Mandatory compensatory interest under income-tax law cannot be cancelled merely for lack of hearing when statutory conditions are met.

Interest under section 215 of the Income-tax Act, 1961 was held to be mandatory and compensatory, and the levy could not be cancelled merely because the assessee was not given an opportunity of hearing. Where advance tax paid fell below 75% of the assessed tax, the statutory conditions for charging interest were satisfied, and the Tribunal's annulment of the levy for want of hearing was therefore unsustainable. The issue was answered in favour of the Revenue and against the assessee.

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Issues: Whether interest chargeable under section 215 of the Income-tax Act, 1961 could be cancelled on the ground that opportunity of hearing was not given to the assessee, where advance tax paid was less than 75% of the assessed tax.

Analysis: The Tribunal had annulled the interest levy only for want of hearing. The provision was treated as mandatory, and the interest was characterised as compensatory in nature, becoming leviable when the advance tax paid fell below the statutory threshold of 75% of the assessed tax.

Conclusion: The question was answered in favour of the Revenue and against the assessee.

Ratio Decidendi: Interest under section 215 of the Income-tax Act, 1961 is mandatory and compensatory, and its levy cannot be set aside merely for want of an opportunity of hearing where the statutory conditions for levy are satisfied.

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