Advance-tax interest under section 217 was unsustainable where the assessee could not reasonably foresee the later income addition.

Interest under section 217 of the Income-tax Act was not justified where the assessee filed the return on the basis of the books of account and did not furnish an advance-tax estimate, but the later enhancement of income from the firm could not reasonably have been foreseen on the material available at the time of filing. On those facts, the levy was unsupported and the assessee succeeded. The stated principle is that interest for failure to pay advance tax is not sustainable when the assessee had no reasonable basis to anticipate the addition that created the liability.

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Issues: Whether interest charged under section 217 of the Income-tax Act, 1961 was justified on the facts of the case.

Analysis: The assessee had filed the return on the basis of the books of account and had not furnished an estimate for advance tax. The subsequent enhancement of income from the firm was not something the assessee could reasonably foresee on the material available at the time of filing the return. In these circumstances, the charging of interest under section 217 was held to be unsupported on facts.

Conclusion: The levy of interest under section 217 was not justified and the assessee succeeded.

Ratio Decidendi: Interest for failure to pay advance tax is not sustainable where, on the facts, the assessee had no reasonable basis to foresee the addition giving rise to the liability.

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