Calcutta High Court
Commissioner Of Income-Tax vs Pixray (India) Ltd. (Formerly Picker ... on 12 January, 1993
Equivalent citations: [1993]201ITR785(CAL)
JUDGMENT Ajit k. Sengupta, J.
1. In this reference under Section 256(1) of the Income-tax Act, 1961, the following question of law has fallen for determination by us :
" Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that, for the purpose of calculation of interest payable to the assessee under Section 214 of the Income-tax Act, 1961, the order passed by the Income-tax Officer in pursuance of the appellate order revising the original assessment constituted 'regular assessment' ?"
2. Briefly, the facts leading to the question are as under :
The assessee is a company and the assessment year involved is 1975-74, the accounting period ending on November 30, 1972. The Income-tax Officer raised an advance tax demand of Rs. 92,178 under Section 210 of the Act, payable in three equal instalments on June 15, 1972, September 15, 1972, and February 15, 1973. After receipt of the said demand notice, the assessee filed an estimate of its income before the Income-tax Officer on June 15, 1972, showing the advance tax payable at Rs. 58,695. On the basis of the estimate filed, the assessee paid two instalments of Rs. 19,565 each on June 16, 1972, and September 18, 1972. Before the third instalment was due to be paid, the assessee filed another estimate on December 30, 1972, wherein the income and the tax payable were shown at nil. The assessee filed the return on June 16, 1973, admitting a loss of Rs. 313. The Income-tax Officer determined the total income of the assessee at Rs. 41,188 in his assessment order dated January 27, 1976, and the tax payable at Rs. 28,110. In the notice of demand issued by the Income-tax Officer on the basis of the aforesaid assessment order, the Income-tax Officer allowed interest of Rs. 3,731 to the assessee under Section 214 of the Act in respect of the excess advance tax paid being the sum of Rs. 11,020.
3. Aggrieved by the assessment, the assessee preferred an appeal and the Appellate Assistant Commissioner, in his order dated October 3, 1977, allowed relief of Rs. 39,969.
4. Before the Appellate Assistant Commissioner passed his order, the Income-tax Officer, by his rectificatory order under Section 154 of the Act dated July 3, 1976, has withdrawn the interest allowed by him to the assessee under Section 214 on the ground that the assessee was not entitled to such interest.
5. Aggrieved by the rectificatory order of the Income-tax Officer, the assessee appealed and the Appellate Assistant Commissioner, vide his order dated October 17, 1977, cancelled the rectificatory order passed by the Income-tax Officer.
6. It is against this order of the Appellate Assistant Commissioner that the Revenue filed the appeal before the Tribunal in I. T. A. No. 3753/(Cal) of 1977-78, which was dismissed by the Tribunal in its order dated December 18, 1978.
7. After receipt of the order of the Appellate Assistant Commissioner dated October 30,1977, in the quantum appeal and the order dated October 17, 1977, cancelling the order of rectification under Section 154 of the Act, the Income-tax Officer by his order under Section 250 of the Act dated November 22, 1977, determined the total income at Rs. 555 and computed the tax payable thereon at Rs. 385. After adjustment of the tax payable, the Income-tax Officer determined the refund at Rs. 38,745. However, the Income-tax Officer allowed interest under Section 214 only to the extent of Rs. 3,634, while, according to the assessee, the interest allowable was a further sum of Rs. 13,129 consequential to the relief in the quantum appeal.
8. Aggrieved by the order of the Income-tax Officer dated November 22, 1977, the assessee appealed to the Commissioner of Income-tax (Appeals) who, in his order, directed the Income-tax Officer to allow interest of Rs. 3,731 under Section 214 of the Act. Thus, the assessee's claim for additional interest of Rs. 13,129 under Section 214 of the Act in respect of the excess advance tax paid of Rs. 27,725 was rejected by the Commissioner of Income-tax (Appeals).
9. On further appeal to the Tribunal by the assessee, the Tribunal held that "regular assessment" under Section 214 of the Act would include an assessment made by the Income-tax Officer pursuant to the direction of the Appellate Assistant Commissioner and relied on the decisions of this court in the cases of Chloride India Ltd. [1977] 106 ITR 38, and Kooha Sidhwa and Co. v. CIT [1964] 54 ITR 54. Accordingly, it directed the Income-tax 'Officer to allow interest under Section 214 on the excess payment of advance tax of Rs. 27,725 and allowed the appeal.
