Calcutta High Court
Commissioner Of Income-Tax And Ors. vs Chloride India Ltd. on 12 June, 1989
Equivalent citations: [1990]186ITR217(CAL)
JUDGMENT Padma Khastgir, J.
1. In this appeal, a short point for consideration is as to the meaning and interpretation of the expression "regular assessment" under Section 214 of the Income-tax Act, 1961. Section 214of the Income-tax Act, 1961, provides as follows :
"214. Interest payable by Government. -- (1) The Central Government shall pay simple interest at twelve per cent, per annum on the amount by which the aggregate sum of any instalments of advance tax paid during any financial year in which they are payable under Sections 207 to 213 exceeds the amount of the tax determined on regular assessment, from the 1st day of April next following the said financial year to the date of the regular assessment for the assessment year immediately following the said financial year, and where any such instalment is paid after the expiry of the financial year during which it is payable by reason of the provisions of Section 213, interest as aforesaid shall also be payable on that instalment from the date of its payment to the date of the regular assessment :
Provided that in respect of any amount, refunded on a provisional assessment under Section 141A, no interest shall be paid for any period after the date of such provisional assessment.
(1A) Where on completion of the regular assessment the amount on which interest was paid under Sub-section (1) has been reduced, the interest shall be reduced accordingly and the excess, if any, paid shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply accordingly.
(2) On any portion of such amount which is refunded under this Chapter, interest shall be payable only up to the date on which the refund was made."
2. Interest is payable by the Government on the amount of advance tax paid during any financial year in which they are payable if it exceeds the amount of the tax determined on regular assessment from April 1 next following the financial year to the date of the regular assessment. Hence, a pertinent question arose as to up to which date such interest would be payable by the Government on the advance tax already paid. By the use of the expression "regular assessment", does it mean the first order of regular assessment passed by the Income-tax Officer or does it mean the last operative order of assessment, as a result of any appellate or revisional proceeding. Advance taxes are paid in a current year on an estimated income and if, after final assessment, any sum is refundable by the authorities by virtue of the provisions made in Section 214 of the Income-tax Act, the excess amount is repayable with interest. What calls for consideration is the date up to which such interest will have to be calculated. Section 2, Sub-section (40), defines regular assessment in the manner following :
"2(40) 'regular assessment' means the assessment made under Section 143 or Section 144."
3. Section 143 provides for the procedure of assessment to be made by the Income-tax Officer with reference to the return and the documents with reference to the records of the assessment of past years and determine the sum payable by the assessee or refundable to him on the basis of such assessment under various provisions as contained in the Section itself, whereas Section 144 makes provision for a best judgment assessment by the Income-tax Officer where any person fails to make the return required by any notice given under Section 139 or fails to comply with all the terms of the notice issued under Section 142 or, having filed a return, fails to comply with all the terms of the notice issued under Section 143. In those cases, the Income-tax Officer, after taking into account all relevant materials with him, shall make the assessment to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment. Such assessment, whether under Section 143 or Section 144, is amenable to appeals. From an order against the assessee under Section 143 or 144, where the assessee objects to the amount of income so assessed or to the amount of tax determined or to the amount of loss computed, an appeal lies to the Commissioner of Income-tax (Appeals) from the order of the Income-tax Officer and to the Appellate Assistant Commissioner under Section 246(1) and 246(2) of the Income-tax Act. Section 246 provides that any assessee aggrieved by any of the orders as enumerated in the section itself of an Income-tax Officer may appeal to the Appellate Assistant Commissioner. Sub-clause (c) of Section 246(1) provides for such right of appeal from any order of assessment made under Sections 143 and 144. An appeal to the Appellate Tribunal lies from the order of the Commissioner or the Appellate Assistant Commissioner. Under the circumstances, when the original regular assessment made by the Income-tax Officer on appeal is reversed and/or modified by reducing the amount of tax to be payable, then the Income-tax Officer implements the said appellate order. Hence, the question calls for determination as to the amount of interest payable on the sums so refunded whether up to the date of the original order of assessment made by the Income-tax Officer or up to the date when such appellate order has been passed. The learned lawyer on behalf of the appellant, Dr. Debi Pal, by giving an example submitted that if originally an assessment had been made by the Income-tax Officer in a sum of Rs. 10 lakhs which ultimately had been reduced by the appellate authority to 1/4th of the sum so assessed, i.e., a sum of Rs. 2 lakhs, then would it be justifiable not to pay interest on the sums so refunded up to the date when the final assessment order was made.
