COMMISSIONER OF INCOME TAX JAIPUR vs. M/S MAHARAJA SHREE UMAID MILLS LTD

This Income Tax Reference is directed against the order dt.03/01/1994 passed by the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur (in short, “ITAT”) for the Assessment Year 1975-76. The ITAT referred following questions of law u/s 256(1) of the Income Tax Act, 1961 (for short 'IT Act'):- “(1)Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in directing the Assessing Officer to allow interest on payments of Rs.15,16,166/- deposited in the financial year (despite the fact that the payment of Rs.15,16,166/- made on 26.12.1974 was not in accordance with the prescribed date given in sec.211 relevant for interest u/s 214 allowable to the assessee?”

Since the question, so framed by the ITAT, did not bring out the real controversy in question, on perusal of the statement of facts, it was clearly borne out that the real controversy is as to “whether on an application u/s 154 of the IT Act, interest u/s 214 of the IT Act could be granted on advance tax payments, made after the prescribed dates but within the financial year”. Therefore, vide order of this Court dt.08/01/2014, the real controversy was brought on record in the presence of counsel for the parties.

The brief facts, as emerging on the face of record, are that the respondent-assessee is a limited company. The respondent-assessee furnished a return of income on 29/07/1975 at Rs. 1,18,79,586/-. Total income was assessed at Rs.1,25,32,040/- u/s 143(3)/ 144 B of the Act, on 07/09/1978. The respondent-assessee paid an advance tax u/s 210 amounting to Rs.75,49,200/-. Further amount of Rs.63,594/- was deducted at source on securities/dividends etc. Thus, the total tax paid came to the tune of Rs.76,12,794/-

Against the additions made by the Assessing Officer (for short, 'AO') an appeal came to be preferred by the assessee before the Commissioner of Income Tax (Appeals) (for short, 'CIT(A)'), who, vide order dt. 28/03/1980, granted certain relief. The assessee became entitled to refund of the excess tax paid

An application u/s 154 of the IT Act dt.12/08/1980 was filed by the assessee pointing out that consequent to the appellate order, the assessee has become entitled to refund on account of excess payment which was made by the assessee u/s 214 of the IT Act. The application was disposed off by the AO on 18/01/1989 after observing that the installment of advance tax due on 15/12/1974 was deposited on 26/12/1974 beyond due date statutorily fixed u/s 211, therefore, the application u/s 154 is rejected.

Dissatisfied with the aforesaid order, an appeal came to be preferred before the CIT(A), who upheld the findings of the AO and in addition held that the matter is not covered u/s 154 as there are divergent views of different High Courts and the issue was debatable. He accordingly, dismissed the appeal.

The assessee preferred appeal before the ITAT. The ITAT, after considering the arguments, allowed the claim of the respondent-assessee, in view of the fact that majority of the High Courts have held that where the advance tax though paid after the prescribed date but within the financial year, then interest is payable u/s 214. In so far as the issue being debatable, the ITAT observed that there was no application of mind by the AO at the time of passing of assessment order and DB ITR-67/1995 4 thus application u/s 154 was maintainable and accordingly allowed the claim of the respondent-assessee. ITAT further 15/12/1974, was deposited on 26/12/1974 i.e. beyond the prescribed due date, but within the financial year cannot be said to be advance tax within the provisions of Sec. 210 read with Sec. 211. He further contended that it is only after the appellate order was passed, that an application u/s 154 was moved with reference to grant of interest u/s 214 of the IT Act. He further contended that an order u/s 154 can be passed only if there is mistake apparent or a glaring mistake on the face of record and in the instant case, it could not be rectified particularly when the advance tax was not paid on or before the due dates. He further contended that if the amount was paid on or before the due date and interest not granted, then a mistake could be said to have occurred but when Sec. 211 prescribes due dates and when due date has not been adhered to, then it DB ITR-67/1995 5 cannot be said to be a mistake apparent on the face of record. He further contended that the order of the ITAT is unjust and bad in law as the ITAT was made aware that judgments are there either way and since the issue was debatable, therefore, the ITAT, in the light of the judgment of the Apex Court, rendered in the case of Volkart Bros. & ors.: 82 ITR 50, ought Court in the case of Associated Stone Industries Vs. CIT : (1996) 217 ITR 246 as also of this Court rendered in the case of Jai Drinks (P) Ltd. Vs. CIT : (1996) 217 ITR 404. He has further relied upon the judgment of Delhi High Court, rendered in the case of CIT Vs. Moti Sagar Kapoor: (1993) 200 ITR 743 (Del.) He accordingly submitted that the reference needs to be answered in favour of the revenue.