10. Before us, Sri N. K. Poddar, learned counsel for the assessee, placed reliance on the following decisions in support of the contention that the words "regular assessment" as appearing in Section 214 should mean and include not only the original order of assessment passed by the Income-tax Officer but also all subsequent orders modifying the assessment including an order of rectification as held in Chloride India Ltd. v. CIT ; Kooha Sidhwa and Co. v. CIT [1964] 54 ITR 54 (Cal) ; General Fibre Dealers Ltd. v. ITO ; Binod Mills Co. Ltd. v. S. A Kadre, EPTO [1980] 122 ITR 778 (Bom) ; CIT v. Rajalahshmi Mills Ltd. [1980] 125 ITR 141 (Mad); Rayon Traders (Pvt.) Ltd. v. ITO [1980] 126 ITR 135 (Mad) ; Bardolia Textile Mills v. ITO [1985] 151 ITR 389 (Guj) [FB] and CIT v. John Palming and Co. Ltd. [1983] 144 ITR (St.) 11 (SC). He urged that the matter is already covered by a number of decisions of this court holding that the connotation of the expression " regular assessment " extends not merely to the first assessment made by the Assessing Officer but also to all subsequent modifications in the course of appeal, revision and rectification.
11. Learned counsel for the Revenue, on the other hand, relied upon the decisions of the Bombay, Kerala, Allahabad and other High Courts against this view to contest the contentions urged on behalf of the assessee. Such cases are as follows :
Sarangpur Cotton Mfg. Co. Ltd. v. CIT [1957] 31 ITR 698 (Bom) ; Sir Shadilal Sugar and General Mills Ltd. v. Union of India ; Lala Laxmipat Singhania v. CIT ; Devaki Amma (N.) v. ITO ; National Agricultural Cooperative Marketing Federation of India Ltd. v. Union of India ; CIT v. Rohtak Delhi Transport P. Ltd. ; Trustees of H. E. H. Nizam's Religious Endowment Trust v. ITO ; CIT v. Ambala Electric Supply Co. Ltd. ; CIT v. Carona Sahu Co. Ltd. [1984] 146 ITR 452 (Bom) [FB]; CITv. India Re-insurance Corporation Ltd. [1984] 146 ITR 477 (Bom) [FB] and CIT v. G. B. Transports [1985] 155 ITR 548 (Ker) [FB].
12. Thus, there is a divergence of judicial opinion amongst the High Courts on this issue, but this High Court has consistently taken the view that the meaning of the expression "regular assessment" cannot be narrowed down to include in it only the first assessment made by the Assessing Officer so as to disentitle the assessee from interest on the increase in the excess advance tax arising on account of the reduction in demand or relief in appeal, reference, revision or rectification. Apart from this court, the view canvassed by learned counsel of the assessee has also the support of the Gujarat and Madras High Courts. Our attention was drawn by Sri Poddar, learned counsel, to the fact that the Supreme Court has rejected the special leave petition of the Revenue in CIT v. John Palming and Co. Ltd, [1983] 144 ITR (St.) 11 (SC), wherein the Bombay High Court expressed the same view as this court. But, later, the Bombay High Court changed its approach to the matter and took an opposite view (see the Full Bench decision in CIT v. Carona Sahu Co. Ltd. [1984] 146 ITR 452 (Bom)). Mr. Poddar submitted that there is no reason for our making a departure from the earlier decisions of this court wherein it has been consistently held that the definition of "regular assessment" should also include an assessment made pursuant to a decision of an appellate authority.
13. But since the Bombay High Court in CIT v. Carona Sahu Co. Ltd. [1984] 146 ITR 452 [FB] and in CIT v. India Re-insurance Corporation Ltd. [1984] 146 ITR 477 (Bom) [FB] and the Kerala High Court in CIT v. G. B: Transports [1985] 155 ITR 548 [FB], all Full Bench decisions, have taken a contrary view, it is necessary to have a closer look into the controversies on the issue. The view taken in those decisions is that the Income-tax Act is a self-contained code and the principles of equity, justice and conscience have no place in interpretation. It is the context that governs the meaning of the words and expressions used and no words can be read in isolation or detachment from the context. According to these courts, the context of Section 214(1) requires the meaning of regular assessment to be limited to the first order of assessment passed by the Assessing Officer.
