CBDT circular binding on tax department bars additional interest under section 217(1A) where section 215 applies

A CBDT circular issued after consultation with the Ministry of Law was treated as binding on the Department under section 119 of the Income-tax Act, 1961. On that footing, where an assessee had under-estimated advance tax and later failed to file the upward estimate under section 212(3A), only interest under section 215 was leviable and additional interest under section 217(1A) could not be charged. The Commissioner's attempt to revise the assessment on the basis that section 217(1A) should also have been applied was therefore unsustainable.

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Issues: Whether, in the light of the binding circular issued by the Central Board of Direct Taxes, interest could be charged under section 217(1A) of the Income-tax Act, 1961 in addition to interest already charged under section 215 of the Income-tax Act, 1961.

Analysis: The assessee had filed an under-estimate of advance tax and later defaulted in filing the upward estimate contemplated by section 212(3A) of the Income-tax Act, 1961. The Commissioner invoked section 263 of the Income-tax Act, 1961 on the footing that the assessing officer ought to have charged interest under section 217(1A). However, a circular issued by the Central Board of Direct Taxes, after consultation with the Ministry of Law, stated that in such cases interest under section 217(1A) should not be charged and that only interest under section 215 need be levied. Since such circulars are binding on the Department under section 119 of the Income-tax Act, 1961, the administrative direction governed the matter.

Conclusion: Interest under section 217(1A) could not be charged in addition to interest under section 215, and the Commissioner's order directing such levy was unsustainable.

Ratio Decidendi: A circular issued by the Central Board of Direct Taxes under section 119 of the Income-tax Act, 1961 is binding on the Department, and where the circular directs that only interest under section 215 is to be charged, additional interest under section 217(1A) cannot be levied.

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