J K SYNTHETICS LIMITED Vs. INCOME TAX OFFICER CENTRAL CIRCLE XVIII

JUDGEMENT

(1.) M/s. J. K. Synthetics Limited, the petitioner, is a company duly incorporated under the Companies Act, 1956. Its registered office is at Kamla Tower, Kanpur (U.P.) and Administrative Office at Ashoka Estate, Barakhamba Road, New Delhi. Its accounting year ends on 31st March. The dispute is regarding its liability to pay the advance tax for the assessment year 1988-89 corresponding to financial year ending 31st March, 1988.

(2.) For appreciating the facts and the controversy between the parties it will be proper if we briefly notice the various relevant provisions contained in the Income Tax Act relating to the payment of the advance tax. These provisions appear in Part 'C' of Chapter XVII of the Income Tax Act, 1962 (hereinafter referred to as "the Act'). Section 207 provides that tax shall be payable in advance in accordance with the provisions of Sections 208 to 219 in case of income except certain incomes mentioned therein. Under Section 208 advance tax is payable by a company if its income exceeds Rs. 2,500.00 . "Section 209 provides the method for computation of advance tax. Every person, where he has been previously assessed by way of regular assessment, is enjoined, under Section 209-A, to send a statement of advance tax payable by him computed in the manner laid down in Section 209. Where he has not previously been assessed by way of regular assessment, he is required to send an estimate of the current income and advance tax payable by him on the current jnceme calculated in the manner laid down in Section 209 and to pay the advance tax as accords with the estimate in three equal instalments prescribed under Section 21] of the Act. As the accounting year of the petitioner ends on 31st March, its instalments for the assessment year 1987-88 fell due, first on or before 15th September, 1987 ; second, on or before 15th December, 1987 and the third, on or befora 15th March, 1988, Section 210 empowers the Income Tax Officer to require a person, who has been previously assessed by way of regular assessment by order in writing to pay an advance tax deermined in accordance with the provisions of Sections 207, 208 and 209. Section 212 allows such an assessee, to send, to the Income Tax Officer, an sstimate of his income and advance tax payable by him on or before the date on which the last instalment of advance tax was due. If he estimates that his income was likely to be less than the income on which the advance tax payabe by him under Section 210 has been computed or for any other rea-son, the advance tax payable by him would be less than the amount which he is so required to pay, then he shall pay advance tax as accords his estimate. Under Section 215, an assssee is liable to pay simple interest @ 15 per cent per annum from 1st April next following the said financial year up to the date of the regular assessment, if the advance tax paid by him is less than 75 per cent of the assessed tax. if the Income Tax Officer, on making the regular assessment, finds that the assessee has under-estimated the advance tax payable by him, he may under Section 216 direct the assessee to pay simple interest @ 15 pel cent per annum. An assessee is also liable to pay interest, under Section 216 where he does not file any estimate. Section 218 provides that an. assessee would be deemed to be an assessee in default if he has sent a statement or an estimate or revised estimate but has failed to pay any instalment or instalments in accordance therewith. An assessee in default or who is deemed to be. in default is also liable to pay penalty under Section 221.

(3.) The petitioner, allegedly under the belief, that its total income in the assessment year 1988-89 will not exceed Rs. 2,500.00 did not file any estimate and did not pay any advance tax on or before 15th September, 1987 i.e. the date on which the first instalment yas due. The petitioner, however) on or about 11th December, 1987 sent an estimate computing its income as Rs. 450 lacs and paid a sum of Rs. 93,12,500.00 as advance tax. This income was computed on the basis that Section 115 J of the Act, which was inserted by the Fiance Act, 1987, with effect from 1st April, 1988, was applicable for payment of advance tax. However, the petitioner on 11th March, 1988 i.e. before the date on whirh the last innstalment berame due, filed a revised estimate in Form No. 29, copy of which is Exhibit 'E', computing its income as 'nil'. The petitioner, it is averred, showed the 'nil' income on the premises that the provisions contained in the newly inserted Section 115J were not applicable as per the legal advice and opinion of Mr. N. A. Palkhivala. Alongwith the estimate the petitioner submitted a letter explaining the said position and annexed therewith the opinion of Mr. Palkhivala.