14. The provisions of the Act call for adjustment of the advance tax which is paid during the currency of the financial year prior to the assessment year. Once the assessment is made under Section 143, the advance tax sheds its character as advance tax and takes on the character of tax paid as per demand. The amount of advance tax credited to the tax determined on assessment turns into tax paid. The subsequent orders in appeal or revision may modify the determination by the Income-tax Officer and such modification may also be part of the assessment proceedings but, according to those courts, the sum payable by the assessee or refundable to him is to be determined by the Income-tax Officer only with a reference to the amount of tax collected or treated as paid and not with reference to the amount of advance tax which has already been adjusted or refunded and has ceased to be advance tax. Even when the original assessment is set aside and a fresh assessment is made pursuant to the appellate order, the Assessing Officer, in such fresh order, determines the sum refundable to the assessee with reference to the amount of tax determined and the tax credited and collected. Therefore, the question of excess of advance tax over the tax determined on assessment cannot arise at that subsequent stage. The sum and substance of this reasoning is that once the assessment order is first made, the advance tax ceases to be advance tax any more. Therefore, on the happening of any subsequent event leading to increased refund, the same cannot be related to the amount of advance tax, as the advance tax, by virtue of the assessment, has ceased to exist. The advance tax by then is transformed into tax paid and the excess arising on subsequent modification is merely excess of tax paid.
15. One point is worth noticing--what is fundamental in the Bombay view is not that "regular assessment" cannot comprehend the subsequent modifications of the assessment in appeal, revision, etc. That issue is neither questioned nor gone into. The ground of the Bombay and Kerala High Courts for not conceding the assessee's entitlement to the interest under Section 214 on the increased excess of advance tax on account of appeal, reference, revision, etc., is that there exists no advance tax after completion of the first assessment. Therefore, the subsequent alterations resulting in excess or larger excess cannot be treated as excess of advance tax so as to earn interest under Section 214. There cannot be a surplus of a fund by way of advance tax after the first assessment as such assessment transforms the advance tax into tax paid and advance tax ceases to be advance tax thereafter.
16. The other part of the reasoning in those decisions is that interest is recomputable only where the statute in terms authorises it. The provisions of the Act as it obtained in the relevant assessment year did not provide for enhancement of interest under Section 215 payable by the assessee to the Central Government in cases where the amount on which interest is payable by the assessee was enhanced pursuant to any order in subsequent proceedings. The provisions of Sections 139(8), 215(3) and 214(1A) are referred to in this connection. It is only by amendment under the Taxation Laws (Amendment) Act of 1984 that provisions have been made for enhancement of interest either payable by the assessee or payable by the Central Government consequent upon modification of the tax liability. The amendment has effect from April 1, 1985. It is, therefore, to be inferred that, prior to the amendment, the law entitled the assessee to receive interest under Section 214 only on such amount as falls refundable on the first assessment made by the Assessing Officer under Section 143. The subsequent reduction in the quantum of tax and the consequential increase in the amount of refund is not entitled to any interest where the assessment year involved is prior to the assessment year 1985-86. Similarly, before the said amendment, the assessee was not liable to pay larger interest under Section 215 for any enlargement of the deficit in advance tax payment in the wake of any appeal order, rectification, etc. Excess or deficit in advance tax payment has to be treated evenly.
