Assessee not liable for interest under section 216, court dismisses appeal

The court held that the assessee was not liable to pay interest under section 216 as they had complied with the provisions of section 209A(1)(a) and later section 209A(4). The court emphasized that interest under section 216 is applicable only when an estimate is filed for the first two instalments and subsequently found to be an underestimate compared to the estimate filed before the last instalment. The appeal was dismissed in favor of the assessee with no order as to costs.

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Issues Involved:
1. Whether the assessee underestimated the advance tax payable by filing a statement under section 209A, thereby reducing the amount payable in the first two instalments, and thus liable to pay interest under section 216 of the Income-tax Act.

Detailed Analysis:

Issue 1: Underestimation of Advance Tax and Liability to Pay Interest under Section 216

Facts and Circumstances:
- The assessee filed a statement of advance tax payable under section 209A(1) of the Income-tax Act for the assessment year 1987-88 based on the total income returned for the assessment year 1985-86.
- The first instalment of advance tax amounting to Rs. 1,33,66,600 was paid on June 15, 1986, and the second instalment of the same amount was paid on September 15, 1986.
- A revised estimate of advance tax was filed on February 13, 1986(Rs.), and the enhanced amount of advance tax was paid before December 15, 1986, based on an estimated income of Rs. 10,27,56,000.
- The Assessing Officer imposed interest under section 216 for underestimating the advance tax, which was later set aside by the Commissioner of Income-tax (Appeals) and upheld by the Income-tax Appellate Tribunal.

Legal Provisions:
- Section 209A: Deals with the computation and payment of advance tax by the assessee. It distinguishes between a "statement" under section 209A(1)(a) and an "estimate" under sections 209A(2), 209A(3), and 209A(4).
- Section 216: Provides for interest payable by the assessee in case of underestimating advance tax payable or deferring payment of advance tax.

Court's Analysis:
- The court referenced the Calcutta High Court's judgment in CIT v. Indian Tube Co. Ltd., which clarified the distinction between a "statement" under section 209A(1)(a) and an "estimate" under sections 209A(2), 209A(3), and 209A(4).
- The court noted that when an assessee files a statement under section 209A(1)(a), they are not required to estimate their current income but to calculate advance tax based on the latest regular assessment or returned income.
- Interest under section 216 is applicable only when an estimate is filed for the first two instalments and subsequently found to be an underestimate compared to the estimate filed before the last instalment.
- The court agreed with the Tribunal's view that section 216 is not applicable where the assessee has filed a statement under section 209A(1)(a) and later filed an estimate under section 209A(4) when the current income exceeded the previously assessed income by more than 33.33%.

Conclusion:
- The court concluded that the assessee was not liable to pay interest under section 216 as they had complied with the provisions of section 209A(1)(a) and later section 209A(4).
- The substantial question of law was answered in the negative and in favour of the assessee.
- The appeal was dismissed with no order as to costs.

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