1988 (1) TMI 86 - AT - Income Tax

ITAT affirms CIT(A)'s decision on interest under Income Tax Act SS216, emphasizing need for specific findings.

INSPECTING ASSISTANT COMMISSIONER. Versus STEELS WORTH PVT. LTD.

INSPECTING ASSISTANT COMMISSIONER. Versus STEELS WORTH PVT. LTD. - TTJ 030, 467, Issues:Appeal against deletion of interest charged under section 216 of the Income Tax Act.Analysis:The case involved an appeal by the Revenue against the deletion of interest amounting to Rs. 60,534 charged by the Income-tax Appellate Tribunal (ITAT) under section 216 of the Income Tax Act. The assessee's accounting year ended on 31st July 1980, with the assessment year being 1981-82. The dispute arose from the Advance Tax payable by the assessee in three installments due on 15th June 1980, 15th Sept 1980, and 15th Dec 1980. The assessing Officer charged interest under section 216 based on the assessee's revised income estimate filed on 11th Dec 1980, which showed a significant increase from the initial estimate. The CIT(A) cancelled the interest following precedents cited in Addl. CIT vs. Vazir Sultan Tobacco Company Ltd. and CIT vs. Elgin Mills Co. Ltd., leading to the Revenue's appeal.The Departmental Representative argued that the initial income estimate by the assessee was a gross underestimate, justifying the interest charged under section 216. However, the assessee's counsel presented a circular from the CBDT and argued that the assessing Officer's order lacked a proper conclusion and did not consider the mens rea aspect. The counsel contended that the CIT(A) rightly cancelled the interest based on legal precedents.The ITAT considered the submissions and referenced the decision of the Andhra Pradesh High Court in Addl. CIT vs. Vazir Sultan Tobacco Company Ltd. The Court clarified that interest under section 216 is payable only if the advance tax is underestimated due to reasons other than income underestimation. The absence of a finding by the assessing Officer regarding the underestimation of advance tax in the order led the ITAT to uphold the CIT(A)'s decision to cancel the interest. The ITAT found no reason to interfere and dismissed the appeal, affirming the cancellation of the interest charged under section 216.In conclusion, the ITAT upheld the CIT(A)'s decision to delete the interest charged under section 216, emphasizing the requirement of a specific finding regarding the underestimation of advance tax to levy such interest. The judgment highlighted the importance of proper reasoning and findings in tax assessments to justify the imposition of interest under the Income Tax Act.