17. These lines of logic of the Full Bench decisions of the Bombay and Kerala High Courts did not have occasion to be examined by this court. But these aspects have been considered by the Gujarat High Court in its Full Bench decision in Bardolia Textile Mills' case [1985] 151 ITR 389. The Bombay decision in Carona Baku's case [1984] 146 ITR 452 [FB], received particular attention by reason of the fact that, in the Bombay decision, the statutory scheme in Sections 214(1), 214(1A) and Section 214(2) has been examined. On one point, the Gujarat High Court agreed with the Bombay decision that the question of entitlement to interest in respect of refund of advance tax must be determined with reference to Section 214(1) and Section 214(2) which have a bearing on the question. In this connection, the Gujarat High Court summed up the rationale of the Bombay High Court in the following observations (at page 427 of 151 ITR) :
"Now, we will proceed to summarise the approach of the learned judges of the Full Bench in that case as follows : (a) After referring to Section 214 and the definition of 'regular assessment' in Section 2(40), the court took up for consideration the assessee's contention that an order of the Income-tax Officer giving effect to the directions contained in an appellate order is an order passed under Section 143 of the Income-tax Act. After referring to the decisions in Kooka Sidhwa and Co. v. CIT [1964] 54 ITR 54 (Cal), Gopi Lal v. CIT [1967] 65 ITR 477 (Punj), CIT v. Warner Hindustan Ltd. and Triplicane Urban Co-operative Society Ltd. v. CIT , the court took the view that for the purpose of appealability, an order giving effect to the directions of the appellate authority under the Act must be treated as an order passed under the provisions of Section 143, but the decisions do not hold that such an order is an order passed under Section 143 for all purposes. The court found that it cannot subscribe to so wide a proposition ; (b) Assuming that the revised order was also an order of regular assessment, the court considered the question whether regular assessment must be taken as the first assessment or the last operative order of regular assessment. In dealing with this question, the one and only reference made was to the scheme of Section 215 of the Act. It found that having regard to the interpretation of Section 215 and the similar objectives of Sections 214 and 215, a strong case was made out for reading 'regular assessment' in Section 214 as the first order of regular assessment and not as the last operative order of regular assessment; (c) While the above two were the reasoning presented in support of the Revenue's case, the court proceeded to consider certain other approaches made on behalf of the assessee to support the claim for interest. The main argument of the assessee's counsel in that case was that Section 214(2) enabled interest to be claimed up to the date of refund and, therefore, even assuming that the term 'regular assessment' in Section 214(1) referred to the first assessment, by operation of Section 214(2) interest till the date of refund will be due. This was dealt with in the light of the scheme of Section 214(1A) and Section 214(2) and the court found no reason to uphold that argument; (d) Yet another argument was presented by the assessee's counsel that, by reason of Section 214(1A), the assessee was entitled to refund. The argument was summarily dismissed by the court ; (e) Reference was then made to the scheme in Sections 209 and 210 of the Act and it was urged that since in these Sections the reference to 'regular assessment' can only be to the revised assessment, the same reasoning must be given to the term in Section 214(1) also. This too was considered unsustainable ; (f) The Revenue's representative contended that Section 240 being a provision concerning refund, Section 214 could not be and was not intended to operate in respect of the interest due upon amounts ordered to be refunded consequent upon an appeal. The court held that Section 244 was not determinative of the construction to be placed upon Section 214; (g) The court then proceeded to consider the case-law and dealt with reported decisions. After referring to the decisions, in paragraph 64 of its judgment, it found that the end result was that the words 'regular assessment' in Section 214(1) mean the first order of regular assessment passed by the Income-tax Officer and not the last operative order of regular assessment at any given point of time passed as a result of the appellate or revisional proceedings. The question was answered in favour of the Revenue."
18. The Gujarat High Court did not agree with the points enumerated as (a) and (b) in the paragraph extracted. The first point relates to the question whether the revised order by the Income-tax Officer giving effect to the appellate order is a regular assessment by virtue of the fact that such order is also appealable. According to the Bombay High Court, the mere appeal-ability of such revised order cannot widen its character so as to be an order of regular assessment. Even though the High Courts in a number of cases have held that the order giving effect to the directions of the appellate authority must be treated as an order passed under the provisions of Section 143, it is not open to a broader formulation that such an order is an order passed under Section 143 for all purposes including interest payable by the Central Government under Section 214(1) on refund. The Gujarat High Court disagreed. According to the Gujarat High Court, if an order is an order under Section 143, for the purpose of appeal, it is equally so for other purposes. Finally, the Gujarat High Court concluded that the decision of the Bombay High Court that the revised order of assessment is not one of regular assessment is not correct.
