that the assessee failed to prove with supporting figures that the initial estimate was based on reasonable data. The Court concluded that the assessee's explanation for underestimating the advance tax was not found to be substantial. Therefore, the question referred to the Court was answered in the affirmative, against the assessee and in favour of the Revenue. The reference was disposed of accordingly with no order as to costs.

What were the facts?

The assessee, Baroda Electric Meters Ltd., is challenging an order that charged interest under Section 216 of the Income-tax Act, 1961, for the Assessment Year 1982-83. The assessee filed an original return on June 29, 1982, and a revised return on November 25, 1983. An initial estimate of income was filed on June 15, 1981, estimating income at Rs. 21,06,000/- and advance tax payable at Rs. 11,87,257/-. The assessee paid installments of Rs. 3,76,961/- on August 28, 1981, and Rs. 3,76,961/- on November 4, 1981. A revised estimate was filed on December 15, 1981, estimating income at Rs. 31,00,000/- and advance tax payable at Rs. 17,90,250/-, with the last installment of Rs. 10,36,328/- paid on December 19, 1981. The Income-tax Officer (ITO) initiated proceedings to charge interest under Section 216 for underestimating advance tax in the first two installments. The assessee's explanation was rejected by the ITO, who confirmed the charging of interest. The appellate authority also confirmed the ITO's order.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that interest under Section 216 was rightly charged? Assessee's Contention: The assessee contended that interest under Section 216 of the Income-tax Act cannot be levied unless the Income-tax Officer finds that the assessee had underestimated the advance tax payable by it. The assessee relied on the decision of this Court in C.I.T. Vs. Nagri Mills Ltd. reported in 166 ITR 292. Revenue's Contention: The judgment does not explicitly record any separate contentions for the Revenue beyond what is implied by their position in the proceedings. However, the ITO's order, as narrated, indicates that the Revenue argued that the assessee had not produced any evidence to show that its sales were less in earlier quarters and had shot up in subsequent quarters, and failed to prove with figures regarding sales, purchase, etc., that the initial estimate was based on reasonable data.

Which sections of the Income-tax Act were involved?

Section 216,Section 256(2),Section 212(3A)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 55 of 1989

For Approval and Signature:

Hon'ble MR.JUSTICE R.K.ABICHANDANI and Hon'ble MR.JUSTICE A.L.DAVE

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

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

4.

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?

5.

Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals?

-------------------------------------------------------------- BARODA ELECTRIC METERS LTD. Versus COMMISSIONER OF INCOME-TAX -------------------------------------------------------------- Appearance: 1. INCOME TAX REFERENCE No. 55 of 1989 MR MANISH K KAJI for Petitioner No. 1 MR MANISH R BHATT for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE A.L.DAVE

Date of decision: 16/01/2003

ORAL JUDGEMENT (Per : MR.JUSTICE R.K.ABICHANDANI) #. Income-tax Appellate Tribunal, Ahmedabad Bench "B" has referred the following question at the instance of the direction issued by this Court for the opinion of this Court under Section 256(2) of the Income-tax Act, 1961. "Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that interest u/s. 216 was rightly charged?"

#. The matter pertains to the Assessment Year 1982-83 in respect of which the assessee had filed a Return on 29.6.82, declaring a total income of Rs. 30,41,556/-. Revised Return was filed by the assessee on 25.11.83, declaring an income of Rs. 28,95,923/-. The assessee Company had filed estimate in form no. 29 on 15.6.81 estimating its income at Rs. 21,06,000/- after claiming set-off in respect of business loss caused which was of Rs. 3,94,000/-. Advance tax payable was shown as Rs. 11,87,257/-. The assessee Company ought to have paid the tax in the installment of Rs. 3,95,752 as per the estimate filed but it paid Rs. 3,76,961/- on 28.8.81 and Rs. 3,76,961/- on 4.11. 81. In the revised estimate filed under Section 212(3A) filed on 15.12.81, the income was estimated at Rs. 31,00,000/- and the advance tax payable was shown to be Rs. 17,90,250/-. The last installment of Rs. 10,36,328/- was paid by the assessee on 19.12. 81. The assessee was, therefore, called upon to explain as to why interest under Section 216 should not be charged for underestimating advance tax payable in the first two installments. The assessee replied to the show cause on 29.9.84, inter alia, contending that due to diverse factors it was impossible for an industry like the one of this Company, to estimate the income at a correct figure. The Income-tax Officer did not find any substance in the explanation of the assessee and rejected the same by holding that the assessee had not produced any evidence to show that in the earlier quarters its sales were less and that the sales had shot up in the subsequent quarter. It was held that the assessee failed to prove with the help of any figures regarding sales, purchase etc. that the estimate filed on 15.6.81 was based on any reasonable data. Interest was, therefore, ordered to be charged under Section 216 of the Act.

#. It is evident from the order of the Income-tax Officer that after issuance of the show cause notice to the assessee and taking into consideration their reply,

the Income-tax Officer came to a finding that the assessee had underestimated the income in the first two quarters without there being any reasonable ground. The appellate authority confirmed the said order of the Income-tax Officer.

#. The only contention that was raised on behalf of the of the Income-tax Act unless the Income-tax Officer finds that the assessee had underestimated the advance tax payable by it.

#. It is clear from the order of the Income-tax Officer that copious reasons are given by the Income-tax Officer for holding that the interest was leviable under Section 216 of the Income-tax Act on the ground that the assessee had underestimated advance tax payable by it and had not given any satisfactory explanation for underestimating advance tax payable by it. In this view of the matter, we are of the opinion that the Tribunal was right in holding that the interest under Section 216 was rightly charged. The question referred to us is, therefore, answered in affirmative against the assessee and in favour of the Revenue. The Reference stands disposed of accordingly with no order as to costs.

[R.K. ABICHANDANI, J.]

[A.L. DAVE, J.] pirzada/-

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