4. In the impugned order appealed against, Mr. Justice Sabyasachi Mukharji (See [1977] 106 ITR 38), as he then was, recorded that the petitioner, Chloride India Ltd., were demanded a sum of Rs. 2,62,239. On appeal, the Appellate Assistant Commissioner on January 12, 1972, revised the assessment and computed the amount refundable to the petitioner at Rs. 4,28,260.40. The Income-tax Officer refused to allow interest under Section 214 of the Income-tax Act of 1961. An application for revision under Section 264 to the Commissioner of Income-tax claiming interest of Rs. 48,280 under Section 244 and Rs. 23,752 under Section 214 of the Income-tax Act was made. By an order dated November 7, 1972, the Commissioner of Income-tax allowed the claim to interest under Section 244 but rejected the claim to interest under Section 214. By referring to the case reported in Sir Shadilal Sugar and General Mills Ltd. and relying on the explanation given to the expression "regular assessment", the Commissioner observed that the words "regular assessment" meant the first order of original assessment made by the Income-tax Officer. Such direction by the Commissioner was under challenge under Article 226 of the Constitution which was dealt with by Mr. Justice Mukharji, as he then was, in the impugned judgment. The learned judge, referring to the case of Kooka Sidhwa and Co. v. CIT [ 1964] 54 ITR 54 (Cal), held that an order which is passed by the Income-tax Officer to give effect to the order of the Appellate Assistant Commissioner is an order of assessment under Section 143 of the Income-tax Act, 1961. In view of the provisions made in Section 2, Sub-section (40), of the Income-tax Act, "regular assessment", as contemplated under Sub-section (1) of Section 214 should be the assessment made by the Income-tax Officer initially or the first assessment made by the Income-tax Officer, if there is no appeal therefrom. But in a case where there is an appeal, the order passed by the Income-tax Officer finally to give effect to the direction, if any, of the appellate authority, would be an order of assessment passed in the regular course of assessment. The learned trial judge fully accepted the meaning given to "regular assessment" in the manner indicated earlier. The learned trial judge opined that, in the context of the provisions of Section 214, that was the only interpretation which could be given to the expression "regular assessment". Under Part "C", in accordance with the provisions of Sections 207, 208 and 209, the assessee is under an obligation to pay income-tax computed on the basis of his total income of the previous year in respect of which there has been an assessment by way of regular assessment and the Income-tax Officer, by an order in writing, may require him to pay advance taxes determined in accordance with these provisions of the Act. The Income-tax Officer issued such notice of demand for payment of advance taxes on the total income as computed on the basis of the regular assessment of the previous year. The learned judge very rightly observed that it would create an anomalous position if such an interpretation is given to the expression "regular assessment" by referring to the first assessment. Then, in a given case where regular assessment made by the Income-tax Officer is reversed and considerable reduction had been made and pursuant to such appellate order, the Income-tax Officer has given effect to such modification and/or reduction, in spite of that, the Income-tax Officer would be in a position to demand advance tax not on the amount as subsequently reduced by the appellate authority but on the basis of the first assessment order made 'by the Income-tax Officer, thereby causing grave injustice to the assessee, inasmuch as the assessee would be under an obligation to meet the demand for payment of advance taxes. The learned trial court was perfectly justified in observing that the expression "regular assessment" has a connotation different from the expression "first assessment" or "provisional assessment". Under those circumstances and on the basis of such sound reasoning, the learned trial court held that the use of the expression "regular assessment" in Section 214 of the Income-tax Act would be the order passed by the Income-tax Officer pursuant to the direction of the Appellate Assistant Commissioner. The learned judge distinguished the case of Sarangpur Cotton Manufacturing Co. Ltd. v. C1T [1957] 31 ITR 698 (Bom), inasmuch as the court was not called upon to consider and determine the question that has fallen for consideration before this court and primarily considered the question of date of assessment at a time when there was no definition of "regular assessment" as provided under Section 2, Subsection (40), of the Income-tax Act, 1961, which had no corresponding provision under the Act of 1922. Similarly, the case in K. Gopalaswami Mudaliar v. Fifth Addl. ITO [1963] 49 ITR 322 (Mad) was clearly distinguished by the learned court below. Both the cases were concerned with initial assessment where there was no occasion for reopening the said initial assessment. The learned judge elaborately dealt with the case of Sir Shadilal Sugar and General Mills Ltd. v. Union of India . The learned court below in the impugned judgment did not accept the contention on behalf of the Revenue. In the new Act, a definition of "regular assessment" has been given by referring to the assessment made under Sections 143 and 144, which did not confine it to the initial assessment alone. In that view of the matter, the learned court below was of the opinion that the legislative intent was not to confine the meaning of regular assessment to the initial or first assessment ; as a result, the learned judge was of the view that the Commissioner committed an error of law apparent on the face of the order by holding that regular assessment was confined to the initial or first assessment. As a consequence the learned court below very rightly set aside and quashed the Commissioner's order.
