1991 (12) TMI 133 - AT - Income Tax

ITAT affirms CIT's decision on advance tax treatment for interest calculation under Sections 139(8) and 217(1)(a).

The ITAT upheld the CIT (Appeals) decision to treat the belatedly paid advance-tax as advance-tax proper for calculating interest under Sections 139(8) ... Advance Tax, Appellate Assistant Commissioner, Attributable To, Interest Payable By Assessee, Late Filing Issues Involved:1. Levy of interest under Section 139(8) of the Income Tax Act.2. Levy of interest under Section 217(1)(a) of the Income Tax Act.3. Treatment of belatedly paid advance-tax as ad hoc payment or advance-tax.4. Validity of the appeal filed by the assessee challenging the levy of interest.Issue-wise Detailed Analysis:1. Levy of interest under Section 139(8) of the Income Tax Act:The assessee contended that interest under Section 139(8) was not exigible because the delay in filing the return was due to the delay in finalizing the accounts of a firm in which the assessee was a partner. The assessee argued that he was prevented by sufficient cause from filing his return of income within time and had filed an application for an extension of time, but did not receive any intimation from the Assessing Officer. The CIT (Appeals) held that the assessee was competent in law to agitate the exigibility issue relating to the levy of interest under the said sections, even if it happens to be the solitary issue raised in the appeal. However, the CIT (Appeals) ultimately concluded that 'the appellant cannot argue that interest was not chargeable under the provisions of section 217 and section 139(8) of the Income-tax Act.'2. Levy of interest under Section 217(1)(a) of the Income Tax Act:The assessee argued that no tax was payable as per the latest completed assessment, and therefore, he was not obligated to comply with the provisions of Section 209A(1)(a) of the Act. Consequently, the provisions of Section 217(1)(a) could not have been lawfully invoked against him. The assessee also disputed the liability to pay interest that was occasioned by the Assessing Officer's decision to treat the sum of Rs. 1,64,113 not as advance-tax but as an ad hoc payment. The CIT (Appeals) directed the Assessing Officer to treat the said sum of Rs. 1,64,113 as advance-tax paid by the assessee and to recompute the interest chargeable under Section 139(8) and 217 of the Act.3. Treatment of belatedly paid advance-tax as ad hoc payment or advance-tax:The Department contended that the advance-tax of Rs. 1,64,113 paid belatedly could not be treated as advance-tax proper. The CIT (Appeals) directed the Assessing Officer to treat the sum of Rs. 1,64,113 as advance-tax for purposes of calculating the interest leviable under Sections 139(8) and 217(1)(a). The ITAT upheld this view, stating that the scheme of the Income-tax Act, 1961, relating to collection and recovery of tax, does not support the contention that belatedly paid advance-tax should be treated as an ad hoc payment. The ITAT emphasized that the tax recovered through recovery proceedings retains its identity as advance-tax, and the delay in payment does not convert it into an ad hoc payment.4. Validity of the appeal filed by the assessee challenging the levy of interest:The Department argued that the CIT (Appeals) was not justified in entertaining an appeal on the solitary ground centering on the charging of interest under Section 139(8) and 217(1)(a) of the Act. The ITAT referred to the Supreme Court case of Central Provinces Manganese Ore Co. Ltd., which laid down that it is open to the assessee to dispute the levy of interest in appeal provided he limits himself to the ground that he is not liable to the levy at all. The ITAT concluded that the CIT (Appeals) was justified in entertaining the assessee's appeal and giving partial relief. The ITAT also noted that the Madras case of Rajyam Pictures, which the Department relied upon, stands overruled by implication by the Supreme Court decision in the case of Central Provinces Manganese Ore Co. Ltd.Conclusion:The ITAT upheld the CIT (Appeals) decision to treat the belatedly paid advance-tax as advance-tax proper for purposes of calculating the interest payable under Sections 139(8) and 217(1)(a). The ITAT also confirmed that the appeal filed by the assessee challenging the levy of interest was valid and justified. Consequently, the departmental appeal was dismissed.