Steel Worth Pvt. Ltd. vs Commissioner of Income Tax , Ner.

A.K. Patnaik, J.—In this reference u/s 256(1) of the Income tax-Act, 1961 (for short, ''the Act''), the following question has been referred by the Income Tax Tribunal for opinion of this Court:

Whether in the facts and circumstances of the case, the Tribunal had any material to hold that the assessee has under-estimated advance tax payable and thereby reduced the amount payable in instalment for the year relevant to the assessment year 1975-76?

The reference was heard earlier by a Division Bench of this Court. But the two judges by their separate judgments dated 3.12.96 differed in their opinions on the aforesaid question. While DN Baruah, J. answered the question in the affirmative, i.e. in favour of the Revenue and against the assessee, and held that the assessee had under estimated advance tax payable and had thereby reduced the amount payable in instalments for the assessment year 1975-76, SL. Saraf, J answered the question in the negative and in favour of the assessee, and held that the Income Tax officer had not exercised his discretion judicially nor had applied his mind and had failed to disclose any material to hold that the assessee had consciously under-estimated its income and advance tax payable thereon during the course of making assessment. In view of the difference of opinion between the two brother Judges, the Chief Justice initially referred the matter to one of us. But pursuant to order dated 14.8.97 passed by one of us, the Chief Justice had now referred the matter to the present Division Bench. We are now required to decide the point of law in accordance with Section 259(2) of the Act.

The facts as disclosed in the statement of the case drawn up by the Income Tax Appellate Tribunal, Guwahati Bench and the Annexures thereto briefly are that for the assessment year 1975-76, the Assessing Officer passed an order on 24.1.81 u/s 216 of the Act. In the said order, it was stated that the assessee company filed an estimate of advance tax u/s 212(2) of the Act on 5.9.74 showing advance tax payable at Rs. 9,34,500/- and thereafter filed a revised estimate u/s 212(2) of the Acton 13.3.75 showing advance tax payable at Rs. 23,20,500/- only. The Assessing officer therefore recorded a finding that the assessee had reduced the amount payable in the earlier estimate and having regard to the facts and circumstances of the case reviewed interest of Rs. 38,433/- @ 12% per annum u/s 216 of the Act on 1/3rd of the difference between the amount that was shown as payable as per the estimate filed on 5.9.74 and the amount that was shown as payable as per the revised estimate filed on 13.3.75. The assessee preferred an appeal against the said order of the Assessing Officer before the Commissioner of Income Tax (Appeals) who held in his order dated 21.9.83 that the assessee could not be accused of deliberately under-estimating its advance tax and deliberately paying under-estimated advance tax, and in such a situation interest u/s 216 of the Act was not attracted and accordingly cancelled the order of the Assessing Officer levying interest of Rs. 38,433/-. The Income Tax Department then carried an appeal to the Income Tax Appellate Tribunal, Guwahati Bench against the order of the Commissioner of Income Tax (Appeals) and the said Tribunal held that the assessee had under estimated the advance tax payable and thereby reduced the amount payable in instalments for the year relevant to the assessment year 1975-76 and accordingly reversed the order of the Commissioner of Income Tax (Appeals) and restored the order of Assessing officer. On an application then being filed by the assessee u/s 256(1) of the Act, the Tribunal has referred the aforesaid question of law to this Court for opinion.

