Setback to Bennett Coleman: Assessee required to pay Interest where Advance Tax paid is less than 75% of Assessed Tax, says Bombay HC [Read Judgment]

In a major setback to Bennett Coleman, the Bombay High Court held that the assessee required to pay interest where advance tax  paid is less than 75% of the assessed tax.

In respect of the assessment year 1985-86 the Appellant filed a return of income, disclosing a total income of Rs.1,53,41,650/-. The Assessing Officer passed an assessment order under Section 143(3) of the Act and, after making various additions and disallowances to the income returned by the Appellant, assessed a total income of Rs.2,74,47,780/-. In the assessment order, the Assessing Officer, inter alia, directed interest under Section 215 of the Act to be charged. The Assessing Officer levied interest of Rs.13,67,999/- under Section 215 of the Act vide the computation sheet.

The appellant has raised the issue whether the Tribunal ought to have held that in the light of the Judgment of this Hon’ble Court in the case of CIT Vs. Bennett Coleman & Co. Ltd. and in the light of the finding in the order dated 20th March, 1989 passed under Rule 40(1) of the Rules that the delay in finalisation of the assessment was not attributable to the Appellant, the Assessing Officer was not justified in waiving only the interest chargeable for a period exceeding one year and he ought to have waived the entire interest.

The division bench of Justice Amit B Borkar and Justice K.R.Shriram highlighted that Section 215 of the Act makes it clear that the Assessee is required to pay interest where he has paid advance tax less than 75% of the assessed tax, the Assessee is required to pay simple interest @ 15% p.a. from the first day of April following the financial year up to the date of regular assessment.

The court added, “Deputy Commissioner of Income Tax, Bombay, by order dated 20/03/1989 in the exercise of power under Rule 40 of Income Tax Rules, held that delay in finalization of assessment is not attributable to Assessee and therefore the Assessee is not liable to pay interest under Section 215 of the Act beyond the period of one year from the date of filing of return. Accordingly, the Appellant was held to be liable to pay an amount of Rs.4,40,020/-. The order of DCIT, Bombay, dated 20/03/1989, has not been challenged by Revenue or Appellant, with the result said order attained finality. In the absence of challenge to the order under Rule 40(1) of IT Rules, the Appellant is not entitled to the benefit of the Judgment of the Division Bench of this Court in the case of CIT Vs. Bennett Coleman & Co. Ltd.”

“Therefore Appellant is not entitled to waiver of interest for a period of one year. Appellant is entitled to the benefit of order passed under Rule 40(1) only to the extent stated therein,” the court observed.

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