The main legal point established in the judgment is that the non-realization of the cheque due to the neglect or default of the Income Tax Officer does not warrant the levy of penal interest or other burdens on the assessee under the Taxing Statute.

V.P. Gopalan Nambiyar, C. J.

1. The following question of law has been referred for our determination by the Income Tax Appellate Tribunal, Cochin Bench, namely:

"Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in law in holding that there was a mistake apparent from records in levying interest under S.139(8) and under S.217(1A) and cancelling those levies".

The assessee is a private limited company. i he assessment year with which we are concerned in 1972-73. The assessee filed an estimate for the purpose of payment of advance tax under S.212(3A) of the Income Tax Act, 1961 showing that, the estimated income will be Rs. 2,88,000 and enclosing a cheque for Rs. 1,10,000 on 10th March 1972, as advance tax on the estimated income. The cheque was not cashed by the Income Tax Officer within time. The Officer demanded a fresh cheque from the assessee, which was sent up on 27th June 1972 and duly encashed. The assessment was completed on 30th November 1972 fixing the income at Rs. 3,36,515. Penal interest was levied on the assessee under S. 217(1A) for Rs. 6,544 and interest was also levied under S.139(8) to the tune of Rs. 3,069 for not submitting the return in time. On appeal by the assessee the interest on both the counts was reduced.

2. The assessee wrote to the Income Tax Officer stating that it had made an estimate and had enclosed a cheque for Rs. 1,10,000 and pointed out that, there could be no question of levying penal interest under S.215 or under S.217(1A). Objection was also raised to the levy of interest under S.139. On the basis of this letter the Income Tax Officer passed an order of rectification under S.154 of the Act accepting the assessee's plea and deleting the amounts charged by way of interest under S.215, but, holding that, as the tax, as per the estimate, was not paid in time, the levy of interest under S.217(1A) and 139(8) was justified and proper. The assessee appealed to the Appellate Assistant Commissioner, but, the appeal proved unsuccessful. On further appeal to the Appellate Tribunal, the Tribunal took the view that, the assessee had filed an estimate, which was received by the Income Tax Officer on 10th March 1972 and, therefore, there cannot be a levy of interest under S.217(1A) of the Act. Regarding the levy of interest under S.139, the Tribunal was of the view that, by a circular issued by the Central Board of Direct Taxes, the assessee had been given an option of paying the advance tax either by cash or by cheque, and that, he had opted for the latter. The Tribunal, therefore, held that the assessee had discharged his burden of proving the payment of tax; that it was for the Income Tax Officer to get the cheque encashed; and having failed to do so, the assessee cannot be penalised by levying interest. In this view, the Tribunal allowed the appeal. It referred the question of law under S.256(1)of the Act.

3. S.139(8) of the Act reads:

"139(8).-- (a) Where the return under sub-s.(1) or sub-s.(2) or sub-s.(4) for an assessment year is furnished after the specified date, or is not furnished, then whether or not the Income Tax Officer has extended the date for furnishing the return under sub-s.(1) or sub-s.(2), the assessee shall be liable to pay simple interest at twelve per cent per annum, reckoned from the day immediately following the specified date to the date of the furnishing of the return or, where no return has been furnished, the date of completion of the assessment under S.144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source:

Provided that the Income Tax Officer may, in such cases and under such circumstances as may be prescribed, reduce or waive the interest payable by any assessee under this sub-section.

Explanation 1.-- For the purposes of this sub-section, "specified date", in relation to a return for an assessment yea