Mr. R. Goenka, learned Counsel for the assessee submitted that a reading of Section 216(a) of the Act would show that levy of interest is not automatic and that the Assessing Officer has been vested with the discretion to direct payment of interest only if he finds that the assessee has under-estimated the advance tax payable by him and thereby reduced the amount payable in either of the first two instalments. Mr. Goenka cited the decision of this Court in Commissioner of Income Tax Vs. Namdang Tea Co. India Ltd., in which a Division Bench of this Court has held that Section 216 of the Act does not make it mandatory for the Assessing Officer to charge interest in all cases of underestimation of advance tax and the Assessing Officer may charge interest if the under-estimation of advance tax was of such a nature and under such circumstances that it has to be regarded as devoid of bona fides. He also relied on the decision of this Court in Commissioner of Income Tax Vs. Lankashi Tea and Seed Estate (P.) Ltd., in which it has been held that underestimation of advance tax may be caused for various reasons and mere underestimation was not sufficient to burden the assessee with interest u/s 216 of the Act and it was the duty of the Assessing Officer or for that matter the appellate authorities to look into the facts of the case and see whether underestimation was made deliberately just to reduce the burden of tax. Mr. Goenka vehemently contended that in the instant case, sales of the assessee during the year 1973-74 upto August, 1973 was Rs. 78,00,579/- and during the year 1974-75 upto August, 1974 was Rs. 93,82,000/- and the difference of sale upto August, 1974 was Rs. 15,82,000/-. Since the assessee had for the assessment year 1974-75 corresponding to previous year 1973-74 returned an income of Rs. 12,83,459/-, the assessee estimated the income for the assessment year 1975-76 corresponding to previous year 1974-75 at Rs. 15,00,000/-in its estimate filed on 5.9.74 for the purpose of advance tax. Hence, there was no underestimation of income of the assessee in its estimate filed on 5.9.74 and in any case there was no deliberate under-estimation by the assessee in the said estimate filed on 5.9.74. Mr. Goenka further submitted that upto December, 1973, the sale of the assessee was Rs. 1,47,79,902/- whereas the sale of the assessee upto December, 1974 was Rs. 1,58,00,000/- and odd and there was a difference of about Rs. 10,00,000/-. The difference in the sale figures between the years 1973-74 and 1974-75 had gone down from Rs. 15,00,000/- and odd upto August, 1974 to Rs. 10,00,000/- and odd upto December, 1974, and it is for this reason that the assessee did not file any revised estimate of its income for the purpose of Income Tax in December, 1974. But during the period upto March, 1975, the sale figure of the assessee shot upto Rs. 2,80,00,000/- compared to Rs. 2,29,55,000/-upto March, 1974 and it is for this reason that the assessee filed a revised estimated of an income of Rs. 23,20,500/- on 13.3.75 and paid advance tax accordingly. According to Mr. Goenka, increase in the estimate of income was on account of the increase in the sale during the period after December, 1974 to March, 1975 and that there was no deliberate under-estimation of its income when the assessee filed its estimate on 5.9.74. The order of the Income Tax appellate Tribunal that the assessee deliberately under-estimated its income in its estimate filed on 5.9.74 is thus without any material.

Dr. AK Saraf, learned Special counsel for the Income Tax Department, on the other hand, contended that the assessee had prayed before the Tribunal for referring three questions and the third question of the said three questions was whether the order of the Tribunal was not perverse due to non-consideration of relevant material and misdirection in law in the facts and circumstances of the case. But the Tribunal refused to refer the said question and instead only referred the question as to whether in the facts and circumstances of the case, the Tribunal had any material to hold that the assessee has under-estimated advance tax payable and thereby reduced the amount payable in instalments for the year relevant to assessment year 1975-76. According to Dr Saraf therefore this Court cannot go into the question as to whether the order of the Tribunal was perverse. He further argued that the question as to whether the order of the Tribunal was perverse or not cannot also be read into the question referred to this Court by the Tribunal. In support of the aforesaid submissions, Dr. Saraf relied on the decision of the Supreme Court in A. Gasper Vs. Commissioner of Income Tax, Calcutta, wherein the Supreme court has held that where the reference of question was declined by the Tribunal, the said question cannot be read into one of the other questions referred. Dr. Saraf also relied on the decisions of the Supreme Court in Hoogly Trust (Pvt.) Ltd. v. Commissioner of Income Tax. (1969) 73 ITR 485 , and in Aluminium Corporation of India Ltd. Vs. Commissioner of Income Tax, West Bengal, in support of his argument that the High Court can only pronounce its opinion on a question referred to it and cannot sit as an appellate court from the decision of the Tribunal. He finally contended that the question referred by the Tribunal to this Court is a question of fact and hence the order of the Tribunal cannot be interferred with by this Court.

