INCOME TAX OFFICER v. INSTITUTE OF COST & WORKS ACCOUNTANTS OF INDIA
[Citation -1984-LL-0418-1]

Citation 1984-LL-0418-1
Appellant Name INCOME TAX OFFICER
Respondent Name INSTITUTE OF COST & WORKS ACCOUNTANTS OF INDIA
Court ITAT-Kolkata
Relevant Act Income-tax
Date of Order 18/04/1984
Assessment Year 1974-75
Judgment View Judgment
Keyword Tags opportunity of being heard • estimate of advance tax • general public utility • non-filing of estimate • waiver of interest • bona fide belief • mistake apparent • interest income
Bot Summary: In the original assessment for the year under appeal, the ITO did not charge interest under s. 217 of the Act. The assessee preferred an appeal before the CIT against charging of interest under s. 217 and contended that the order under s. 154 was not in accordance with law inasmuch as while issuing notice under s. 154 the ITO did not mention the point regarding interest to be charged under s. 217. Counsel for the assessee, on the other hand, contended that the CIT was justified in cancelling the interest charged under s. 217 by the ITO b y his order under s. 154 of the Act. Of s. 215 shall apply to interest payable under the said section as they apply to interest payable under that section. Interest is payable under s. 217(1) where an assessee fails to submit the estimate of advance-tax under s. 212. Counsel for the assessee that there was enough cause for non- filing of estimate under s. 212 inasmuch as the assessee was under the bona fide belief that income earned by it was eligible for exemption under s. 11 of the IT Act, 1961. On a consideration of the facts and keeping in view the principle laid down in the aforementioned cases, we have no hesitation in holding that there was sufficient cause for non-filing of estimate under s. 212 of the Act by the assessee and it was not a case in which interest under s. 217 was to be charged.


A. R. HALDAR, J. M.: This appeal by Revenue is directed against order of CIT (A) dt. 16th March, 1981 by which he cancelled interest charged by ITO under s. 217 of IT Act, 1961 (hereinafter referred to as "the Act"). In original assessment for year under appeal, ITO did not charge interest under s. 217 of Act. Subsequently, ITO issued notice under s. 154 of Act in order to rectify mistake which, according to him was apparent from record. In said notice ITO did not state that interest under s. 217 of Act was sought to be charged. perusal of order passed by ITO under s. 154 would show that ITO wanted to rectify his order inasmuch as he had not included certain income from branch offices in original assessment. ITO after allowing assessee opportunity of being heard, passed order under s. 154 by which he added sum of Rs. 18,080 being interest income from branch offices to originally assessed income. ITO also charged interest under s. 217 of Act. assessee preferred appeal before CIT (A) against charging of interest under s. 217 and contended that order under s. 154 was not in accordance with law inasmuch as while issuing notice under s. 154 ITO did not mention point regarding interest to be charged under s. 217. It was further contended that ITO never informed assessee that by his order under s. 154 he was going to charge interest under s. 217. It was also submitted that assessee had already been assessed to tax before relevant previous year and that since no notice under s. 210 had been issued by ITO, assessee was not required to submit any estimate of advance-tax and thus interest under s. 217 was not chargeable in instant case. CIT (A), after going through facts of case as also considering submissions made before him on behalf of assessee, cancelled interest charged by ITO under s. 217 of Act. Against said order of CIT (A), Revenue has preferred present appeal before Tribunal and ld. departmental representative vehemently urged that CIT (A) was not justified in cancelling interest charged by ITO under s. 217 due to default of non-filing of estimate of advance- tax. He submitted that assessee was under obligation to file estimate under s. 212 and since assessee failed to file that estimate, interest under s. 217 was chargeable. departmental representative vehemently urged that ITO committed error in not charging interest under s. 217 while making original assessment and that this mistake was glaring mistake which could be rectified by invoking provisions of s. 154 of Act. For this proposition he relied on decision of Calcutta High Court in case of Singho Mica Mining Co. Ltd. vs. CIT (1978) 111 ITR 231 (Cal) and that of Karnataka H i g h Court in case of CIT vs. Executors of Estate of Late H.H. Rajkuverba Dowager Maharani Saheba of Gondal 1978 CTR (Kar) 347: (1978) 115 ITR 301 (Kar). ld. counsel for assessee, on other hand, contended that CIT (A) was justified in cancelling interest charged under s. 217 by ITO b y his order under s. 154 of Act. He took us through provisions of s. 217(1) to point out that where