Ld. counsel for the assessee submitted that admittedly the installment of advance tax, paid on 26/12/1974 amounting to Rs.15,16,166/-, has been held to be advance tax even by the DB ITR-67/1995 6 AO and once the credit of the said amount having been allowed as advance tax, then the assessee was certainly entitled to interest u/s 214 of the IT Act. He further contended that the issue was not at all debatable as even at the time of disposal of the application u/s 154 on 18/01/1989, majority of the High Courts had held that interest is to be allowed, even if the advance tax was deposited beyond prescribed time but within the financial year. He further contended that the ITAT, after appreciating the judgments of various High Courts, has correctly allowed the appeal and no interference is required to be made. He further contended that refusal to grant interest u/s 214 by specific order or otherwise is not appealable u/s 246 and there was no other option before the assessee except to move application u/s 154. He further contended that since interest was not granted automatically by the AO, though admittedly the assessee became entitled to refund with interest and after waiting for some time, there being no other alternate before the assessee except to move application u/s 154, hence application was moved. He also relied upon judgments rendered in the case of Bharat Textile Works Vs. ITO: (1978) 114 ITR 28 (Guj.); CIT Vs. Traub (India) P. Ltd.: (1979) 118 ITR 525 (Bom); Addl. CIT Vs. Chitra Sagar: (1980) 121 ITR 699 (Mad); Chandrakant Damodardas Vs. ITO: (1980) 123 ITR 748

We have considered the arguments advanced by ld.counsel for the parties and perused the impugned order so also the judgments cited by counsel for the parties.

On perusal of Sec. 210 read with Sec. 211 of the IT Act, it is clear that the due dates are prescribed to mean that advance tax is required to be paid by an assessee within the prescribed dates and credit is given of the amount paid as advance tax. Tax can be paid upto the end of the financial year i.e. 31st March and is also to be treated as an advance tax. Any tax paid after 31st March shall be self Assessment Tax. The controversy in the present matter is narrow and we are required to answer question of allowance of interest u/s 214 in a case where the installment of advance tax, though paid after the due date but before close of the financial year i.e. 31/03/1975. It is true that majority of the judgments have held that interest in a case like this would be allowed u/s 214, however, we are considering

We have gone through the judgments cited by ld. counsel for the assessee. However, we also agree with the first contention of ld. counsel for the assessee on the basis of the judgments relied upon by him and which have by and large held that any amount paid after the dates prescribed u/s 211 satisfied (i) the entire amount of advance tax is paid up; (ii) it is DB ITR-67/1995 9 advance during the previous year and if he fails to make an estimate in accordance with his income, he invites the liability to pay interest u/s 217. Similarly, if he pays more, he has (supra), while dealing with interest u/s 215, held that when the due date of payment was 15th December, 1971 and the amount having been paid on 22nd December, 1971, was to be treated as advance tax and in view of the same, interest u/s 215 was not leviable. Same view has been expressed as observed by us herein above and by the other High Courts in the judgments, relied upon by ld. counsel for the assessee but the question, in the present case, is grant of interest in a case where an application u/s 154 has been moved and Assessing Officer as also CIT(A) holds the issue is debatable. In one of the judgment cited on behalf of the assessee in the case of CIT Vs. TT Investments & Trades P. Ltd. (supra), we notice reference of an application u/s 154 but has not gone into the issue whether

(supra), has observed:- “It is now well-settled that the decision of the Supreme Court in the case of T. S. Balaram, ITO v. Volkart Brothers: [1971] 82 ITR 50 (SC) , that, if there is a debatable question involved, then the provisions of section 154 cannot be invoked because, under section 154, it is only a mistake apparent on the face of the order which can be rectified.”

Calcutta High Court in the case of Amalgamated Coalfields Ltd. Vs. CIT: (1979) 116 ITR 383 had held that the law is well settled that proceedings u/s 154 cannot be initiated if two opinions may possibly be taken on the legal issue involved in it. Thus it declined to grant interest u/s 214. 16. Viswanatha Reddy: (1991) 190 ITR 266 held that the controversy regarding interpretation of Sec. 214 had not been resolved and the issue remained debatable and therefore, rectification proceedings were held not valid.

The Bombay High Court in the case of Surat Cotton

Bhai Patel and Smt. Jyotsnadevi Patel:(1983) 144 ITR 871 also considered the issue and held that grant of interest u/s 214 is still a debatable question and different views have been expressed by different High Courts. It further held that view has been taken by the Andhra Pradesh High Court and Kerala High Court and in view of the sharp divergent of opinion, it is clear that there could be no mistake on record on such a question and, therefore, held that the order of rectification would be invalid and without juri iction.

The Delhi High Court, in the case of JMA Industries Ltd. Vs. CIT : (1993) 200 ITR 210 has held so and also the Allahabad High Court, in the case of CIT Vs. Modi Industries: (1999) 235 ITR 464. 20. Accordingly, we would choose to follow the view expressed by this Court and accordingly, the reference is answered in favour of revenue and against the respondent-

Consequently, the Tax Reference stands allowed. We make no order as to costs. [J.K. RANKA], J. [AJAY RASTOGI], J.