5. In the case, General Fibre Dealers Ltd. v. ITO , Mr. Justice Sabyasachi Mukharji, as he then was, dealt with the question whether, under Section 214(1) of the Income-tax Act of 1961, the claim of the petitioner to interest on the amount of difference between the advance tax paid and the tax finally determined pursuant to the direction of the Appellate Assistant Commissioner was tenable in law. Referring to the judgment in the case of Chloride India Ltd. v. CIT , he reiterated that "regular assessment" as contemplated under Section 214(1) should be the assessment made by the Income-tax Officer initially or the first assessment made by the Income-tax Officer if there is no appeal therefrom, but, in a case where there is an appeal, the order passed by the Income-tax Officer finally to give effect to the direction, if any, of the appellate authority should be the regular assessment. Having regard to the scheme of the Act and the context in which the expression "regular assessment" had been used under Section 214 of the Income-tax Act, it would include the assessment made by the Income-tax Officer pursuant to the direction of the Appellate Assistant Commissioner. The learned judge was requested in that case to reconsider his decision in view of the decision of the Allahabad High Court in the case of Lala Laxmipat Singhania v. CIT [1977] 110 ITR. 289 which did not agree with the decision arrived at by Mr. Justice Sabyasachi Mukharji in the instant case. The learned judge observed that the expression used in a particular chapter should be given the same meaning. The expression used in a catena of sections in a particular chapter should receive, unless there are good reasons to the contrary, the same interpretation. Inasmuch as there is nothing in the context of Section 214 which requires the expression "regular assessment" not to be understood as the first or the original assessment, similarly there was nothing in the context of Section 214 which required that the expression "regular assessment" be confined to the first or the original assessment. Inasmuch as the Legislature has not chosen to use the expression "first" or "the original assessment", therefore, the expression "regular assessment" should not be given a meaning different from the meaning which is attributable to it under Sections 209 and 210.
6. The view expressed by the learned trial court finds support from the decision reported in Triplicane Urban Co-operative Society Ltd. v. CIT , where a Division Bench of the Madras High Court had considered the point as to whether the Tribunal was right in holding in the facts and circumstances of the case that the interest under Section 214 was payable up to the date of the regular assessment in respect of advance taxes and the order reducing the assessment in consequence of the Appellate Assistant Commissioner's order has to be treated as a regular assessment under Section 143 of the Income-tax Act. Referring to the Calcutta High Court decision in Kooka Sidwa and Co. [1964] 54 ITR 54 (Cal), which held that the order passed finally by the Income-tax Officer as a result of the order of the Appellate Tribunal partakes the character of a fresh assessment order (sic).
7. In the case reported in Bardolia Textile Mills v. ITO [1985] 151 ITR 389, a Full Bench of the Gujarat High Court also considered the question of refund of excess advance tax together with interest and for that purpose what was the date of regular assessment and the learned judges were of the view (at page 400) that :
"The above contention of the Revenue in the alternative envisages two different meanings to be given to the term 'regular assessment' occurring in Section 214(1) of the Act. This contention assumes that in Section 214(1), the first reference to regular assessment is to the revised assessment, and the reference to regular assessment immediately following is to the first assessment. Read and understood in that manner, interest will be due up to the date of the first assessment, and the interest will be due on an amount found to be in excess on the basis of the determination of the tax under the revised assessment. It will be difficult to understand the subsection in this manner for more than one reason. It is not as if the term 'regular assessment' appears in two different sections. It appears in one and the same sub-section. In the sequence in which it appears, it would be quite unreasonable to construe the term in two different senses. The term 'regular assessment' is defined in the statute. Section 2(40) which embodies the definition provides that 'regular assessment' means 'an assessment made under Section 143 or Section 144, and it cannot be disputed that an assessment made pursuant to a decision of an appellate authority is an assessment under Section 143. The position is well settled (Kooka Sidhwa and Co. v. C1T [1964] 54 ITR 54 (Cal), Gopi Lal v. CIT [1967] 65 ITR 477 (P & H) and Dwarka Nath v. ITO [1965] 57 ITR 340 (SC)). It is no doubt true that the definition is 'unless the context otherwise requires. Normally, unless it is shown that the context calls for a different meaning to be given to the term used in the same section, one would be justified in assuming that the term has been used so as to mean the same, particularly when the sequence is such as in this case. There would be more reason to assume that the term 'regular assessment' is used in the same sense, that of referring to the revised assessment. It would