The question referred to this Court for opinion is whether in the facts and circumstances of the case, the Tribunal had any material to hold that the assessee has under-estimated advance tax payable and thereby reduced the amount payable in instalments for the year relevant to assessment year 1975-76. It is settled position of law that the question as to whether there was any material at all for a particular finding by a court or a Tribunal is a question of law and it is for this reason that the Tribunal has referred the aforesaid question of law to this Court for opinion. We are therefore not impressed by the argument of Dr. Saraf that the question referred to this Court by the Tribunal is not a question of law.

The third question amongst the three questions in respect of which the assessee prayed for reference before the Tribunal was to the following effect:

In the facts and circumstances of the case whether the order of the Tribunal is not perverse due to non-consideration of relevant material and misdirection in law?

In the aforesaid question therefore the order of the Tribunal was sought to be challenged by the assessee on the ground that it was perverse due to non-consideration of relevant material and misdirection in law. But the Tribunal refused to refer the aforesaid question on the ground that the said question was not statable question of law which required reference and the said question was not be said to have arisen out of the order of the Tribunal. Thus, the challenge to the order of the Tribunal by the assessee was perversity due to non-consideration of relevant material and misdirection in law. This challenge of the assessee is entirely different from the challenge on the ground that there was no material before the Tribunal to hold that the assessee has under-estimated advance tax payable and thereby reduced the amount payable in instalments for the year relevant to the assessment year 1975-76. Since the Tribunal has refused to refer the aforesaid third question, we cannot examine the question as to whether the order of the Tribunal was perverse due to non-consideration of relevant material and misdirection in law. But, we are to examine in the present reference as to whether the Tribunal had any material to hold that the assessee has under-estimated advance tax payable and thereby reduced the amount payable in instalments for the year relevant to the assessment year 1975-76. This is because, this question is different from the third question which has not been referred to us and this is again because this very question has been referred to us by the Tribunal u/s 256(1) of the Act.

For answering the question as to whether the Tribunal had any material to hold that the assessee has under-estimated advance tax payable and thereby reduced the amount payable in instalments for the year relevant to the assessment year 1975-76, it is necessary to quote the relevant portion of the order of the Tribunal in which materials for the aforesaid finding have been discussed:

...In the instant case before us, it is seen that the assessee had filed first estimate on 5.9.74 u/s 212(1) which was based on the sale as noted by the CIT(Appeals) of the corresponding period ended August, 1973. As mentioned earlier, the sale upto the end of August, 1973 was at Rs. 78,00,000/- and odd, whereas the sale upto August, 1974 has gone upto Rs. 93,82,000/- and odd. It was the finding of the C.I.T. (Appeals) that the basis for the assessee''s estimation of Rs. 15,00,000/- was the corresponding figure for the immediately preceding assessment year 1974-75 which period the sale was at Rs. 78,00,000/- and odd. Thus, it can be seen that as on 5.9.74, the assessee had the figures of Rs. 93,82,000/- and odd being the sales effected upto March, 1974, relevant to the assessment year 1975-76 with which we are concerned. Thus it could be said that the assessee knew that advance tax payable for the year was more than during the earlier assessment year 1974-75. That apart, the C.I.T.(Appeals) noted that by the end of December, 1973, the sale had gone upto Rs. 1,47,79,902/- whereas the sale upto December, 1974 had gone upto Rs. 1,58,00,000/- and odd and there was a difference of about Rs. 10,00,000/- for which no revised estimate was filed in December, 1974 relevant to the assessment year 1975-76.