assessee fails to submit estimate of advance tax under s. 212(3) of Act, sub-s. (2) of s. 217 provides that provisions of sub-ss. (2), (3) and (4) of s. 215 shall apply to interest payable under said section as they apply to interest payable under that section. He further pointed out that under s. (4) of s. 215, ITO is empowered to reduce or waive interest payable in such circumstances, as may be prescribed. He also took us through provisions of r. 40 of IT Rules, 1962 which provides circumstances under which interest payable under ss. 215 & 217 can be reduced or waived. He urged that sub-r. (5) or r. 40 empowers IAC to waive or reduce interest under s. 217 in case he feels that circumstances are such as justify such waiver. ld. counsel for assessee, therefore, urged that charging of interest under s. 217 is not automatic or mandatory. IT Authorities have discretion to reduce or waive interest and hence in case where discretion can be exercised either way cannot be subject-matter of rectification proceedings. He also took us through provisions of s. 154 for proposition that ITO can assume jurisdiction to initiate rectification proceedings under s. 154 when he is satisfied that there must be self-evident mistake apparent from record which does not require investigation into facts or arguments. According to ld. counsel for assessee, charging of interest or waiving or reducing of interest under s. 217 is matter which requires investigation into circumstances of respective case of assessee and to take decision as to whether case falls within any of clauses or f. 40 of IT Rules. He, therefore, submitted that ITO was wrong in invoking provisions of s. 154 for charging interest under s. 217, more so, when there was no mention regarding charging of interest under s. 217 in notice issued by ITO under s. 217 in notice issued by ITO under s. 154. He also urged that since ITO had discretion to charge or not to charge interest under s. 217, it could not be said that ITO committed glaring mistake in not charging interest under s. 217 while making original assessment. For above proposition he relied on decision in following cases: (1) Shantilal Rowji vs. M. C. Nair, IV ITO (1958) 34 ITR 439 (Bom). (2) S.A.L. Narayan Row & Ors. vs. Ishwarlal Bhagwandas & Ors. (1965) 57 ITR 149 (SC). (3) Md. Kunhi, M. K. vs. ITO (1967) 66 ITR 250 (Ker). (4) CIT vs. General Electric Co. of India Ltd. (1978) 112 ITR 246 (Cal). ld. counsel for assessee urged that cases relied on by ld. departmental representative were distinguishable on facts. He urged that decision of Calcutta High Court in case of Singho Mica Mining Co. Ltd. (supra) and that of Karnataka High Court in case of Executors of Estate of late H.H.R.D.M. Saheb of Gondal (supra) was relating to exercise of power of CIT under s. 263 of IT Act to revise order of ITO in not charging interest under ss. 215 or 217. According to him, those cases were not concerned with rectification proceedings and, therefore, principle laid down in those cases had no application to facts of present case. ld. counsel for assessee further urged that assessee also was under no obligation to file estimate under s. 212 for advance-tax. He submitted that assessee being Institute of Cost & Works Accountants is statutory body constituted under provisions of Cost & Works Accountant Act, 1959 and Institute's properties are held for charitable purposes within meaning of s. 2(5) of Act. objects of Institute are of general public utility and it has also been granted registration by CIT under s. 12A of Act accepting that Institute is one to which provisions of s. 11 of Act are applicable. Institute has also been notified under cl. (23A) of s. 10 of Act by Central Government. He urged that case of assessee from beginning is that it is not liable to pay tax under Act in respect of any part of its income and, therefore, assessee was seeking exemption both in respect of income falling under cl. (23A) of s. 10 and in respect of rest of income under s. 11 of IT Act. He urged that for earlier assessment years no return was filed by Institute nor any advance tax was paid in view of legal provisions relating to exemption. He next urged that for first time, Institute filed its return of income for year under consideration and ITO made assessment on basis that assessee could not claim any exemption under s. 11 of Act as it was confined under cl. (23A) of s. 10. He submitted that by reason of lack of proper guidance assessee did not pursue its claim for exemption under s. 11 by filing further appeal against order of assessment made. But this fact alone is not sufficient for coming to conclusion that assessee was not entitled to exemption under s. 11. According to him, assessee is entitled to exemption both under ss. 10(23A) and 11 of IT Act, 1961. For that proposition, he relied on order of Tribunal in case of Calcutta Medical Research Institute (ITA No. 5466/Cal/76-77) as also on