19. The second point--point (b)--relates to the question whether, even if the revised order be an order of regular assessment, it is to be taken as such even for the purpose of Section 214(1). The Bombay High Court, inter alia, rejected such proposition. It relied upon the scheme of Section 215. The broader construction of the expression "regular assessment" in the context is inconsistent with the scheme of Section 215 which also deals with interest on advance tax where the interest is payable by the assessee for the shortfall. But the Gujarat High Court held that Section 215 is not similar to Section 214. Section 214 deals with refund due to the assessee, such refund that is due at the first assessment and that could be found further due at the revised assessment, for a revised assessment is passed on proceedings resorted to for reducing the tax liability and not for enhancing it (at page 430 of 151 ITR) :
" In the case of interest payable by the assessee under Section 215, such interest would be payable on the first assessment. The Section deals with payment of interest to the Central Government by the assessee. Since revised orders of assessment would not normally create further liability on the assessee but only reduce it, the liability to pay the tax would depend upon the first assessment and that would only stand reduced by the revised assessment. In the case of interest payable to the assessee under Section 214, the revised assessment would create an obligation on the Central Government to pay interest even though there may not be obligation to pay interest on account of the first assessment."
20. It is necessary to mention at this juncture that the presumption of the Gujarat High Court is that revised assessment in further proceedings after the first assessment never results in higher assessment of tax. But the first appellate authority has the power to enhance the assessment. The rectification may be adverse to the assessee. Such eventualities have gone unnoticed. There is no reason indeed as to why there should not be equation and reciprocity of liability, inter se, of the assessee and the public exchequer.
21. Therefore, the view of the Gujarat High Court that equating the scheme of Section 214 with that of Section 215 is fallacious is based on a premise from which we, with respect, differ. We find that there arises the contingency where the liability of the assessee after completion of the first assessment need be enhanced culminating in larger deficit of advance tax. But Section 215 until its amendment with effect from the assessment year 1985-86 did not contemplate charge of increased interest.
22. The Gujarat High Court finally demonstrated how the words" regular assessment" if construed to mean only the first order made by the Income-tax Officer would land us in a fallacy ( at page 431 of 151 ITR ):
" Assuming that the approach in the Bombay High Court decision on the question of inference to be drawn from the schemes of Sections 214 and 215 is correct, let us see the result. Section 215 would enable the Central Government to obtain from the assessee interest on the deficit on the first assessment being made. The liability of the assessee may stand reduced by proceedings by way of appeal or revision. He would then be entitled to refund of the excess of tax he had paid on the basis of the first assessment. That is provided for in Sub-section (3) of Section 215. That is fair enough. But, in the case of payment of interest by the Central Government on the excess advance tax paid by the assessee, he would get refund only on the basis of the first assessment order of the Income-tax Officer, if the Bombay view is adopted as the correct view. He gets relief in appeal. On the basis of such relief, he is found entitled to refund of excess not found by the Income-tax Officer. If we adopt the approach of the Bombay decision, it would mean that the assessee would not get interest for the period after the first assessment. In other words, while the Central Government would get interest only for real deficit and not deficit under the first order by reason of Section 215(3), the Central Government will not pay interest for the real excess, but only for the excess under the first assessment and that too up to the date of the first assessment only. If the scheme of Section 214 is similar to that in Section 215, this result should not follow. Hence, assumption of a similar scheme in the two Sections and emphasis on it to understand Section 214 may not be warranted."
23. Finally, the Gujarat High Court emphasises that the context of Section 214 requires a more flexible construction of the expression "regular assessment" because Section 214 has to provide for many contingencies, viz., provisional assessment under Section 141A, refund pursuant to such provisional assessment, a subsequent regular assessment, the amount of tax due being found more than that determined under Section 141A on such regular assessment and providing for recovery of such taxes. To provide for this, a scheme entirely different from that contemplated in Section 215 will have to be envisaged. Therefore, the context of Section 214 has to provide for payment by the Central Government on the excess advance tax paid on the basis of the tax as finally assessed. When the first assessment becomes final, that is the regular assessment for the purpose of Section 214(1). Where the first assessment happens to be revised, the excess will be determined with reference to such revised assessment and the term " regular assessment" would refer to such revised assessment.