From the brief narration of the facts of the present case before us, it is seen that the facts are distinguishable from those of the cases relied on by the CIT(Appeals) in the impugned order. Of course, the CIT (Appeals) has given a finding that the assessee cannot be accused of deliberately under estimating his advance income and deliberately under estimated advance tax. But on the facts noted by the CIT (Appeals) in the impugned order, it is seen that by the time first estimate was filed the sale has gone up to Rs. 93,82,692/-, whereas the assessee based his estimate for the assessment year 1974-75 as mentioned earlier. Having regard to the background of the case and the surrounding facts mentioned above, we do not agree with die conclusion arrived at by the CIT (Appeals). In our opinion, the facts and circumstances of the case do not support the conclusion of the CIT (Appeals). We are of the opinion that the assessee has under-estimated advance tax payable and thereby reduced the amount payable in instalments for the year relevant to the assessment year 1975-76. In this view of die matter; the order of the CIT (Appeals) on the point is reversed and that of die assessing officer is restored...

On a reading of the aforesaid extract from the order of the Tribunal, it is clear that the Tribunal''s finding that the assessee has underestimated advance tax payable and thereby reduced the amount payable in instalments for the year relevant to the assessment year 1975-76 was based only on the sale figures of the assessee during the years 1973-74 relevant to the assessment year 1974-75 and 1974-75 relevant to the assessment year 1975-76. The said sale figures of the assessee on which the Tribunal has relied on in its aforesaid order, are as follows:

Sale Figures of the Assessee Upto August 1973 Upto August, 1974 Difference 78,00,000/- 93,82,000/- 15,82,000/- Upto December, 1973 Upto December, 1974 1,47,79,902/- 1,58,00,000/- 10,20,098/- Upto March, 1974 Upto March, 1975 2,29,55,000/- 2,80,00,000/- 50,45,000/-

The aforesaid sale figures on which reliance was placed by the Tribunal in its order show that the sale of the assessee during the year 1974-75 upto August, 1974 exceeded than the sale of the assessee during the year 1973-74 upto August, 1973 only by Rs. 15,82,000/- and odd. The assessee returned an income of 12,83,459/- for the assessment year 1974-75. Since the difference in the sale during the year 1973-74 upto August, 1973 and during the year 1974-75 upto August, 1974 was Rs. 15,82,000/- and odd, the assessee filed the estimate of its income on 5.9.74 at Rs. 15,00,000/- which was more than Rs. 2,00,000/- than the returned income of Rs. 12,83,459/-for the assessment year 1974-75. There was therefore no material whatsoever before the Tribunal to hold that the assessee had underestimated its income in the estimate filed on 5.9.74.

The aforesaid sale figures relied on by the Tribunal in its order further show that the sale of the assessee during the year 1974-75 upto December, 1974 had exceeded the corresponding sale of the assessee during the year 1973-74 upto December, 1973 by Rs. 10,20,098/- Thus, the difference in the sale figures of the years 1973-74 and 1974-75 had fallen to Rs. 10,20,098 in December, 1974 from Rs. 15,82,000/- in August, 1974. There was therefore no need for the assessee to file a revised estimate in December, 1974. The finding of the Tribunal that the assessee had under-estimated advance tax payable and thereby reduced the amount payable in the second instalment falling due in December, 1974 is therefore without any material.

The aforesaid sale figures of the assessee on which reliance has been placed by the Tribunal in its order would also show that the difference in the sale of the assessee for the year 1973-74 upto March, 1974 and for the year 1974-75 upto March, 1975 shot upto Rs. 50,45,000/- due to increase in sale during January, 1975 to March, 1975 and in the circumstances, the assessee appears to have filed a revised estimate of its income of Rs. 23,20,500/- on 13.3.75 and paid the advance tax accordingly.

For the reasons stated above, we are of the view that the only materials on which the Tribunal has relied on for coming to the conclusion that the assessee has underestimated advance tax payable and thereby reduced the amount payable in instalments for the year relevant to the assessment year 1975-76 were the sale figures of the assessee during the years 1973-74 and 1974-75 and the said sale figures did not support the said finding of the Tribunal. We accordingly differ from the opinion expressed by DN Baruah, J and answer the question referred to this Court in the negative and in favour of the assessee and hold that in the facts and circumstances of the case, the Tribunal had no material to hold that the assessee has under-estimated advance tax payable and thereby reduced the amount payable in instalments for the year relevant to the assessment year 1975-76./

The reference is answered accordingly.