decision of Calcutta High Court in case of Birla Vidya Vihar Trust vs. CIT (1981) 24 CTR (Cal) 307: (1982) 136 ITR 445 (Cal). Reliance was also placed on decision of Allahabad High Court in case of Bar Council of U.P. vs. CIT (1983) 33 CTR (All) 41: (1983) 143 ITR 584 (All) based on decision of Supreme Court in case of CIT vs. Bar Council of Maharashtra (1981) 22 CTR (S)C 106: (1981) 130 ITR 28 (SC). It was therefore submitted that when assessee was entitled to exemption in respect of its income, there was no question of filing of estimate under s. 212 for payment of advance-tax. We have heard submission of both parties and considered facts on record. Interest is payable under s. 217(1) where assessee fails to submit estimate of advance-tax under s. 212. Sub-s. (2) of s. 217 provides that provisions of sub-ss. (2), (3) and (4) of s. 215 shall apply to interest payable under this section as they apply to interest under that section. Then again, under s. 215(4), ITO is empowered to reduce or waive interest payable under such circumstances as may be prescribed. Rule 40 of IT Rules, 1962 provides circumstances under which interest payable under ss. 215 and 217 can be reduced or waived. Rule 40(5) empowers IAC to waive or reduce interest charged under s. 217 in case he (the IAC) feels that reduction or waiver of interest is justified. It, therefore, follows that charging of interest under s. 217 is not automatic or mandatory. IT Authorities have discretion to reduce or waive such interest. We are therefore, of opinion that when there is question of discretion in charging interest, it cannot be said that non- charging of interest in original assessment is glaring mistake on part of ITO which can be rectified by invoking provisions of s. 154 of Act in view of principle laid down in following cases: (1) Shantilal Raoji (supra) (2) S.A.L. Narayan Rao & Ors. (supra) (3) Md. Kunhi (supra) Calcutta High Court in case of General Electric Co. of India (supra) has also held that in view of scope for exercising discretion by ITO to reduce or waive interest under ss. 18A(6) and 18A(7) of old Act, omission to charge interest cannot be said to be mistake apparent from records which can be rectified. It may be mentioned that Calcutta High Court while coming to above said conclusion followed decision of Supreme Court reported in (1965) 57 ITR 149 (SC) (supra). That being position, we are of opinion that ITO was not justified in charging interest under s. 217 by invoking provisions of s. 154. cases relied on by ld. departmental representative, as pointed out by ld. counsel for assessee, are distinguishable on facts; inasmuch as in those cases, their Lordships were concerned with power of CIT to revise assessment in which ITO failed to charge interest under s. 217. We also find sufficient force in submission of ld. counsel for assessee that there was enough cause for non- filing of estimate under s. 212 inasmuch as assessee was under bona fide belief that income earned by it was eligible for exemption under s. 11 of IT Act, 1961. ITO assessed t h e income of assessee on ground that assessee institute was notified under cl. (23A) of s. 10 and, therefore, it could not claim any exemption in respect of any portion of its income not covered by sub-cl. (23A) of s. 10 even though conditions for applicability of said section were fulfilled. In our opinion, this view of ITO was contrary to view expressed by Tribunal in case of Calcutta Medical Research Institute (I.T.A. No. 5466/Cal/1976-77) in which one of us was party. In this case, Tribunal has categorically observed that there is nothing in s. 10 on one hand and ss. 11 and 12 on other to suggest that they are mutually exclusive. In that order it has been made clear that both sections operative concurrently and assessee may come under both sections and may claim exemption under both sections. Calcutta High Court in case of Birla Vidya Trust (supra) has also held that Trust can claim exemption both under ss. 10(22) and 11 of Act. Allahabad High Court has also taken same view in case of U.P. State Bar Council of Uttar Pradesh (supra). Allahabad High Court based its decision on Supreme Court decision in case of Bar Council of Maharashtra (supra). It is also important to mention that assessee Institute applied for exemption under s. 11 of Act before CIT and assessee had been granted registration by CIT under s. 12A of Act accepting that Institute is one where provisions of s. 11 of Act are applicable. On consideration of facts and keeping in view principle laid down in aforementioned cases, we have no hesitation in holding that there was sufficient cause for non-filing of estimate under s. 212 of Act by assessee and, therefore, it was not case in which interest under s. 217 was to be charged. In result, appeal is dismissed. *** INCOME TAX OFFICER v. INSTITUTE OF COST & WORKS ACCOUNTANTS OF INDIA
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