be appropriate at least to start on such premises and only if the result disclosed by such an approach is unreasonable or unjustifiable, the need to look for another meaning would arise. If 'regular assessment' in Section 214(1) is understood as revised assessment, where there is one, the obligation on the State will be to pay interest on the amount paid as advance tax found to be in excess of what is due from the assessee on the basis of the revised or final assessment. Why should such a result be considered unreasonable ? Why should any attempt be made to reach another result ? We do not think that this goes against the scheme of the Act. On the other hand, it promotes the scheme. Broadly speaking, there is an obligation on the assessee to pay interest on money which should have been paid to the State, but which was not paid as required by law and there must be a corresponding obligation on the State to pay interest on the money taken in excess by the State and found to be in excess later. The provision for payment of interest was envisaged simultaneously with the scheme of introduction of advance tax. No doubt that underwent several changes and refinements, but it remained essentially a part of the scheme relating to payment of advance tax. There will be more logic in saying that, if interest is to be paid on any amount retained by the Government in excess found ultimately to be due to the assessee, such interest is to be paid till the date on which it is determined as excess, consequent upon which an obligation to pay such excess arises in law, than to say that such obligation is only to pay up to an earlier date, the date when the Income-tax Officer erroneously determined a higher tax as payable by the assessee. If in a case where the Income-tax Officer makes a correct determination, the assessee gets the benefit of refund with interest immediately, where he makes a mistake on assessment which is revised later, interest must naturally be payable up to the date of such revision. Our attempt is only to show that no circumstances disclosed in the facts justify an approach suggested by the Revenue in regard to the meaning to be assigned to the term 'regular assessment' in Section 214(1) of the Act.
There is yet another approach that could be made to the controversy. What happens to an assessment by the Income-tax Officer when such assessment is subject to an appeal and pursuant to the appellate decision, the matter is reopened obliging the Income-tax Officer to pass a fresh order ? When he makes a fresh order of assessment, he determines afresh the tax payable by the assessee. It is not as if two assessment orders survive against the assessee then. The first order is substituted by the second order. The first order, when it did operate was legal and recovery and enforcement could legally have been made pursuant to that order. But, after the passing of the second order, the obligation of the assessee arises from that order and where it is a fresh assessment determining tax payable for the year consequent upon the appellate decision setting aside the order of the Income-tax Officer, the order of the Income-tax Officer would no longer survive. It is true that it lived earlier. But by the passing of the fresh order it is the fresh order that would operate. By the decision in appeal, the earlier order ceases to be valid and it is replaced by the fresh order. At that point of time, any reference to an assessment order could only be to the order of assessment passed afresh. It could not be to an order which was once passed and which had become dead, having been set aside."
8. Relying on the case of Dwarka Nath v. ITO [1965] 57 ITR 349, the learned lawyer for the respondent, Dr. Debi Pal, submitted that, in that case, the learned judges of the Supreme Court were of the view that, when any tax, penalty or interest is due in consequence of any order passed under or in pursuance of the Act, the Income-tax Officer shall serve upon the assessee liable to pay such tax, penalty or interest a notice of demand in the prescribed form specifying the sum so payable. When tax is due from an assessee in consequence of an order, the Income-tax Officer is under a duty to serve on him a notice of demand pursuant to the directions given by the Tribunal. The Income-tax Officer makes fresh calculations and ascertains the amount due from the assessee. By not serving a notice of demand on the assessee, it was held that the Income-tax Officer did not discharge his duty which he was bound to do under the Act, with the result that he became amenable to a writ of mandamus directing him to do what he should have done under the Act. Under the circumstances, the Income-tax Officer assessed finally pursuant to the direction of the Tribunal or the appellate authority. Hence, Dr. Debi Pal contended that the regular assessment was made in a case where there had been an appeal by the Income-tax Officer by making such order passed by the appellate authority workable. Any deviation therefrom would entitle the assessee to seek relief under Article 226 of the Constitution.
9. The reasoning given and the view expressed by Sabyasachi Mukharji J. in the impugned judgment had been followed by other High Courts as indicated above. Under the circumstances, this court does not find any reason or ground to differ from the view expressed by the learned trial judge, Under the circumstances, this appeal is dismissed. There will be no order as to costs.