Commissioner of Income Tax vs Moti Sagar Kapoor

B.N. Kirpal, J.—At the instance of the Income Tax Department, the following question of law has been referred to this court in respect of the assessment year 1971-72 :

"Whether, on the facts and in the circumstances of the case, the Tribunal is correct in holding that the order of the Income Tax Officer granting interest to the assessed u/s 214 cannot be rectified u/s 154 ?"

Briefly stated, the facts are that the assessed had paid advance tax, within the relevant financial year, but beyond the dates prescribed in the Income Tax Act, 1961. The Income Tax Officer, however, allowed interest of Rs. 25,145 u/s 214.

Subsequently, the Income Tax Officer came to the conclusion that the advance tax had not been paid in accordance with the provision of section 207 to 213 and, Therefore, payment of interest was not warranted and he passed an order u/s 154 withdrawing the amount of interest which had been allowed. The assessed filed an appeal before the Appellate Assistant Commissioner who came to the conclusion that it was a debatable issue as to whether interest on the Installment of advance tax was payable or not and, in that view of the matter, the same could not be withdrawn u/s 154. The appeal of the assessed was allowed. The Department then filed a second appeal before the Tribunal who also came to the same conclusion, namely, that whether the payments made by the assessed were advance tax or not on which interest u/s 214 to be paid was a debatable issue and, in view of various decisions, both for and against the propositions, action could not be taken u/s 154 of the Act.

It is now well-settled that the decision of the Supreme Court in the case of T.S. Balaram, Income Tax Officer, Company Circle IV, Bombay Vs. Volkart Brothers, Bombay, , that, if there is a debatable question involved, then the provisions of section 154 cannot be invoked because, u/s 154, it is only a mistake apparent on the face of the order which can be rectified. In view of the aforesaid decision of the Supreme Court in T.S. Balaram, Income Tax Officer, Company Circle IV, Bombay Vs. Volkart Brothers, Bombay, , the conclusion of the Tribunal has to be upheld. The question of law is, Therefore, answered in the affirmative and in favor of the assessed. There will be no order as to costs.