AJIT K. SENGUPTA, J.

( 1 ) AT the instance of the Commissioner of Income-tax, Central, the following questions of law have been referred to this court under Section 256 (1) of the Income-tax Act, 1961, for the assessment years 1969-70 and 1971-72 :" (1) Whether, on the facts and in the circumstances of the case and on a correct interpretation of Section 216 of the Income-tax Act, 1961, the Tribunal is right in holding that charging of interest under that section is discretionary and there must, therefore, be material on record to show that, before charging the interest, the Income-tax Officer had applied his mind to the facts and circumstances of the case and satisfied himself that it was a fit case for charging interest under that statutory provision ? (2) Whether, on the facts and in the circumstances of the case, and on a correct interpretation of Section 216 of the Income-tax Act, 1961, the Tribunal is right infolding that, before exercising the power of directing the assessee to pay interest under the said section, the Income-tax Officer has to give a finding that the assessee has underestimated the advance tax payable by him and thereby reduced the amount payable in either of the first two instalments of advance tax ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the levy of interest under Section 216 of the Income-tax Act, 1961, is bad in law and in that view setting aside the order of the Income-tax Officer charging interest and in sending back the matter to the Income-tax Officer for fresh consideration ?"the facts leading to this reference are briefly stated hereafter.

( 2 ) FOR the assessment year 1969-70, the Income-tax Officer issued a notice under Section 210 to the assessee demanding payment of advance tax of Rs. 3,61,000. Thereupon, the assessee filed an estimate on August 21, 1968, under Section 212, according to which the advance tax payable by the assessee was Rs. 3,85,000. As per that estimate, the assessee paid the first instalment of advance tax (Rs. 1,28,333) on September 1, 1968, and the second instalment of advance tax (Rs. 1,28,333) on December 2, 1968. Both the first and second instalments of advance tax were paid within time. The assessee filed a revised estimate under Section 212 (2) on March 12, 1969, estimating the advance tax payable by it for the year at Rs. 12,10,000. The balance of advance tax payable for the year as per the revised estimate was Rs. 9,53,334 and the assessee paid the same on March 15, 1969. On these facts, the Income-tax Officer charged interest of Rs. 17,531 under Section 216, on the deficiency in the payment of the first instalment and the second instalment of advance tax. In identical circumstances, the Income-tax Officer charged interest under Section 216 for the assessment year 1971-72 also.

( 3 ) THE levy of interest under Section 216 was challenged by the assessee in the appeals filed before the Appellate Assistant Commissioner for both the assessment years.

( 4 ) THE Tribunal held that the Income-tax Officer has to come to a finding that the assessee has underestimated the advance tax payable by him and thereby reduced the amount payable in either of the first two instalments. Even if Section 216 does not require the recording of such finding by the Income-tax Officer in writing, there must be evidence aliunde to show that the Income-tax Officer applied his mind and found that the assessee underestimated the advance tax payable by him. In the instant case, there is nothing on record to show that the Income-tax Officer found that the assessee has underestimated the advance tax payable by him and thereby reduced the amount payable in either of the first two instalments. In other words, the Tribunal held that there is nothing on record to apply his mind to the facts and circumstances of this case before the interest was levied under Section 216. It is also the view of the Tribunal that levy of interest under Sec

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