24. In this connection, the Gujarat High Court also adverted to the fact that any interpretation contrary to this interpretation leads to results which cannot by any means be the intention of the Legislature. In that connection, it gave an illustration : If an assessee pays advance tax of Rs. 50,000 and if the Assessing Officer determines the tax payable at Rs. 60,000 in his assessment but as a result of directions in appeal, the assessed tax is revised to a lower sum of Rs. 30,000, the Income-tax Officer would be under an obligation to refund Rs. 20,000 upon such redetermination of income while giving 'effect to the appeal and pursuant to the revised assessment. But, he, according to the decision of the Bombay High Court, is under no obligation to pay interest on that amount under Section 214(1) for any period. If, on the other hand, the same Income-tax Officer rightly determines the tax at the original assessment at Rs. 30,000 as it ought to be, the assessee would be entitled to the refund of Rs. 20,000 and also interest on the amount of Rs. 20,000 up to the date of such regular assessment. In other words, where the Officer acts wrongly, the party would not be entitled to such interest, though such wrong is corrected later by the appellate authority. It is submitted that the Legislature could never have contemplated that such a result should follow. This amply illustrates the fallacy of the approach of the Revenue.
25. So, the Gujarat High Court held that this necessarily leads to not only a fallacious situation but also to an invidious discrimination on grounds of hypertechnicality. The Full Bench of the Kerala High Court has noticed the possibility of such an anomalous situation but has observed that anomalies are, in any case, inherent to occur even otherwise. It was pointed out by the Kerala High Court that, in cases where the assessee has paid advance tax as well as additional amounts as assessed in the initial assessment and subsequently becomes entitled to refund out of both payments, he would be receiving interest under Section 214 on the excess of the advance tax up to the date of final order while interest on the additional amounts paid would be under Section 244 for a limited period after the final order.
26. But the Gujarat High Court does not accept that such a situation presents an anomaly. Section 214(1) speaks of payment of interest on excess payment of advance tax. On the other hand, Section 244(1A) deals with payment of interest where the whole or any part of the refund is due as a result of any payment of tax made after March 31, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof is found to have been paid in excess as a result of any appeal or other proceedings under this Act. Section 244(1A) provides that the Central Government shall pay interest to the assessee on the amount found to have been paid in excess from the date on which such amount was paid to the date on which the refund is granted. So, in respect of amounts paid by an assessee after assessment which subsequently become refundable as a result of appellate order, the assessee is clearly entitled to interest from the date of payment to the date of refund under Section 244(1A). But Section 244(1A) cannot enable an assessee to obtain any interest on the excess payment of advance tax. Section 244(1A) is inapplicable to amounts paid as advance tax which are not a payment in pursuance of any order of assessment or penalty. It is a payment made in a financial year preceding the assessment year. Section 244(1A) operates in its own independent domain totally unrelated to Section 214(1).
27. It is not that the Bombay view does not appeal to us. We are inclined to share the opinion that irrespective of the ambit and the dimension of the expression " regular assessment", once the Income-tax Officer makes the assessment under Section 143, the payment of the sum as advance tax in the immediately preceding financial year sheds its character as advance tax. Its complexion becomes that of tax paid. Therefore, even if the final assessment in appeal, revision and rectification results in a larger excess, that enhanced excess is ho more the excess of advance tax but excess of tax paid.
28. We also feel drawn by the view that there should be a parity between the provisions of Sections 214 and 215. It is a bipartite matter. The payments of interest on excess or shortfall in payment of advance tax must have reciprocity. In one case, the excess entitles the payer, the assessee, to interest on the excess. By the same token, deficit in payment of advance tax entitles the payee, i.e., the Central Government to receive the interest. The interest is merely compensation for the deprivation of the use of the money. Therefore, there cannot be two standards, one for the assessee and another for the Central Government. Both the payer and the payee could have a right to the compensation on equal terms. Section 215 conferred on the Central Government no right to recompute the interest on a higher amount where the base amount, i.e., tax payable, is increased as a result of the final assessment in appeal, revision, etc. The presumption of the Gujarat High Court that final assessment in appeal, revision or rectification cannot augment the tax liability is not correct. It can in many cases reduce the excess of advance tax. But Section 215 before its Amendment Act, 1984, did not envisage enhancement of the interest chargeable under Section 215. Sub-section (3) of Section 215 only provides for the reduction of the interest payable by the assessee following the reduction of the tax payable in consequence of rectification or adjustment or appeal order or result of reference or revision.
29. Again, if we read the unamended Section 214 we only find that there is no provision at all to reduce the interest on reduced excess of advance tax consequent upon the enhancement of the tax liability in appeal or rectification or adjustment subsequent to the first assessment under Section 143. Nor is there any provision for enhancing the interest under Section 214 when the final assessment subsequent to the first assessment culminates in a lesser tax and hence a higher excess of the advance tax. This is quite in parity with the unamended Section 215 which did not inflict higher interest for higher tax than tax first assessed.
30. That the regular assessment refers to the first assessment made by the Assessing Officer is also clear from Sub-section (1A) of Section 214. We have to read Sub-section (1A) with reference to the proviso to Sub-section (1) of Section 214. It indicates that where the refund on provisional assessment is allowed on account of the excess of advance tax along with interest till the date of making such provisional assessment, but on completion of regular assessment by the Income-tax Officer such refund gets reduced as also the interest thereon, the excess interest shall be treated as tax payable by the assessee. Thus by linking the words "regular assessment" to the words "provisional assessment", the Legislature has shown its intention that regular assessment should mean the assessment under Section 143 by the Assessing Officer following the provisional assessment. The expression " regular assessment" when pitted against the expression " provisional assessment" in the proviso is indicative enough that, by regular assessment, the Legislature has in mind the first assessment under Section 143. If the Legislature intended that, if, in further proceedings after the assessment under Section 143, the tax liability increases and the excess of advance tax gets reduced, the interest should as well be reduced, there would have been an express provision to that effect. In the absence of such a mandate and reduction of interest being contemplated only in relation to interest granted on provisional assessment, it has to be construed that regular assessment referred to is the assessment made by the Income-tax Officer following the provisional assessment.
31. The Gujarat High Court has differed from the view of the Bombay High Court and the Kerala High Court merely on questions of equity, but equitable considerations may have a place in construing the law where law is ambiguous. But here we admit our hesitancy in saying that there is ambiguity in the provisions of Section 214 or Section 215. Where the law is clear, the courts have no option but to go by the words even if literal construction might produce results not wholly to be desired. But we cannot read into the law beyond what the words of the law would permit.
32. As for the inequitous results flowing from the plain reading of the provision, we may say that this aspect later dawned on the Legislature and the discrepancy was removed by amending both Sections 214 and 215. The amended provision of both the Sections now provide for revision of the interest both upwards and downwards following the result in appeal, rectification, reference and revision, etc., and the discrepant situations earlier prevailing are now eliminated. This only shows that the law as obtaining before the amendment itself created the inequitous situation. The extracts of the amended Sub-section (1A) of Section 214 and Sub-section (3) of Section 215 would show that the Legislature itself has accepted the imperfection of the earlier law. This indirectly lends support to the view taken by the Bombay High Court as well as the Kerala High Court.
33. Provisions before amendment :
"214. (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.
215. (3) Where as a result of an order under Section 154 or Section 155 or Section 250 or Section 254 or Section 260 or Section 262 or Section 264, the amount on which interest was payable under this Section has been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded."
34. Provisions after amendment ;
"214. (1A) Where as a result of an order under Section 147 or Section 154 or Section 155 or Section 250 or Section 254 or Section 260 or Section 262 or Section 263 or Section 264, the amount on which interest was payable under Sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, the Income-tax Officer shall serve on the assessee, a notice of demand in the prescribed form specifying the amount of the excess interest payable and requiring him to pay such amount ; and such notice of demand shall be deemed to be a notice under Section 156 and the provisions of this Act shall apply accordingly.
215. (3) Where, as a result of an order under Section 147 or Section 154 or Section 155 or Section 250 or Section 254 or Section 260 or Section 262 or Section 263 or Section 264, the amount on which interest was payable under Sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and-
(i) in a case where the interest is increased, the Income-tax Officer shall serve on the assessee, a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be a notice under Section 156 and the provisions of this Act shall apply accordingly ;
(ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded."
35. However, since this High Court has consistently taken the view that a regular assessment must be construed to extend to all subsequent modifications of the regular assessment in appeal, reference, revision, rectification, we respectfully follow the earlier decision.
36. We, therefore, answer the question in the affirmative and against the Revenue and in favour of the assessee.
37. There will be no order as to costs.
J.N. Hore, J.
38. I agree.